Iceland to start easing 2008’s capital controls

Tim Wallace
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ICELAND’S government is offering international investors new routes to take their money out of the country, in the first step to normalise financial relations after seven years of capital controls.

The state stopped flows of capital out of the island nation in the financial crisis in an attempt to limit the damage to the economy.

Since then it has been rebuilding its financial strength and now feels able to open some channels for money to leave. But it will be tightly controlled to avoid a sudden outflow.

Investors holding assets from its failed banks will have to pay a 39 per cent tax on outflows. And those with assets like government bonds will have the option of selling them to the central bank at a fixed exchange rate, or of swapping them for new bonds, and waiting until they mature before removing the cash.

The government said the new rules cover assets worth 1.2 trillion crowns, or roughly £6bn. Investors such as hedge funds bought the assets of the failed banks at enormous discounts to their face value, in the hope that the assets would rise in value again in years to come. As a result they stand to make huge profits, when they can extricate their cash.