STOCKHOLM, Feb 25 (Reuters) - Iceland’s central bank said in a statement it will consider offering exemptions to its Foreign Exchange Act for derivatives trading, marking another step towards lifting the country’s capital controls.
It said in a statement on Friday that it would accept applications for long-term hedging aimed at mitigating exchange rate risks and enabling firms to correct foreign exchange imbalances on their balance sheets.
The central bank’s move is aimed at assessing to what extent companies need and are interested in such hedging, as a way to prepare for full liberalization.
The capital controls, imposed at the height of the financial crisis in 2008 to shore up a tumbling krona, have left the country isolated from international financial markets and have hampered recovery.
In November last year, the Central Bank said Iceland could fully remove all its remaining capital controls during 2017 thanks to its growing foreign exchange reserves and a strong banking sector.
The central bank said exemptions would not be available for speculative derivatives trades at this stage due to their lower priority in the liberalisation process.
The bank said it would consider granting exemptions based on specific conditions including the length of the contracts involved, the hedge ratio, timing, and information disclosure to the central bank itself. (Reporting by Bjorn Rundstrom; Editing by Hugh Lawson)