Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698060737298.pdf (Liberia)
his is an English translation.

The original Icelandic text, as published in the Law Gazette (Stjórnartíðindi), is the authoritative text.

Should there be discrepancy between this translation and the authoritative text, the latter prevails.

Act No.

161/2002 on financial undertakings This is an unofficial translation as of per October 2011.

Chapter I.

Scope.

Purpose.

Definitions.


Article 1 The purpose of this Act is to ensure that financial undertakings are operated in a sound and reasonable manner in the interests of customers, shareholders, guarantee capital owners and the entire national economy.

This Act shall apply to Icelandic financial undertakings and to the activities of foreign financial undertakings in Iceland.

Article 1(a) Definitions.

For the purposes of this Act the following definitions shall apply: 1.
Close links: Close links are regarded as existing when: a. direct ownership ties or direct control over up to 20% of the shares or voting rights of an undertaking are in place; or b. control or a partnership is in place between parties in the understanding of this Act.

2.
Group of connected clients: A group is a „group of connected clients' if one or both of the following conditions are met: a. two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other(s); or b. two or more natural or legal persons between whom there is no relationship of control as set out in point (a) but who are to be regarded as constituting a single risk because they are so financially interconnected that, if one of them were to experience financial problems, especially with regard to funding or repayment of debts, the other or all of the others would be likely to encounter repayment difficulties.
3.

Qualifying holding: a direct or indirect holding in a company which represents 10% or more of its equity capital or voting rights or other holding which enables the exercise of a significant influence over the management of the company concerned.

4.

Participating interest: direct or indirect holding or, as applicable, another form of right to dispose of a holding, e.g.

voting rights.

5.
voting rights.

5.

Concert: Parties are regarded as acting in concert if they have entered into an agreement to the effect that one or more of them should together obtain a qualifying holding in a company, whether the agreement is formal or informal, written or oral or in any other form.

Parties shall always be deemed to act in concert if the following links exist, unless the opposite is proved to be the case: a.
Married couples, registered or co-habiting partners and the children of married couples or registered or co- habiting partners.

Parents and children are also regarded as parties acting in concert.

b.

Links between parties which, directly or indirectly, involve control by one party of the other, or if two or more companies are directly or indirectly under the control of the same party.

Regard shall be had for links between parties as provided in subsections (a), (c) and (d).
c. Companies in which a party directly or indirectly owns a significant participating interest, i.e.

where the party directly or indirectly owns at least 20% of the voting rights in the company concerned.

A company, its parent company, subsidiaries and associated companies are regarded as acting in concert.

Regard shall be had for links between parties as provided in subsections (a), (b) and (d); d. links between a company and its board of directors and a company and its managing directors.

6.
6.

Managing director: A person appointed by the board of directors of a financial undertaking to take charge of its operation in accordance with the provisions of legislation on companies or this Act of law, regardless of the name of the position in other respects.

7.

Member State: a state which is a member of the European Economic Area (EEA), a party to the Convention establishing the European Free Trade Association, or the Faeroe Islands.

8.
8.

Key employee: A natural person in a position of management, other than the managing director, who is empowered to make decisions which are capable of impacting the future development and performance of an undertaking.

9.

Control: The links between a parent company and a subsidiary, as defined in the Annual Accounts Act, or a comparable relationship between a natural or legal person and a company.

10.
10.

Financial undertaking: A commercial bank, savings bank, credit undertaking, electronic money undertaking, securities undertaking, securities brokerage or UCITS management company which is licensed pursuant to Article 6, cf.

Article 4.

11.
Article 4.

11.

Securitisation: A transaction or scheme, whereby the credit risk associated with a specific exposure or pool of exposures is tranched, in the following manner: 1. payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; and 2. the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme.

Chapter II.

Operating licence.

A.


Granting of an operating licence Article 2 Granter of operating licences The Financial Supervisory Authority shall grant operating licences pursuant to this Act.

A financial undertaking may commence operation upon receiving an operating licence from the Financial Supervisory Authority.
The Financial Supervisory Authority shall consult with competent authorities in other member states in assessing an application for an operating licence from a financial undertaking which is: a. a subsidiary of a financial undertaking or insurance company with an operating licence in another member state, b. a subsidiary of the parent company of a financial undertaking or insurance company with an operating licence in another member state, or, c. controlled by a party, either a natural person or legal entity, which has a dominant position in a financial undertaking or insurance company in another member state.
Consultation as provided for in the second paragraph shall include information on the eligibility of shareholders and management, cf.

articles 42 and 52.

Consultation as provided for in the second paragraph shall furthermore apply to on-going surveillance that conditions for operation are satisfied.

Article 3 Activities subject to operating licences The following activities shall be subject to operating licences pursuant to this Act: 1.

Receipt of repayable funds from the public: a.

Deposits.

b.
Deposits.

b.

Debt certificates.

2.

Granting of credit which is financed by repayable funds from the public.

3.

Asset leasing, if such activity forms the principal activity of an undertaking.

Asset leasing shall mean the leasing of movable assets or real estate where the lessor sells the lessee the leased property for the leasing fee agreed upon for a specified minimum rental period 4.

The issuing and handling of electronic money.

5.


Trade and services in financial instruments, in accordance with the Act on securities transactions: a.

Reception and transmission of instructions from clients in relation to one or more financial instruments.

b.

