Iceland’s Banking Industry Regulatory Bodies: A Strong Foundation for Stability and Growth

In the aftermath of the 2008 financial collapse, the Central Bank of Iceland has implemented stringent measures to promote stability, financial security, and sound banking practices. As an independent institution owned by the Icelandic government, the bank operates under the Prime Minister’s auspices with the objective of maintaining international reserves, promoting price stability, and ensuring a safe and effective financial system.

Banking Sector Overview

Iceland’s banking sector is generally considered healthy, with three commercial banks: Landsbankinn, Islandsbanki, and Arion Banki. The government took over operations during the 2008 crisis, and while Landsbankinn remains government-owned, the state is working to privatize Islandsbanki. Arion Banki, formerly known as Kaupthing Bank, has been fully privatized and listed on the Nasdaq Iceland stock exchange.

Investment Banking

In addition to commercial banks, there is one investment bank in Iceland, Kvika, which is also listed on Nasdaq Iceland. Icelandic pension funds offer loans, mortgages, and actively invest in local companies. Notably, no foreign banks operate in Iceland, ensuring a domestic focus for financial activities.

Access to Banking Services

All companies have access to regular commercial banking services, with financing available through the country’s three main banks. Establishing a bank account requires a local personal identification number, or “kennitala.” Foreign nationals seeking information on registration should contact Registers Iceland.

Exchange Rates and International Reserves

The Central Bank of Iceland is responsible for publishing the official exchange rate and maintaining international reserves. The Act on Investment by Non-Residents in Business Enterprises guarantees non-residents’ right to convert dividends and profits into any currency, as long as the Central Bank maintains a regular exchange rate.

Capital Controls and Foreign Exchange Transactions

Following the 2008 financial collapse, capital controls were lifted in 2017, allowing for greater freedom in foreign exchange transactions. The official exchange rate is published daily on the Central Bank’s website, reflecting the market-determined rate of the Icelandic krona against foreign currencies.

International Cooperation and Financial Security

Notably, there are no U.S. banks operating in Iceland, and Icelandic banks facilitate international transfers with major global financial institutions. Overall, Iceland’s banking regulatory bodies have established a strong foundation for stability, growth, and financial security in the country.

Key Takeaways

• The Central Bank of Iceland has implemented stringent measures to promote stability, financial security, and sound banking practices.
• Three commercial banks (Landsbankinn, Islandsbanki, and Arion Banki) operate in Iceland, with one investment bank (Kvika).
• No foreign banks operate in Iceland, ensuring a domestic focus for financial activities.
• The Central Bank of Iceland is responsible for publishing the official exchange rate and maintaining international reserves.
• Capital controls were lifted in 2017, allowing for greater freedom in foreign exchange transactions.