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Agreement Reached Between Central Bank and Íslandsbanki

In a statement published this morning by the Central Bank of Iceland, an agreement has been reached to conclude the matter of Íslandsbanki’s controversial March 2022 sale of shares.

The statement can be read here, in Icelandic.

The Financial Supervisory Authority of the Central Bank of Iceland has been examining the alleged violations by Íslandsbanki of security trading regulations since last year. The examination by the Financial Supervisory Authority focused on the conduct of Íslandsbanki in the offering of the state’s 22.5% ownership stake in Íslandsbanki in March of last year.

The report states that “the management and CEO of Íslandsbanki have not implemented satisfactory governance practices and internal monitoring, which ensure effective and prudent management, including the failure to ensure that the bank complies with legal requirements regarding the provision of investment services and adherence to its own internal regulations.”

Íslandsbanki to Pay ISK 1.2 Billion in Fines

Preliminary findings of the Financial Supervisory Authority were sent to Íslandsbanki on December 30, 2022. In a letter dated January 6, 2023, Íslandsbanki expressed its intention to resolve the matter through a settlement with the Financial Supervisory Authority of the Central Bank.

By signing the agreement, Íslandsbanki admits to having violated specific provisions of the Act on Securities Transactions, in addition to committing to take remedial measures. Íslandsbanki is required to pay the fine to the treasury by November 1, 2023.

Among the violations described in the report are Íslandsbanki’s failure to record phone calls, providing customers with inaccurate information about the terms of the offering, and incorrectly assessing customers’ applications to be classified as professional investors. The March 2022 offering was nominally only open to professional and institutional investors. However, Íslandsbanki classified eight clients, who were retail investors, as professional investors without meeting the legal criteria.

Additionally, the bank did not take sufficient measures to prevent conflicts of interest, such as the involvement of directors and employees of the bank in the offering and adequate separation of duties, and the bank did not conduct a proper risk assessment in relation to its participation in the sales process.

Finally, Íslandsbanki was found to have failed to fully meet its obligations to operate in a fair, honest, and professional manner, in accordance with “normal and sound business practices.”

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