Seðlabanki Íslands - Company Announcement

- The Central Bank of Iceland expands the definition of eligible collateral in regular transactions with the Bank

The Board of Governors of the Central Bank of Iceland has decided to alter the
rules on collaterals in regular transactions with the Bank. The changes aim at
aligning the rules closer to practice in other European countries to ensure
that the relative operating environment and competitive position of Icelandic
banks will be in line with that of foreign competitors in transactions with
their respective central banks. 

Foreign currency denominated bonds will now be accepted as collateral and
restrictions on covered bonds will be modified, as will be further defined in
rules to be issued by the Central Bank. 

Several central banks have expanded their potential liquidity provision in
recent weeks and months. The Icelandic interbank market has functioned very
smoothly and continues to do so. Rates have been in line with the policy rate
of the Central Bank and the transmission of liquidity has without exception
been very smooth. 

New rules on collaterals will be presented to financial institutions in the
coming days and published in the regular manner. 

For further information, please contact Sturla Pálsson Director of the
International and Market Operations Department of the Central Bank, tel.
+354-569-9600.