Lánamál ríkisins - Company Announcement

Government Debt Management measures in connection with Central Bank of Iceland foreign currency auctions

According to a press release from Government Debt Management (GDM) dated 28
March 2011, purchasers of foreign currency in Central Bank of Iceland auctions
were authorised to sell the Treasury their Treasury bills and bonds maturing
before year-end 2013 in order to finance the purchases. The objective of this
authorisation was to mitigate the undesirable price fluctuations that could
result if a large number of Treasury bond owners should sell their bonds in the
secondary market in order to finance foreign currency purchases. 

Participants have not made extensive use of this authorisation, however, and in
four of the last five Central Bank auctions, they have only exercised that
right once. It is therefore clear that, for the most part, participants are
using deposits and not Treasury bonds to pay for their foreign currency
purchases. Since the above-specified press release was published, all of the
bills and two of the Treasury bond series covered by the authorisation have
matured. 

Based on the experience gained from the most recent auctions, it has been
concluded that the risk of undesirable price fluctuation that gave rise to this
authorisation is negligible. As a result, it has been decided to discontinue
the practise of accepting Treasury bonds in connection with upcoming Central
Bank foreign currency auctions. 

 Further information can be obtained from Björgvin Sighvatsson, Government Debt
Management, at tel +354 569 9633.

Attachments:

Press.release_no repurchase_03Oct.2012.pdf