Carrying out instructions on behalf of clients.

c. Portfolio management.

d. Investment advice.

e. Underwriting in connection with the issue of financial instruments and/or placing of financial instruments.
f. Placing of financial instruments without underwriting and admission of financial instruments to trading in a regulated market.

g. operation of multilateral trading facilities (MTF).

6.

Operation of Undertakings for Collective Investment in Transferable Securities (UCITS).

The provisions of Chapter IV shall apply concerning other operating authorisations of financial undertakings.

The following parties do not fall within the scope of the Act: 1.
The central banks of member states of the European Economic Area and other public institutions handling or dealing with national credit issues.

2.

Insurance undertakings.

3.

Undertakings for collective investment in transferable securities, investment funds and pension funds, and custodians of such undertakings and funds.

4.

Lawyers and certified public accountants, provided that incidental services are involved, made available as a normal part of a more extensive activity in their field of operation.
5.

Persons providing services for their parent companies, subsidiaries or other subsidiaries of the parent company.

6.

Persons providing services only in connection with managing staff investment funds.

7.
7.

Persons who are not engaged in business which is subject to licence under this Act as their main business, assessed on a group basis, and who deal on own account in financial instruments or who provide services to clients of their main business involving commodity derivatives or derivative instruments pursuant to sub- paragraph 2 of point 2 of the first paragraph of article 2 of the Act on securities transactions.

8.
8.

Persons who provide investment advice as part of a service that does not fall within the scope of this Act in other respects, provided that the provision of such advice is not specifically remunerated.

9.

Persons whose main business is dealing on own account in commodities or commodity derivatives, provided that they do not form part of a group whose main business is subject to licence under this Act.
The Minister may also establish further provisions on exceptions pursuant to the third paragraph by means of a government regulation.

Article 4 Types of operating licences A financial undertaking may be granted a licence to operate as: 1.

A commercial bank, in accordance with points 1-6 of the first paragraph of article 3.

A commercial bank must, however, always have an operating licence and provide services in accordance with points 1 and 2 of the first paragraph of article 3.

2.
2.

A savings bank, in accordance with points 1-6 of the first paragraph of article 3.

A savings bank must, however, always have an operating licence and provide services in accordance with points 1 and 2 of the first paragraph of article 3.

3.

A credit undertaking, in accordance with sub-paragraph b of point 1 and points 2-6 of the first paragraph of article 3.
A credit undertaking must always have an operating licence in accordance with sub-paragraph b of point 1 and point 2 of the first paragraph of article 3.

A credit undertaking shall be authorised to call itself an investment bank.

4.

An electronic money undertaking, in accordance with point 5 of the first paragraph of article 3.

5.

A securities company, in accordance with point 6 of the first paragraph of article 3.

6.
6.

A securities brokerage pursuant to sub-paragraphs a and/or d in point 6 of the first paragraph of article 3.

7.

UCITS management company in accordance with sub-paragraph c of point 6 and point 7 of the first paragraph of article 3.

A financial undertaking which has been granted an operating licence in accordance with points 1-4 of the first paragraph shall be deemed to be a credit institution in the understanding of this Act.
A financial undertaking which is not permitted to deal on own account may still invest in financial instruments off their trading book for the purpose of investing their own funds.

The Financial Supervisory Authority may adopt more detailed rules under this provision.

Article 5 Application An application for an operating licence must be made in writing and shall be accompanied by: 1.

Information on the type of operating licence applied for, cf.

article 4, on activities subject to authorisation, cf.
the first paragraph of article 3, and other proposed activities, cf.

Chapter IV.

2.

The company's Articles of Association.

3.

Information on the operational structure, including information as to how the activities proposed will be carried out.

4.

Information on the internal organisation of the undertaking, including rules on supervision and work procedures.

5.

A business plan and budget, indicating for instance the expected growth and composition of own funds.

6.
6.

Information on founders, shareholders or guarantee capital owners, cf.

Chapter VI.

7.

Information on the board of directors, managing director and other management officers.

8.

Confirmation by an accountant that share capital or initial capital has been paid.

9.

Information on close links between the undertaking and individuals or legal entities, cf.

article 18.

10.

Other relevant information, as determined by the Financial Supervisory Authority.
Article 6 Granting of an operating licence A decision by the Financial Supervisory Authority on 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 Financial Supervisory Authority must notify an applicant when an application is considered to be satisfactory.

The operating licence must indicate what type of authorisation is involved, cf.
article 4, what activities subject to licence may be carried out on the basis of the same, and what other activities are to be carried out in accordance with Chapter IV.

An operating licence may not be issued which covers only ancillary services pursuant to article 25.
A financial undertaking intending to expand its business so that it includes other business pursuant to Chapter IV which is not covered by its licence shall apply to the Financial Supervisory Authority for a licence to engage in such business.

A financial undertaking may not commence activities before its share capital or guarantee capital has been paid in full in cash.
The Financial Supervisory Authority must publish notifications of licences granted to financial undertakings in the Legal Gazette (Lögbirtingablað).

Article 7 Refusal of an operating licence If an application does not fulfil the requirements of this Act, in the estimation of the Financial Supervisory Authority, the Authority shall refuse to grant an operating licence.
Grounds must be given for refusal of an application by the Financial Supervisory Authority and the applicant notified within three months of receipt of a complete application.

A refusal must, however, always be received by an applicant within 12 months from the receipt of an application.

