Iceland’s parliament approved a bill designed to prevent offshore investors re-investing their kronur inside the island.
Foreign investors trapped behind Iceland’s capital controls won’t be allowed to use their kronur assets to purchase securities that are eligible for repo transactions with the island’s central bank, according to a statement posted on the Parliament’s website. The measure includes Treasury bonds with short maturities, it said.
Iceland imposed capital controls in 2008 after its financial crisis triggered a krona sell-off that sent the currency plunging as much as 80 percent in offshore trading. The restrictions are blocking as much as $8 billion in kronur assets from being sold, according to Reykjavik-based Arion banki hf.
Investors affected by the controls had placed 197 billion kronur ($1.6 billion) in Iceland’s Treasury bonds and bills as of Feb. 28, according to a March 13 note by Thordur Gunnarsson, an analyst with Jupiter Capital Management hf.
The new legislation also gives Iceland’s central bank greater authority to investigate foreign exchange transactions related to interest payments, dividends and contractual payments. The bank can also fine individuals as much as 65 million kronur and companies as much as 250 million kronur for breaking the new law.
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