Íslandsbanki hf. - Other information disclosed according to the rules of the Exchange

Íslandsbanki enters market making agreement with Arion bank, Kvika and Landsbankinn

Íslandsbanki  hf. has signed market-making agreements  with Arion bank hf. Kvika
hf. and Landsbankinn regarding covered bonds issued by Íslandsbanki. The covered
bonds  are  listed  on  NASDAQ  Iceland  and  the  market makers' obligations in
accordance with the agreement will become effective on 16 October 2017.
The purpose of the agreement is to promote trading with the bonds covered by the
agreement  in order to increase their  liquidity and encourage transparent price
formation.
The market makers will submit bids and asks for the bonds every day. The minimum
amount  at nominal value  for benchmark series  shall be ISK  80 million and the
minimum  amount  for  other  series  shall  be  ISK  20 million.  In the case of
benchmark  series, if the outstanding nominal value is less than ISK 10 billion,
the  total amount shall  be ISK 60 million.  If the series  is more than ISK 10
billion,  the total amount shall be ISK 80 million. The bond series ISLA CB 23,
ISLA CBI 26 and ISLA CBI 30 are benchmark series.
The  maximum bid-ask spread  depends on the  number of years  to maturity at any
given time, cf. table below.
+------------------+--------------+
|Years to maturity |Maximum spread|
+------------------+--------------+
|   0 - 6 months   |  No maximum  |
|                  |              |
|6 months - 2 years|    0.20%     |
|                  |              |
|   2 - 4 years    |    0.30%     |
|                  |              |
|    4 -6 years    |    0.35%     |
|                  |              |
|   6 - 9 years    |    0.60%     |
|                  |              |
|   9 -12 years    |    0.70%     |
|                  |              |
|  12 - 18 years   |    1.00%     |
|                  |              |
| 18 years or more |    1.15%     |
+------------------+--------------+

Inflation-linked  series that are prohibited from further issuance, according to
the  Central Bank  of Iceland's  rule no.  492/2001 on indexation of savings and
loans,  as subsequently amended, are  exempt from the aforementioned obligations
on maximum spread.
Individual  market makers  are released  from their  obligations on a particular
trading  day once  the trading  volume (specified  as "AUTO") of that particular
market  maker  totals  ISK  500m for  all  series  of  covered  bonds  issued by
Íslandsbanki.
In conjunction with the market-making agreements, Íslandsbanki will provide the
market makers with bond lending facilities under which each market maker can
borrow up to 320m in each benchmark series, and series previously defined as
benchmark series, and 80m in other series.

For further information:

  * Treasury - Egill Thorolfsson, egill.thorolfsson@islandsbanki.is and tel:
    +354 440 2615.
  * Public Relations - Edda Hermannsdóttir, pr@islandsbanki.is and tel:
    +354 440 4005.


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