Article 8 Register of financial undertakings The Financial Supervisory Authority shall keep a register of financial undertakings and their branches, including all the principal information on the undertakings concerned.
The Financial Supervisory Authority shall be notified in advance, as applicable, of any changes in previously submitted information, including information concerning the board of directors or managing directors, any increase or decrease in the number of branches, and when a financial undertaking no longer meets the conditions for the issue of an operating licence.

B.
Revocation of an operating licence Article 9 Grounds for revocation The Financial Supervisory Authority may revoke a financial undertaking's operating licence in whole or in part: 1. if the undertaking has been granted an operating licence based on incorrect information or by other improper means; 2. if the undertaking does not satisfy the provisions of this Act concerning initial capital, share capital, own funds or number of guarantee capital owners; 3. if the undertaking does not utilise its operating licence within twelve months of its granting, relinquishes the licence expressly, or ceases operation for more than six successive months; 4. if the shareholders, members of the board and management of the undertaking do not satisfy the qualification requirements laid down in articles 42 and 52; 5. if there are close links between a financial undertaking and individuals or legal entities in the manner referred to in article 18; 6. if measures adopted on the basis of provisions concerning Financial Supervisory Authority intervention in the assets, rights and obligations of a financial undertaking pursuant to article 100(a) have not been successful or if a ruling has been rendered concerning the winding-up of the undertaking pursuant to Chapter XII; 7. if the undertaking seriously or repeatedly infringes in any other manner against this Act, rules, statutes or regulations adopted by virtue of it.
Before any revocation may be enacted pursuant to the first paragraph, the undertaking must be allowed a suitable period to rectify the situation, if rectification is possible in the estimation of the Financial Supervisory Authority.
Notwithstanding revocation of an operating license as provided for in point 6 of the first paragraph, a provisional board of directors, winding-up committee handling the winding-up of a financial undertaking, or trustee managing its bankruptcy proceedings may, with the approval and under the supervision of the Financial Supervisory Authority, continue to pursue specified activities subject to license insofar as this is necessary for the administration of the estate and disposal of its interests.
The Financial Supervisory Authority may prohibit a financial undertaking from pursuing certain activities for which it is authorised in accordance with Chapter IV.

The provisions of the first and second paragraphs shall apply to such a prohibition.

Article 10 Notification of revocation and winding-up of a financial undertaking Revocation of the operating licence of a financial undertaking must be notified to its board of directors and grounds given in writing.
The Financial Supervisory Authority shall publish the notification in the Legal Gazette and advertise in the mass media.

If the financial undertaking operates branches or has services in another country such notification must be sent to the competent supervisory authorities in that country.

If the operating licence of a financial undertaking is revoked, the undertaking must be wound-up; the provisions ofChapter XII shall apply to the winding-up.
Article 10(a) Restrictions on the activities of financial undertakings The Financial Supervisory Authority is authorised to restrict the operations of individual establishments of a financial undertaking if it sees specific reasons to do so.

Also, the Authority is authorised to establish special conditions for the continued operations of individual establishments of a financial undertaking.
Furthermore, the Financial Supervisory Authority is permitted to restrict temporarily the operations that an undertaking is permitted to engage in, in part or in full, whether the undertaking is subject to an operating licence or not, if the Authority sees specific reasons to do so.
Before any restrictions are imposed pursuant to the first paragraph, the financial undertaking shall be granted an opportunity to rectify the situation, if rectification is possible in the estimation of the Financial Supervisory Authority.

Decisions of the Financial Supervisory Authority pursuant to this Article shall be reasoned in writing.
If the financial undertaking provides services in another Member State a notification concerning the substance of the decision and reasoning shall be sent to the competent regulatory authority in that State.

Chapter III.

Establishment and Activities Article 11 Requirements as to residence of founders Only individuals and legal entities resident in Iceland can be founders of financial undertakings.
Citizens and legal persons of other states in the European Economic Area and members of the European Free Trade Association, as well as citizens and legal persons in the Faeroe Islands, are exempt from the conditions of residence in the first paragraph.

The Minister is authorised to grant the same exemption to citizens of other states.
Article 12 Names Only financial undertakings may use, in their company name or as a clarification of their activities, the words “bank”, “commercial bank”, “investment bank”, “savings bank”, “electronic money undertaking”, “securities company”, “securities brokerage” and “UCITS management company”, either alone or in combination with other words, in accordance with their operating licence.
If there is a danger of confusion between the names of a foreign and a domestic financial undertaking operating in Iceland, the Financial Supervisory Authority may require one of the undertakings to be specifically identified.

A financial undertaking may not identify its activities in a manner which is open to the interpretation that this could be the Central Bank of Iceland.

Article 13 Legal form A financial undertaking must operate as a limited-liability company.
The provisions of Chapter VIII shall apply to savings banks.

Article 14 Share capital and guarantee capital On the granting of an operating licence the minimum paid-in initial capital of a financial undertaking shall be as specified in the second to eighth paragraphs.

Initial capital pursuant to the first sentence comprises paid-in share capital, the paid-in guarantee capital of a savings banks and cash money.
The share capital of a commercial bank and credit undertaking and the guarantee capital of a savings bank must amount to a minimum of EUR 5 million.

The guarantee capital of a savings bank operating in a delimited local market and possessing only operating permissions pursuant to points 1, 2, 4 and 5 of the first paragraph of article 3 must amount to a minimum of EUR 1 million.
In the application for an operating licence the applicant shall explain what constitutes the local delimited market of the savings bank in question.

The Financial Supervisory Authority shall determine what constitutes a local delimited market.

The share capital of an electronic money company must amount to a minimum of EUR 1 million.

