Íslandsbanki hf. - Company Announcement

Íslandsbanki and Kvika enter market making agreement on covered bonds

Íslandsbanki and Kvika banki have entered into a market making agreement on
covered bonds issued by Íslandsbanki on Nasdaq Iceland.

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.

Kvika will submit bids and asks for the bonds every day. 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. For other series the minimum
amount shall be ISK 20 million. The bond series ISLA CB 19, ISLA CB 23, ISLA CBI
22 and ISLA CBI 26 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%     |
+------------------+--------------+

The maximum amount of total trades which Kvika is obliged to make in bond series
under this agreement each day and during the time of validity of the agreement
is ISK 500 million at nominal value in total in all bond series.

Íslandsbanki will grant Kvika access to securities loans. The maximum loan to
Kvika 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:

  * Investor Relations - Guðbjörg Birna Björnsdóttir, ir@islandsbanki.is and
    tel: +354 440 4752.
  * Public Relations - Edda Hermannsdóttir, pr@islandsbanki.is and tel
    +354 440 4005.


[HUG#1961229]