Operating licences of credit institutions

In order to be allowed to engage in financial activities, the undertaking must have been granted an operating licence as a financial undertaking, i.e. credit institution (commercial banks, savings banks, credit undertakings) and investment firm. The operating licences of financial undertakings are subject to Chapter II of Act no. 161/2002 on Financial Undertakings and Chapter I, Part 2 of Act no. 115/2021 on Markets in Financial Instruments. See more detailed discussion of operating licences for investment firms.

The Central Bank of Iceland grants undertakings a licence to operate as credit institutions pursuant to Article 2 of the Act on Financial Undertakings. Article 3 of the Act on Financial Undertakings stipulates which activities are subject to a licence according to the Act. Requirements for the establishment and operation of financial undertakings are laid down in Chapter III of the Act and Chapter IV of the same Act specifies their operating licences. It further states that credit institutions are also permitted to engage in investment services and investment activities as provided for in the Act on Markets for Financial Instruments.

The Central Bank draws attention to the fact that, pursuant to Point 1 of Paragraph 1 of Article 110 of the Act on Financial Undertakings, it may impose administrative fines on any party that violates the provisions of Article 3, prohibiting pursuit of activities subject to licence without an operating licence.

Application and processing of operating licences for credit institution

Application

Article 5 of the Act on Financial Undertakings stipulates that an application for an operating licence must be in writing and accompanied by specified information, although this is not an exhaustive list. The Central Bank has prepared an overview of the information which it requires to be submitted with an application, as well as relevant supporting documents. The Central Bank emphasises that the application must be structured in a manner that corresponds to the relevant items in the summary in question.

In other respects, reference is made to Rules no. 771/2023 on the provision of information regarding the application for a licence to operate as a credit institution, and taking into account EBA/GL/2021/1 on the granting of licences to credit institutions.

According to Article 6 of the Act on Financial Undertakings, the Central Bank's decision regarding the granting of an operating licence must be notified to the applicant in writing as promptly as possible and no less than three months following the receipt of a complete application. The Central Bank must notify an applicant when an application is considered to be satisfactory. One can expect the processing of an application for an operating licence to take up to 12 months.

Refusal to grant an operating licence

Article 7 of the Act on Financial Undertakings stipulates that if an application does not fulfil the requirements of the Act in the estimation of the Central Bank, it shall refuse to grant an operating licence. Grounds must be given for the rejection and the applicant informed thereof within three months of receipt of a complete application. A refusal must, however, always be received by the applicant within 12 months from the receipt of an application. In this connection, it should be noted that the Central Bank must have scope to assess the information that accompanies the application, and therefore satisfactory information must have been received no later than 9 months from the time the original application was received by the Central Bank. Otherwise, the Central Bank will examine the application on the basis of available data.

Cost of operating licences for credit institutions

A fixed fee shall be paid for the processing of applications for operating licences from regulated parties, see details at " costs due to the operating licence of regulated entities".

Eligibility assessment of members of the board of directors and managing director of credit institutions

In parallel with the processing of an application for an operating licence for a credit institution, the Central Bank shall examine the assessment of the eligibility of the members of the board of directors and managing director of the undertaking, pursuant to Article 52 of the Act on Financial Undertakings.

Qualifying holding

In parallel with the processing of an application for an operating licence for a credit institution, the Central Bank may have to assess whether the shareholders are qualified to hold a qualifying holding, pursuant to Chapter VI of the Act on Financial Undertakings. Further information on the assessment.