The share capital of a securities undertaking must amount to a minimum of EUR 730 thousand.
The share capital of a financial undertaking which has not been granted a licence to deal on own account or underwrite financial instruments and possesses at least one of the licences in subparagraphs a – c of this paragraph, in addition to serving as custodian for the cash or financial instruments of its clients, shall amount to a minimum of EUR 125 thousand: a. reception and transmission of client instructions in relation to one or more financial instruments; b. execution of instructions on behalf of clients; or c. portfolio management.
The share capital of a securities brokerage must amount to a minimum of EUR 50 thousand.

The share capital of a UCITS management company must amount to a minimum of EUR 125 thousand.

The share capital shall be increased by an amount corresponding to 0.02% of the assets of UCITS and other collective investment schemes operated by the management company and exceeding EUR 250 million.

However, share capital as provided for in the first and second sentences is not required to exceed EUR 10 million.
For the purposes of this paragraph, the assets of a management company shall include the assets of UCITS and other collective investment schemes.

If share capital or guarantee capital pursuant to the first to eighth paragraphs is listed in Icelandic krónur, the official exchange rate (bid price), as posted at any time, shall be used.
If a financial undertaking requests a new operating licence the book value of its equity sheet, in lieu of share capital or guarantee capital, must comprise an amount not less than that provided for in the first to eighth paragraphs.

The capital base of a financial undertaking pursuant to articles 84 and 85 shall at no time be less than the amount provided for in the first to eighth paragraphs.

The Financial Supervisory Authority may adopt more detailed rules under this Article.
Article 15 Head office A financial undertaking, which has been granted an operating licence in accordance with article 6, must have its head office in Iceland.

Article 16 Auditing section A financial undertaking shall have an auditing section to handle internal auditing.

The internal auditing section shall operate independently of other departments in the organisation of the financial undertaking and form a part of its organisation chart and an element of its system of controls.
The employees of the internal auditing section shall jointly possess sufficient knowledge and experience to undertake the tasks of the section and the size of the staff shall reflect the size of the financial undertaking and its business activities.

Employees of the internal auditing section shall not be shareholders in the financial undertaking in question.

Further provisions on the activities of internal auditing sections may be established in a government regulation.
The board of directors of a financial undertaking shall engage the director of the undertaking's auditing section, who shall be responsible for internal auditing on its behalf.

The director shall possess expertise in the field of internal auditing, shall have completed a university degree which is relevant to his work and shall possess sufficient experience to carry out his functions.
The director shall not have been declared bankrupt at any time or been sentenced before a court of law for any criminal action in connection with the conduct of business under the Penal Code, Competition Act, legislation on public limited companies or private limited companies, the Accounting Act, Annual Accounts Act, Bankruptcy Act etc.
and the provisions of the Act on withholding public levies at source, as well as special legislation applicable to parties who are subject to public supervision of financial activities.

The Financial Supervisory Authority may at any time subject the qualifications of the director of the internal audit section to special investigation as necessary in the opinion of the Authority.

The internal auditing section shall report to the board of directors and the audit committee regularly on its activities.
Any comments regarded by the director of an internal auditing section as important must be addressed at meetings of the board of directors and recorded in the minutes.

The director of the internal audit section is entitled to attend meetings of the board of directors where his comments are on the agenda.

Once a year, at a minimum, the internal audit section shall report to the Financial Supervisory Authority on the conclusions of its reviews.
Furthermore, the internal audit section shall specifically and promptly report to the Financial Supervisory Authority any comments made and submitted to the board of directors.

The Financial Supervisory Authority may, having regard to the nature and scope of the operation of individual financial undertakings, grant an exemption from the operation of such an internal audit section, or individual aspects of its activities, and establish special conditions for undertakings granted such exemptions.
Article 17 Risk management system A financial undertaking must at all times have in place a secure risk management system for all its activities.

Financial undertakings shall have in place adequate and documented internal processes to assess the necessary size, composition and internal distribution of the capital base in light of the risks entailed by the business activity at any time.
The internal processes shall be reviewed regularly for the purpose of ensuring that they are adequate in the light of the nature, scope and diversity of the business activity.

A financial undertakings is required to conduct regular stress tests and document their underlying assumptions and outcomes.

The outcomes of stress tests shall be included on the agenda of the next meeting of the board of directors after their outcomes are available.
The Financial Supervisory Authority may adopt rules on the conduct of risk management, the positions of persons responsible for risk management in the organisational chart of a financial undertaking, and systems for the management of specific exposures in the activities of financial undertakings and financial conglomerates.

Article 17(a) Updated register of obligations A financial undertaking shall maintain a separate list of all parties using its credit services.
“Credit” under this article includes direct lending to the party in question, purchases of bonds issued by the party in question, purchases of the portfolio of another lender containing a claim against the party in question and any other services which may be regarded as constituting credit, provided that the gross debt of the party to the financial undertaking corresponds to a minimum of ISK 300 million.
A financial undertaking shall submit to the Financial Supervisory Authority an updated register as at each turn of the month.

The register shall be itemised by name and identifier of the borrower.

Furthermore, a similar register shall be submitted of parties with close links and groups of connected clients, to the extent that such parties are not included in the said register.
In other respects, the provisions of this Act and the provisions of the Act on the official supervision of financial operations shall apply to the handling of information contained in the register.

