Iceland to Apply New Rules Before Capital Controls Are Removed

Iceland will apply “prudential rules” to reduce risks associated with unrestricted capital movements before the government removes capital controls blocking as much as $8 billion from leaving the economy, the central bank said.

“The pertinent ministries, the central bank, and the Financial Supervisory Authority will begin to formulate such rules in their final form, including proposing legislative amendments where appropriate,” Reykjavik-based Sedlabanki said in a statement on its website. The suggested rules “should limit foreign exchange risk in the financial system, as well as limiting foreign currency liquidity risk; furthermore, they will, in combination, limit the banks’ potential for excessive growth.”