Iceland: Next steps in capital control liberalisation - Updated impacts on securities settlement, cash and Certificates of Deposit issued by the Central Bank of Iceland
Following our Announcement A16086, dated 14 June 2016, and Announcement A16114, originally published 4 August 2016 and most recently updated on 9 September 2016, Clearstream Banking1 would like to update customers on the impacts of the progressive capital control liberalisation currently ongoing in Iceland on the offshore Króna assets.
Background
On 21 May 2016, the Icelandic Parliament passed a bill of legislation into law, the Act on the Treatment of Króna-Denominated Assets Subject to Special Restrictions, no. 37/2016, which addressed the treatment of Króna-denominated assets subject to special restrictions. The Act set forth the key steps that enabled the authorities to progressively achieve the segregation of the offshore Króna assets and further prepare the market for a lifting of the capital control.
The Auction was held on 21 June 2016 by the Central Bank of Iceland (CBI) and the imposed transfer of the remaining offshore assets onto accounts subject to special restrictions on 1 September 2016 both represented major elements of that segregation process.
During these last months Clearstream Banking has been in continuous discussion and close cooperation with the CBI in order to best preserve its customers’ interests and assets. Despite those efforts, cash and settlement activities in the Icelandic market have been heavily impacted and have been subject to continuous changes and adaptations.
Clearstream Banking herewith provides a consolidated update on the settlement activity currently available to its customers.
Cash ISK
Cash transfer
As from 13 June 2016 ISK cash balances have been converted into Certificates of Deposit (ISIN IS0000027068), also referred as CBI2016 or CDs, issued by the CBI for the above described segregation purposes. As a direct consequence, and until further notice, ISK cash delivery and receipt as well as settlement against payment in ISK are no longer accepted. Those instructions will be blocked.
However, customers of Clearstream Banking can continue to transfer ISK cash onto their account with Clearstream Banking under the form of CBI2016.
Due to the exceptional process requested by such transfers customers of Clearstream Banking willing to wire in ISK cash under the form of CBI2016 are invited to send their cash preadvice instructions under standard format before 15:00 CET. Credit of the CBI2016 onto customers’ accounts will be processed on a best effort basis and will be confirmed via MT544.
Cash Income proceeds
Likewise receipt of ISK cash from income proceeds due on offshore Króna securities will be systematically converted into CBI2016 and credited to entitled customers on a best effort basis.
Status summary of current cash activity
Cash instruction type | Status | Process outcome and notes |
1. Delivery of ISK | Not allowed | Rejected |
2. Receipt of ISK | Allowed | Systematic conversion into CBI2016 Deadline: 15:00 CET |
2bis. Receipt of ISK income proceeds |
| Systematic conversion into CBI2016 |
3. Transfer ISK within CBL | Not allowed | Rejected |
Offshore Krõna securities
Despite the significant restrictions imposed on the Icelandic settlement activity there are a limited number of types of instructions that The Act no 37/2016 authorises provided that certain conditions are met as per below description.
Clearstream Banking wants to highlight that settlement of these authorised transactions involves specific procedures and manual processes. As a consequence longer processing time and a different settlement cycle must be expected.
Clearstream Banking will assist its customer on a best effort basis and will not bear any liability should the instruction not be executed on time.
CBI2016 - IS0000027068
Certificates of Deposit, CBI2016, issued by the CBI are eligible for free of payment delivery and receipt instructions provided that specific format conditions are met.
Until 25 October 2016 at 10:00 CEST the CBI2016 securities remain eligible to the foreign exchange offer of the CBI. Customers willing to engage in foreign exchange transactions at a fixed rate with the CBI are invited to instruct as per the deadlines and terms, including the relevant disclosure and compliance duties, which are described in the voluntary purchase event notification that has been issued under Corp ID AC5674960.
Offshore Króna securities held in restricted account (also referred to as TEMP ISINs)
Against payment transactions
According to The Act settlement of the offshore Króna securities against ISK is permitted provided that the sale proceeds are deposited to accounts subject to special restrictions.
Therefore, domestic deliveries against ISK payment on TEMP ISINs are available to customers of Clearstream Banking provided that ‘ART 5 37 2016’ is indicated in the narrative and that the instruction is sent before 15:00 SD CET. Sales proceeds will be converted into CBI2016 and credited to customer account on a best effort basis.
Domestic free of payment transfers
Below listed free of payment transfers are allowed for customers of Clearstream Banking provided that the instruction is received before 15:00 SD CET and that the requested narratives are provided:
- Transfers between restricted accounts without change in beneficial ownership (narrative: ‘ART 11 37 2016’ and the number of the receiving restricted account)
- Transfer of CBI2016 between accounts subject to special restrictions (narrative: ‘ART 11.1’, or IBAN ISxxxxxx21xxxxxxxxxxxxxxxx of receiving restricted securities account, or CBI2016 TRANSFER).
Internal free of payment transfers
Customers of Clearstream Banking are allowed to settle free of payment against Clearstream Banking counterparties. Customers of Clearstream Banking willing to sell their offshore Króna securities with the intention to submit the sale proceeds to the CBI foreign exchange offer can do so through free of payment transactions whereby both delivery and receipt instructions indicate the following information into their respective narratives:
- ART 5 37 2016
- BIC of the delivering/receiving agent of the CBI 2016
- Agreed countervalue in nominal amount of CBI2016
The list of ISINs eligible for the above transactions is attached to this announcement for your convenience and may be subject to further update.
XS ISINs denominated in ISK
Settlement against ISK payment in general, as well as settlement through the Bridge, is not allowed.
Status summary of securities settlement activity
Security instruction type | Status | Process outcome and notes |
1. Domestic free of payment | Not allowed | Blocked - exceptions exist |
2. Domestic versus ISK payment | Not allowed | Blocked - exceptions exist |
3. Internal free of payment | Not allowed | Blocked - exceptions exist |
4. Internal versus ISK payment | Not allowed | Rejected |
5. Bridge versus any payment | Not allowed | Rejected |
6. Bridge free of payment | Not allowed | Rejected |
Exceptions autorised | Status | Requested format |
1a. Transfer free of payment of IS0000027068 between accounts subject to special restrictions | Allowed | Standard MT540/542 or COL equivalent
Deadline: 15:00 CET |
1b. Transfer free of payment between accounts subject to special restrictions with no change of beneficial owner (NCBO)2 | Allowed | Standard MT540/542 or COL equivalent
Deadline: 15:00 CET |
2a. Domestic against payment deliveries intended for participation to the CBI foreign exchange at rate 220 ISK/EUR | Allowed | Standard MT543 or COL equivalent Deadline: 15:00 CET Cash ISK countervalue will be systematically converted into CBI2016 and credited on best effort basis. |
3a. Internal free of payment with agreed countervalue in IS0000027068 | Allowed | Standard MT540/542 or COL equivalent
Deadline: 15:00 CET |
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.
2. Such transfer between custodians can entail cross border capital movements that are in breach of Act No. 87/1992 on Foreign Exchange. The CBI can provide exemptions from the restrictions according to the Act on Foreign Exchange, cf. Article 7 of the aforementioned Act. Information on the exemptions process can be found on the Central Bank’s website or via e-mail at gjaldeyrismal@sedlabanki.is.