The Financial Supervisory Authority may establish further rules regarding the contents of the register.
Article 17(b) Borrowers' obligation to provide information If the Financial Supervisory Authority is of the opinion that the borrowings of a single party who is included in a register of obligations under article 17(a) and is not subject to supervision of financial operations could have a systemic impact, the Authority may require information from the party in question regarding his obligations.
Obligations under this article include direct borrowings, drawn lines of credit, issues of debt instruments of the party in question, purchases of debt insurance or payment insurance for borrowings, put and call options and any other services, on and off the balance sheet, that the party in question has used and may be regarded as the equivalent of loan services or guarantees.
If a party refuses to supply the Financial Supervisory Authority with information pursuant to the first paragraph the Financial Supervisory Authority may instruct entities under supervision that there should be no further services on the part of regulated entities to the party in question.

The same shall apply if the supply of information by the party in question is inadequate.

Decisions of the Financial Supervisory Authority pursuant to this article shall be reasoned in writing.
Article 18 Close links An operating licence shall not be granted if close links, as defined in point 1 of article 1(a), between a financial undertaking and individuals or legal entities obstruct supervision of the undertaking by the Financial Supervisory Authority.

The same shall apply if acts or rules applying to such connected parties obstruct supervision.
Article 19 Good business practices and customs A financial undertaking shall operate in accordance with proper and sound business practices and customs on the financial market.

The Financial Supervisory Authority shall establish rules on what constitutes normal and sound business practices on the part of a financial undertaking pursuant to this Act.

Financial undertakings are required to observe accepted guidelines on the governance of such undertakings.
To this end they shall, among other things, publish an annual statement concerning the governance of the undertaking in a separate chapter of their annual financial report or annual report and provide an account of governance on the undertaking's website and publish on the same site a statement on their governance.

A financial undertaking shall specify on its website the names and proportional holdings of all persons owning an interest of 5% or more in the undertaking.
Article 19(a) Complaints committee A financial undertaking shall have information accessible as to what regulatory and legal remedies are available to its clients in the event of a dispute arising between a client and the financial undertaking, including referrals to the Complaints Committee on Transactions with Financial Firms.

Financial undertakings are required to participate in the Complaints Committee on Transactions with Financial Firms.
The Complaints Committee on Transactions with Financial Firms functions in accordance with an agreement between the Minister, the Consumers' Association and the Icelandic Financial Services Association and in accordance with its own statutes.

The chairman of the committee shall meet the qualifications required of a district court judge.
The Committee shall issue reasoned rulings, which cannot be appealed to administrative authorities, but the parties to a case may refer their dispute to the courts of law by normal procedure.

The Minister shall undertake the publication of the Committee's statutes in the B-series of the Official Journal.

Article 19(b) Information on clients Financial undertakings shall establish rules on maintaining information on individual clients.
They shall include information on employees' access to information for the purpose of their work, procedures for the communication of information to internal audit, government regulators and the police and the procedures for control of the implementation of the rules.

The rules shall be accessible to clients.

Chapter IV.

Authorised Activities A.


Commercial banks, savings banks and credit undertakings Article 20 Authorised activities of commercial banks, savings banks and credit undertakings The activities of commercial banks and savings banks may include the following: 1.

Acceptance of deposits and other repayable funds from the public.

2.

Lending activities, including: a. consumer credit; b. long-term mortgages; c. factoring and the purchase of debt instruments; and d. commercial credit.

3.
3.

Financial leasing.

4.

Payment Services in accordance with the Act on Payment Services.

5.

Issuing and administering of payment documents e.g.

travellers' cheques and bankers' drafts.

6.

Providing guarantees and commitments.

7.

Trading for own account or for account of customers in: a. money-market instruments (cheques, bills, other comparable instruments, etc.

); b. foreign exchange; c. futures and swaps (options); d. exchange and interest-rate instruments; and e. transferable securities.

8.
8.

Participation in placing securities, services related to such placing and admission of securities to trading in a regulated market.

9.

Providing advice to undertakings on capital structure, strategy and related issues, and advice as well as services related to mergers and acquisitions.

10.

Money broking.

11.

Portfolio management and advice.

12.

Safekeeping and administration of securities.

13. Credit reference (credit rating) services.

14.

Safe custody services.


Activities of credit undertakings may include points 1 to 14 of the first paragraph, with the exception that credit undertakings may not accept deposits.

Commercial banks, savings banks and credit undertakings are authorised to trade in securities as provided for in article 25.
Article 21 Other services and ancillary activities Commercial banks, savings banks and credit undertakings may pursue other activities naturally linked to their authorised activities listed in article 20.

In addition to services as provided for in article 20, commercial banks, savings banks and credit undertakings may pursue ancillary activities, provided this is a normal extension of the undertaking's financial services.
The provisions of the first sentence of this paragraph shall also apply when a financial undertaking has a holding in or participates in other business activity.

Notification must be sent to the Financial Supervisory Authority of any intention to pursue the activities provided for in this article.

Such notification must be accompanied by information on the proposed activity deemed to be satisfactory by the Financial Supervisory Authority.
If the Financial Supervisory Authority raises no objection to the proposed activity within one month of receiving satisfactory notification, this shall be interpreted as authorisation for commencing the activity.

The Financial Supervisory Authority may require that a separate company pursue this activity, in which case it must notify the party concerned of its decision within the time limit specified above.
Failure to send a notification in accordance with this paragraph may result in prohibition of the activity by the Financial Supervisory Authority or its demand that the activity be pursued by a separate company.

