Arion Bank hf. - Company Announcement

Arion Bank and Kvika enter market making agreement on covered bonds

Arion Bank and Kvika 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. 

Kvika 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
----------------------------------
    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 of amount of total trades which Kvika is obliged to make in bond
series under this agreement each day, on which Kvika 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 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 please contact Haraldur Gudni Eidsson of Arion Bank´s
communications division at haraldur.eidsson@arionbanki.is, or tel: +354 444
7108