Covered Bonds
The issuance of covered bonds is governed by Act No. 11/2008, on Covered Bonds, cf. Point 7 of Paragraph 1 of Article 1(c) of Act No. 161/2002, on Financial Undertakings, and Rules No. 190/2023 on covered bonds. Act No. 7/2023, amending the Act on Covered Bonds and the Act on Financial Undertakings, which entered into force on 1 March 2023, transposes into Icelandic law Directive (EU) 2019/2162, on the issue of covered bonds and covered bond public supervision, and Regulation (EU) 2019/2160, amending Regulation (EU) No 575/2013 (CRR) as regards exposures in the form of covered bonds. The legal instruments are intended to create a common and homogeneous market for covered bonds within the European Economic Area (EEA).
Credit institutions can apply to the Central Bank of Iceland for a licence to issue covered bonds, cf. Chapter I of the Act on Covered Bonds. Their issuance, cover pool assets, disclosure to investors, resolution and insolvency proceedings of the issuer, supervision by an independent inspector, etc. shall be as provided for in Chapters II-VIII of the Act. The Central Bank monitors compliance with the Act, the application of sanctions and communications with the relevant authorities in the EEA, including the European Banking Authority (EBA), cf. Chapters IX and X of the Act.
The three systemically important financial undertakings, Arion banki hf., Íslandsbanki hf. and Landsbankinn hf., have all been granted licences to issue covered bonds.
Pursuant to Point 3 of Article 24(b) of the Act on Covered Bonds, the Central Bank shall publish a list of the covered bonds that are entitled to use the labels European Covered Bonds or European Covered Bonds (Premium), cf. Article 4(a) of the same Act. The main purpose of the disclosure is to increase transparency in the market, which benefits both issuers and investors. The list is updated regularly and at least quarterly.