Commercial banks, savings banks and credit undertakings may, pursuant to special agreement upon receiving the authorisation of the Financial Supervisory Authority, undertake to provide postal service on behalf of a party authorised to provide such service.
They are furthermore permitted to provide services on behalf of other entities, such as insurance companies, pension funds and other financial undertakings, provided that such activities are not deemed by the Financial Supervisory Authority to prejudice their ability to provide services in accordance with their operating licenses or prejudice its own ability to regulate the activities.
The Financial Supervisory Authority shall be notified in advance of the intentions of the entity in question so that its assessment is available before provision of the service commences.

Article 22 Temporary activities and take-over of assets Commercial banks, savings banks and credit undertakings may only pursue activities other than those listed in this Chapter on a temporary basis and for the purpose of concluding transactions or reorganising the activities of customers.
A reasoned notification to this effect shall be sent to the Financial Supervisory Authority.

If a commercial bank, savings bank or credit undertaking, or their subsidiary, has needed to take action pursuant to the first sentence and taken over at least a 40% holding in its client, the provisions of Chapter VII and VIII of Act No.

108/2007 on securities transactions shall apply to the client, as applicable.
The Financial Supervisory Authority is permitted to grant an exemption from the provisions of the third sentence, provided that financial reorganisation is completed within six months from the time that the commercial bank, savings bank or credit undertaking, or their subsidiary, commenced the operation.
The Financial Supervisory Authority shall assess whether the financial conditions in the first sentence are met, and reorganisation shall be completed before twelve months have passed from the time that operations pursuant to the first sentence began.

The Financial Supervisory Authority may extend the deadline pursuant to the fifth sentence, and an application shall contain reasoning regarding the circumstances that prevent the sale.
Commercial banks, savings banks and credit undertakings may take over assets to secure payment of claims.

Such assets must be sold as soon as this is feasible.

Article 23 Authorisation for insurance activities Commercial banks, savings banks and credit undertakings may operate an insurance company as a separate company.

B.
B.

Other financial undertakings Article 24 Authorised activities of electronic money undertakings The activities of an electronic money undertaking shall include the issuing and administering of electronic money.
Activities by an electronic money undertaking, apart from the issuing of electronic money, shall be limited to: 1. closely related financial services or other services, such as administration of electronic money by pursuing operational or support aspects linked to the issuing of the same and the issuing and administration of other means of payment, with the exception of any and all types of credit provision; and 2. storage of data from undertakings or the public sector in the electronic medium in which electronic money is stored.
Notwithstanding the provisions of the first paragraph and Chapter V, a foreign electronic money undertaking providing services in Iceland may only issue electronic money.

The same shall apply to an Icelandic electronic money undertaking providing services abroad.

Article 25 Authorised activities of securities undertakings Activities of a securities undertaking may include the following factors in connection with trading in financial instruments: 1.

Services: a.
Services: a.

Reception and transmission of client instructions in relation to one or more financial instruments.

b.

Execution of instructions on behalf of clients.

c. Dealing in financial instruments on own account.

d. Portfolio management.

e. Investment advice.

f. Underwriting of financial instruments and/or placing of financial instruments.

g. Placing of financial instruments without underwriting and admission of financial instruments to trading in a regulated market.
h. Operation of multilateral trading facilities (MTF).

2.

Ancillary services: a. Safekeeping and administration of one or more financial instruments for the account of clients, including custodianship and related services, such as cash/collateral management.

b.

Granting of credits, guarantees or loans to an investor, enabling him/her to carry out transactions with one or more financial instruments if the securities undertaking granting the credit or loan handles the transaction.
c. Providing advice to undertakings on capital structure, strategy and related matters, and provision of advice and services on mergers and acquisitions.

d. Services related to underwriting.

e. Foreign-exchange services where these form a part of the provision of investment services.

f. Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments.
g. Services related to the underlying assets of derivatives provided for in sub-paragraphs (e) and (h) of point 2 of the first paragraph of article 2 of the Act on securities transactions where these are connected to services provided pursuant to points 1 and 2.
Securities undertakings falling within the scope of the fourth paragraph of article 14 which are authorised to carry out instructions relating to financial instruments on behalf of clients are permitted to safeguard such financial instruments on their own account, provided that the following conditions are met: a.

Such positions in financial instruments may only result from a situation where it was not possible to carry out a client's instructions precisely.

b.
b.

The total value of financial instruments pursuant to this paragraph must not exceed 15% of the securities undertaking's own funds.

c. The provisions of Chapter IV (C) and Chapter X must be met.

d. The actions in question must be temporary and restricted to the time limits necessary to carry out the instructions.
Article 26 Authorised activities of securities brokerages The activities of securities brokerages shall include acting as an intermediary in buying and selling financial instruments and/or providing investment advice on securities trading in return for remuneration.
A securities brokerage is not permitted to deal on its own account and may only accept clients' cash or securities as part of its activities for a limited period, provided that this is necessary for concluding a transaction in which the undertaking has served as an intermediary.

Securities brokerages must provide insurance against losses they may cause to their clients through their activities.
Detailed provisions on the amount of insurance and minimum conditions in other respects shall be laid down in a regulation.

Article 27 Authorised activities of a management company The authorised activities of a management company shall always include the operation of UCITS and other funds for collective investment.

A management company shall also be authorised to pursue the following activities: 1.

Portfolio management.

2.

Investment advice.

3.


Custody and management of financial instruments in collective investment.

A management company authorised to manage assets must seek a client's approval before investing in UCITS and other funds for collective investment.

