The Minister of Finance has decided to assign issuance of domestic marketable
securities, currently handled by the National Debt Management Agency (NDMA), to
the Central Bank of Iceland, which already manages the Treasury's foreign
borrowing.
In light of the changes that have taken place in Iceland's financial market
environment and the position of the Treasury in the domestic capital market, it
is now considered feasible to perform the Treasury's debt management more
cost-effectively by transferring the functions of the NDMA to the Central Bank.
The central banks of Denmark and Norway are responsible for their national
Treasury borrowing on the basis of agreements with their respective ministries
of finance.
The main advantages of consolidating oversight of Treasury borrowing within a
single institution are to provide a clearer overview, create more effective
management of loans, foreign exchange and liquidity, and achieve economies in
overheads and deployment of human resources. Since one of the main functions of
the Central Bank involves the conduct of monetary policy, which need not
necessarily be synonymous with efficient Treasury debt management, the
agreement with the Central Bank on the functions currently assigned to the NDMA
will contain clear provisions specifying the division of tasks between them,
and on the Ministry of Finance's discretion with regard to its borrowing and
its ultimate right to determine how the agreement is implemented.
The agreement, which was signed today, enters into force on October 1, 2007. As
of that date, the activities of the National Debt Management Agency will be
discontinued and the agency will subsequently be formally abolished by an act
of law.
