Arion Bank hf. - Company Announcement

Arion Bank and Landsbankinn enter market making agreement on covered bonds

Arion Bank and Landsbankinn have entered into a market making agreement on
covered bonds on Nasdaq OMX Iceland hf. issued by Arion Bank. 

The purpose of the agreement is to stimulate trading with the bonds covered by
the agreement in order to generate normal market prices and to foster effective
and transparent price formation. 

Landsbankinn 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 ARION CBI
21, ARION CBI 29 and ARION CB 22 are benchmark series. Other series are ARION
CBI 19 and ARION CBI 34. 

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
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    0-6 months        No maximum  
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6 months - 2 years       0.20%    
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     2-4 years           0.30%    
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     4-6 years           0.35%    
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     6-9 years           0.60%    
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    9-12 years           0.70%    
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   12-18 years           1.00%    
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 18 years or more        1.15%    
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The maximum of amount of total trades which Landsbankinn is obliged to make in
bond series under this agreement each day, on which Landsbankinn is obliged to
make an offer under this agreement, is ISK 500 million at nominal value in
total in all bond series. 

Arion Bank will grant Landsbankinn access to securities loans. The maximum loan
to Landsbankinn in each series of covered bonds shall be ISK 320 million at
nominal value for benchmark series and ISK 80 million at nominal value for
other series. 

For further information please contact Haraldur Gudni Eidsson of Arion Bank´s
communications division at haraldur.eidsson@arionbanki.is, or tel: +354 444
7108