A management company may not acquire securities with voting rights which will enable it to significantly influence the management of the securities issuer.
C. Holdings in undertakings and large exposures Article 28 Maximum qualifying holdings A financial undertaking is not permitted to own a qualifying holding in individual undertakings which are not financial undertakings or undertakings connected with the financial sector, amounting to more than 15% of the capital base of the financial undertaking concerned, net of the deductions provided for in the fifth paragraph of article 85.
Undertakings connected with the financial sector” refers to undertakings which are not credit institutions and which operate primarily in acquiring holdings or pursue any of the activities referred to in points 2 to 12 of the first paragraph of article 20.

The aggregate of qualifying holdings pursuant to the first paragraph shall not exceed 60% of the capital base of a financial undertaking, net of the deductions provided for in the fifth paragraph of article 85.
The total book value of holdings acquired by a financial undertaking shall not exceed 100% of its capital base.

Holdings to be deducted when calculating the capital base, and holdings in undertakings forming a consolidation, shall not be included in the calculation of the ratios referred to in the first paragraph and the first and second sentences of this paragraph.
The temporary holdings of a financial undertaking, excluding trading book holdings, in a company in connection with a financial restructuring designed to defend the claims of the financial undertakings shall be excluded in the calculations pursuant to the first paragraph and the first two sentences of this paragraph.
Holdings of a financial undertaking may exceed the ratios referred to in the first paragraph or the first sentence of the second paragraph, provided that the amount in excess is deducted in calculating the capital base of the undertaking concerned.

Should the holdings concurrently exceed the ratios referred to in both the first paragraph and the first sentence of the second paragraph, the greater of the excess amounts shall be deducted in calculating the capital base of the undertaking concerned.
Financial undertakings must provide the Financial Supervisory Authority with an itemised statement of holdings in other financial undertakings which they have acquired or accepted as collateral.

In calculating ratios pursuant to the first and second paragraphs, account shall be taken of forward contracts and other derivatives which a financial undertaking has concluded for its own shares.

The Financial Supervisory Authority may adopt more detailed rules on this point.
Article 29 Own shares The aggregate holdings of a financial undertaking and its subsidiaries shall not exceed a nominal amount corresponding to 10% of the nominal price of the paid-in share capital or guarantee capital of the undertaking.

If the undertaking acquires more of the share capital or guarantee capital by the completion of a transaction pursuant to article 22 the Financial Supervisory Authority shall be notified without delay.
The Financial Supervisory Authority may grant a time limit of up to three months to bring the holdings within the limits prescribed by law.

In other respects, the provisions of Chapter VIII of the Act on public limited companies shall apply to the permission of financial undertakings to acquire their own shares.
Calculations pursuant to the first sentence of the first paragraph shall take account of forward contracts and other derivative contracts which a financial undertaking has concluded for its own shares.

Article 29(a) Lending A financial undertaking or its subsidiaries are not permitted to grant loans secured by a mortgage on shares or guarantee capital certificates issued by the undertaking.

The same applies to other contracts if the underlying exposure is to own shares.
The Financial Supervisory Authority is authorised to issue rules exempting specific contracts from the prohibition in the second sentence, provided that such contracts do not increase the lending risk of a financial undertaking.
A financial undertaking is prohibited from extending a loan or other credit to a member of the board of directors, the managing director, a key employee or any person owning a qualifying holding in the undertaking, or a party having close links with such persons, which constitutes an exposure, except against secure collateral.

The amount of an exposure pursuant to the first sentence shall not exceed 1% of the capital base, but may in any case amount to up to ISK 100 million.
The Financial Supervisory Authority shall establish rules on the calculation of the amount of exposure pursuant to the second paragraph and what constitutes secure collateral.
The Financial Supervisory Authority shall establish rules on the manner in which loans secured by shares or guarantee capital in another financial undertaking should be included in the calculation of the risk base and capital base and the assessment of capital needs in order to ensure that the lending does not create systemic risk in the financial system.
The rules should also cover the procedures for assessing loans secured by a mortgage on asset portfolios, such as custody accounts and UCITS which include shares or guarantee capital certificates, whether they are issued by the financial undertaking itself or other financial undertakings, so that such procedures comply with the provisions of the first paragraph and the first sentence of this paragraph.

The provisions of the first and second paragraphs apply to lending by subsidiaries, as applicable.
Article 29(b) Exposures to transferred credit risk In the calculation of capital requirement, a commercial bank, credit undertaking, savings bank or electronic money undertaking which is neither the originator, sponsor nor original lender shall not carry credit risk in the form of securitised credit exposure, unless the securitisation complies with rules established by the Financial Supervisory Authority.
In the calculation of capital requirement, an originator, sponsor or original lender shall not exclude securitised exposures sold to another party, unless the originator, sponsor or original lender retain a certain proportion of the risk in compliance with the rules established by the Financial Supervisory Authority.
Article 29(c) Securitisation disclosure requirements Originators or sponsors shall disclose to investors the level of their commitment relating to securitisation pursuant to Article 29(b).They shall ensure that prospective investors have access to all materially relevant data on the credit quality and default performance of the underlying assets, cash flows and collateral as well as such information that is necessary to conduct comprehensive and sound stress tests on the cash flows and collateral values supporting the underlying exposures.
For that purpose, materially relevant data shall be determined as at the date of the securitisation and thereafter, where appropriate due to the nature of the securitisation.
Article 29(d) Rules of the Financial Supervisory Authority regarding securitisation The Financial Supervisory Authority shall establish further rules on securitisation, including rules on compliance with articles 29(a) and 29(c), stating, inter alia, the level of risk that an originator, sponsor or original lender should retain and responses to general market liquidity stress.
In the event of violation of the rules of the Financial Supervisory Authority, the Authority shall require a minimum of a 250% increase in risk weight in calculating capital requirement.

