Iceland: Next steps in capital account liberalisation - Temporary authorisation for foreign exchange transactions of offshore Kròna securities - Update
Note: This announcement, originally published on 24 August 2016, has been updated to provide information for customers wishing to trade their offshore assets with the intention to submit the countervalue of their trades to the Central Bank of Iceland’s temporary foreign exchange offer. Changes have been highlighted.
Following our announcement A16114, originally published on 4 August 2016 and last updated on 17 August 2016, Clearstream Banking1 would like to inform customers that, effective
25 August 2016 to 25 October 2016
Clearstream Banking will support its customers in participating in a temporary foreign exchange transaction offer with the Central Bank of Iceland (CBI) at the reference exchange rate as set forth by the Icelandic Act no 37/2016, the Act on the treatment of Kròna-denominated assets subject to special restrictions, also referred to later as “The Act”, and Rules no 425/2016 on the Treatment of Kròna-denominated assets subject to special restrictions and its amendment, Rules no 518/2016.
Background
Article 9 of the The Act foresees that owners of Kròna-denominated assets according to art 2, item 1(a)-(d) and 1(h) are permitted to withdraw funds from account subject to special restrictions and use them for foreign exchange transactions with the CBI at a special reference exchange rate, until 1 November 2016.
The above described foreign exchange offer will be handled by Clearstream Banking via a voluntary repurchase event.
Impact on customers
Scope of the voluntary repurchase event
Clearstream Banking will assist its customers in this temporary foreign exchange offer with their holdings in offshore Króna assets in the form of CBI Certificates of Deposit (CD) - ISIN IS0000027068.
As per the Act no 37/2016 on offshore ISK assets, as well as by Foreign Exchange Regulations, the selling of offshore securities is permitted provided that the sales proceeds are deposited in restricted accounts.
Although ISK cash deposits are no longer accepted in the system Clearstream Banking Clearstream will be able, until 25 October 2016, to permit the below described transactions to its customers willing to trade their offshore securities in order to participate to the CBI temporary foreign exchange offer. The list of ISINs eligible for the below transactions is attached to this announcement for your convenience and may be subject to further update.
Type of transaction | Additional format requirement | Deadline (CET) |
Internal free of payment deliveries/receipts with agreed countervalue in IS0000027068 | Narrative must indicate the following:
| 15:00 SD |
Domestic Against payment deliveries (resulting sale proceeds will automatically be converted into CDs/IS0000027068 and credited on customer securities account upon receipt) | Narrative must indicate the following:
| 15:00 SD |
All Clearstream Banking customers holding CBI CDs are eligible to participate in the voluntary purchase event in accordance with their positions held within Clearstream Banking and provided that their instructions comply with the terms and deadlines set forth by Clearstream Banking and described in the related event, to be released to impacted customers in due course.
Participation in CBI foreign exchange transactions
Customers willing to engage in foreign exchange transactions at a fixed rate with the CBI are invited to instruct as per deadlines and terms, including the relevant disclosure and compliance duties, which are described in the voluntary purchase event notification that will be released to the impacted customers in due course.
Timeline
The CBI foreign exchange offer is available until 1 November 2016. To be able to process customers’ instructions properly and in accordance with market requirements, Clearstream Banking customers are invited to send their participation instructions by 10:00 Central European Time (CEST) on 25 October 2016.
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 which will be credited to the customer’s account in Clearstream Banking upon receipt of the funds from CBI.
Trades will generally be settled on a T+2 basis, but CBI reserves the right to settle very large trades on a T+5 basis.
Clearstream Banking reminds its customers that at this stage all cash wires into Clearstream Banking, including possible income proceeds due on offshore Kròna securities positions held with CBL, will continue to be automatically converted into CBI CDs at the rate provided by CBI. The resulting securities positions will be credited on the same day to the customer account.
Disclosure and compliance duty
By instructing and providing the details requested in the corporate action notification, including the identification of the ultimate beneficial ownership of the assets subject to the foreign exchange, each customer shall be deemed to represent that;
- It is compliant with Financial Action Task Force (“FATF”) Guidance on transparency and beneficial ownership, FATF Recommendations and local regulations preventing money laundering and terrorist financing;
- It is in possession of information concerning the ultimate beneficial owner and the source of the funds which are legitimate and in compliance with the FATF Guidance, FATF Recommendations and the regulations preventing money laundering and terrorist financing that are applicable to it;
- The ultimate beneficial owner of the funds is not subject to any sanction pursuant to the Act on Implementation of international sanctions.
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