From Iceland — Iceland Prepares To Phase Out Capital Controls

Iceland Prepares To Phase Out Capital Controls

Published July 8, 2014

Nanna Árnadóttir
Photo by
Natsha Nandabhiwat

Iceland is planning to sell six-year euro-denominated bonds in a push to ease the capital controls that have been in place since the economic collapse of 2008.

According to Bloomberg, the government hired Barclays Plc, Citigroup Inc., Deutsche Bank AG and JPMorgan Chase & Co. to handle the sale and the initial price talk on the debt is about 190 basis points over the mid-swap rate.

Since the financial crash in 2008 Iceland has sold two separate $1 billion U.S. dollar-denominated bonds. One in 2011 and another in 2012.

Iceland has relied on capital controls to keep the currency in check since 2008 following the failure of its three largest banks; Kaupthing, Glitnir and Landsbanki. However the capital controls also limit much needed investment.

Iceland still owes $1.8 billion of the $4.6 billion it borrowed from the Washington-IMF, Nordic governments and Poland. The IMF loans are due in 2015 and 2016, while the Nordic loans mature from 2019 through 2021.

In order to lift capital controls a deal to wind up the left-overs of the old banks – around 2,500 billion ISK ($22 billion) in cash, shares and bonds – needs to be reached with creditors. Finance Minister Bjarni Benediktsson said in May that the government will probably force a solution this year if the creditors, many of which are hedge funds, fail to come with a viable plan on how to wind up the banks.

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