Lánamál ríkisins - Company Announcement

Central Bank concludes assessment of preliminary composition proposals

The winding-up boards of the three largest failed commercial banks, Kaupthing
hf., Glitnir hf., and LBI hf., have requested that the Central Bank of Iceland
grant them exemptions from the Foreign Exchange Act in connection with the
proposed composition agreements with their creditors and the conclusion of the
winding-up proceedings of the failed banks' estates; cf. Article 103(a) of the
Act on Financial Undertakings, no. 161/2002.  According to Article 7 of the
Foreign Exchange Act, exemptions may only be granted from the restrictions
provided for in the Act if it is ensured that monetary, exchange rate, and
financial stability will not be jeopardised by the winding-up process.  In
order to ensure that the settlement of the failed commercial and savings banks
estates does not cause instability, it is necessary to adopt countervailing
measures in order to mitigate the potential adverse effects deriving from
distributions of domestic assets to foreign creditors.  The Central Bank has
now completed its assessment of the preliminary composition proposals.  The
Bank has concluded that the proposals satisfy the requirements set forth in the
Foreign Exchange Act, in that the fulfilment of the composition agreements
together with the proposed countervailing measures will not jeopardise
monetary, exchange rate, or financial stability.  Consultations pursuant to
Article 13c of the Foreign Exchange Act have taken place, and the Minister has
presented the conclusions before the Parliamentary Economic Affairs and Trade
Committee. Further discussion of the Central Bank's assessment can be found in
a report that has been published on the Bank's website. 

Further information can be obtained from Már Guðmundsson, Governor of the
Central Bank of Iceland, at tel: +354 569-9600.