Iceland: Next steps in capital account liberalisation - Central Bank of Iceland foreign currency auction - Update
Note: This announcement originally published on 6 June 2016 and updated on 9 June 2016 has been updated following the Central Bank of Iceland's publication, on 10 June 2016, and as foreseen in the auction terms, of the purchase price of the State-guarantee securities in exchange for euros in the auction. This announcement is updated with the below attached purchase price table based on a settlement date of 29 June 2016, also referred to as the "buyback price".
Following our Marketflash M16010, dated 25 May 2016, Clearstream Banking would like to provide customers with additional information on the auction to be held by the Central Bank of Iceland (CBI) 16 June 2016 from 10:00 to 14:00 UTC and in which the CBI will purchase offshore Icelandic Króna (ISK) assets against Euros.
Background
On 22 May 2016 the Icelandic Minister of Finance and Economic Affairs passed a Bill of Legislation into law (Bill of Legislation on the treatment of Króna-denominated assets subject to special restrictions (Submitted to the 145th Legislative Session of Parliament 2015–2016)) which aimed at defining the offshore Króna and set forth the key principles of the upcoming auction.
Clearstream Banking wants to highlight that this auction comes as a last step in the Icelandic Authorities’ process of capital control liberalisation. There is no obligation for owners of offshore Króna assets to participate to this latest auction. However, remaining offshore Króna assets that will not have been successfully tendered will be submitted to restrictions and be held on a segregated account within the CBI, as foreseen by the above referred Bill of Legislation passed into law. Similarly cash proceeds that would derive from remaining offshore Króna positions after the auction date will also be transferred to accounts subject to special restrictions.
Scope of the auction
Assets eligible to the CBI’s auction are offshore Króna assets as defined per the Bill of Legislation.
Clearstream Banking will assist in this auction its customers with their holding in offshore Króna assets in the form of ISK cash, government guaranteed bills and bonds denominated in ISK, including HFF securities, and positions in the CBI‘s certificates of deposit. For exchange traded and Non-exchange traded equity securities Clearstream invites its customers to liase with another authorised intermediary (list of intermediaries is available on the CBI’s website).
All customers of Clearstream Banking holding Offshore Króna assets are eligible to participate to the auction to the extent of the positions held within Clearstream Banking and provided that their instructions comply with the terms of the auction set forth by Clearstream Banking and detailed into the Corporate Action notifications which will be released to the impacted customers.
In order to fulfil the requirements set forth by the CBI with respect to KYC and AML, customers of Clearstream Banking participating to the auction are requested to sign a letter of representation in the form of Annex 1 or 2 to this announcement, and provide the complete list of documentation as requested by the letter of representation. Customer instructions can only be released to the market provided that Clearstream Banking is in possession of the original documents duly completed and before 12:00 CET on 15 June 2016.
Participation of cash ISK
To enable the processing of the auction on cash positions Clearstream Banking has chosen to make use of the certificates of deposit instruments (CD) issued by the CBI for the purpose of the auction.
As a result Clearstream Banking will convert its customers’ cash position into an equivalent position in the CBI’s CDs. The conversion is expected to take place on the 8th of June at the latest. Customers of Clearstream Banking with ISK cash position at that time will have their position converted into CBI’s CD and will be notified through their normal balance reporting.
Customers willing to instruct on their cash position that will have been converted into CBI’s CD are invited to send their instruction as per the terms and deadlines described in the corporate notifications. As foreseen in the law defining the auction the CDs will be held in a deposit money bank’s administrative account with the CBI.
Participation of Government guaranteed bills and bonds denominated in ISK, including HFF securities
Customers willing to instruct on their securities position are invited to send their instruction as per the terms and deadlines described in the corporate notifications.
Timeline
CBI will hold the auction on 16 June from 10:00 to 14:00 UTC, Reykjavik time. In order to be able to process customers’ instructions properly and in accordance with market requirements customers of Clearstream Banking are invited to send their participation instructions within the deadline and terms described in the corporate action notifications.
Due to the complexity of the process and the short time-frame Clearstream Banking highly recommends to its customers willing to participate to the auction to send their instructions and the complete requested documentation as soon as possible. Clearstream Banking will not bear any liability should the instruction not be executed on time due to incomplete, late or invalid documentation.
Auction impact
Accepted offers will be exchanged against Euros no later than 5 July 2016 in accordance with the customer’s offer to sell. These Euros will not be subject to any restriction any later.
Offshore Króna assets that will not have been successfully submitted, or that will not have been submitted at all will be transferred into a segregated account with the CBI and will be subject to restrictions.
Participation fees
Clearstream Banking will apply to the event the custody fees in accordance with the Fee Schedule.
Further information
For further information, please contact the Clearstream Banking Client Services or your Relationship Officer.
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1.Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for CBF customers using CreationOnline), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.