- Instructions on the execution of foreign currency sales due to Article 8 of the Rules on Foreign Exchange, no. 1130/2008

Because of the uncertainty that has surfaced concerning the
interpretation of Article 8 of the Rules on Foreign Exchange, no.
1130/2008, as regards the purchase and transfer of foreign currency
due to current transactions, the Central Bank of Iceland wishes to
direct the following instructions to financial institutions:


Article 1

Foreign transactions

In the sense of Article 8, the free transferability of interest payments in
Icelandic krónur applies only to interest payments by residents to nonresidents.
As a result, it is not possible to convert the following into
foreign currency: 1) interest on foreign financial instruments issued by
non-residents in Icelandic krónur (e.g. Glacier bonds), 2) interest
payments on Icelandic krónur accounts held at non-resident financial
institutions, or 3) interest on any other financial asset/instrument
issued by non-residents.


Article 2

Calculation of interest and indexation

The accrued interest on bonds may be transferred from the date of the
interest payment. In the case of zero coupon bonds, the date of the
interest payment is the date of the bond's redemption.

For coupon bonds that accrue interest on a daily basis, the transferable
amount is calculated proportional to the holding period. In the case of
zero coupon bonds, the notional coupon shall be calculated as the
difference between its issued discounted price and its redemption
value. In both cases, interest is deemed to accrue on a straight-line
basis.

The indexation part of coupons is transferable, whereas the indexation
part of the principal payment is not.


Article 3

Dividends, equity income, and capital gains

Dividends and other equity income may be converted to foreign
currency and are transferable. Capital gains may not be converted or
transferred.


Article 4

Recent transactions

All payments in accordance with Article 8 must be converted within 6
months of the date the balances are acquired. After that time, the
authorisation for cross-border transfer shall expire.


Article 5

Information disclosure requirement

Financial institutions shall send information on all current movements
in the sense of Article 8 by e-mail to the International and Market
Operations Department of the Central Bank of Iceland:
kronubord@sedlabanki.is. Data for each business day shall be received
before 14:00 the following day of the time foreign currency is sold.
The following information must be included:

Bonds
a. Name and/or national ID number of the owner
b. Bond series
c. Interest amount
d. Coupon payment date and date of foreign exchange
   transaction

Equities
a. Name and/or national ID number of the owner
b. Name of company
c. Dividend amount
d. Dividend date and date of foreign exchange transaction