If a violation is insignificant, in the opinion of the Financial Supervisory Authority, the increased capital requirement may be waived.
Article 29 (e) Publication of surveys of the Financial Supervisory Authority The Financial Supervisory Authority shall annually publish the findings of its surveys of compliance with the rules established under Articles 29(b) and 29(d).

If an originator, original lender or sponsor is in breach of obligations pursuant to Article 29(b) or the rules of the Financial Supervisory Authority pursuant to Article 29(d), the Financial Supervisory shall publish a summary describing the measures taken.
Article 30 Limits to large exposures Exposure resulting from one client, or a group of connected clients, shall not exceed 25% of a financial undertaking's capital base, cf.

articles 84 and 85.

However, the provisions of the first sentence do not apply to securities undertakings which are not licensed pursuant to subsections (c) and (f) of point 1 in the first paragraph of Article 25, securities brokerages and management companies of undertakings for collective investment in transferable securities.
If there is any doubt as to which parties pertain to a group of connected clients a financial undertaking is required to link the parties unless the financial undertaking in question can demonstrate the contrary.

The aggregate of large exposures shall not exceed 400% of the capital base; a “large exposure” refers to any exposure amounting to 10% or more of the capital base.
“Exposure” in the first paragraph refers to loans, securities portfolios, holdings and guarantees granted by a financial undertaking and other obligations to the financial undertaking.

If a financial undertaking's exposures exceed the limits provided for in the first paragraph, such exposures shall be notified to the Financial Supervisory Authority without delay.

The Financial Supervisory Authority may grant the undertaking a time limit to bring its obligations into compliance.
The Financial Supervisory Authority shall set detailed rules on large exposures of financial undertakings and financial conglomerates.

Chapter V. International Activities of Financial Undertakings A.
Activities of foreign financial undertakings in Iceland Article 31 Branches of financial undertakings within the EEA A foreign financial undertaking, which is established and holds an operating licence in another member state of the European Economic Area (EEA), may establish a branch in Iceland two months after receipt by the Financial Supervisory Authority of notification of the proposed activity from the competent authority in the undertaking's home state.
The branch may pursue any of the activities covered by this Act, provided the undertaking is authorised to do so in its home state.
Swiss and Faeroese financial undertakings may establish branches in the manner provided for in this paragraph, provided that the same requirements are made of them as of financial undertakings established in a member state of the European Economic Area, and provided that a co- operation agreement has been concluded between the Financial Supervisory Authority and the competent Swiss or Faeroese authorities.
A “branch” shall mean a place of business which by law is part of a financial undertaking and which handles directly, in full or in part, those activities pursued by financial undertakings.

The Financial Supervisory Authority shall confirm that the foreign undertaking is subject to supervision in its home state and check its authorisations to operate and activities.
The provisions of the Act on public limited companies, concerning branches of foreign limited-liability companies, shall not apply to branches as referred to in the first paragraph.

Article 32 Services provided by a financial undertaking within the EEA without establishing a branch A foreign financial undertaking, which is established and has an operating licence in another member state of the EEA, may provide services in Iceland in accordance with this Act without establishing a branch.
Such services may not commence until the Financial Supervisory Authority has received notification thereof from competent authorities in the undertaking's home state.

Authorisations to provide services in Iceland from abroad in accordance with this article may not, however, be more extensive than the operating authorisations held by the undertaking in its home state.
Swiss and Faeroese financial undertakings may provide services in the manner provided for in this paragraph, provided that the same requirements are made of them as of financial undertakings established in states of the European Economic Area, and provided that a co-operation agreement has been concluded between the Financial Supervisory Authority and the competent Swiss or Faeroese authorities.
Article 33 Provision of services or establishment of a branch by a financial undertaking outside the EEA The Financial Supervisory Authority may authorise a financial undertaking established in a state outside the European Economic Area to open a branch in Iceland or to provide services in this country without establishing a branch.
The requirement for the granting of such authorisation is that the undertaking be authorised to pursue activity in its home state parallel to that which it proposes to pursue in Iceland and that such activity be subject to comparable supervision in the home state.
Article 34 Recourses relating to the activities of foreign financial undertakings The Financial Supervisory Authority may prohibit a foreign financial undertaking from pursuing activities in Iceland if the undertaking in question has blatantly or repeatedly violated the provisions of this Act or statutes and rules adopted by virtue of it, or violated the provisions of other Acts on financial undertakings, provided the remedies provided in this Act have not succeeded in putting a stop to the above-mentioned violations.
Before taking a decision on a prohibition in accordance with the first paragraph, the Financial Supervisory Authority may take provisional action, if there is urgent cause for so doing, in order to protect the interests of the depositors, investors and customers of a financial undertaking.

The procedure as provided for in the first and second paragraphs shall accord with provisions of the EEA Agreement as appropriate.
The Financial Supervisory Authority is permitted to require from branches of financial undertakings licensed to engage in securities transactions any information necessary to ascertain whether the branch is compliant with applicable rules on investor protection and transaction transparency.
If the Financial Supervisory Authority has reason to believe that a foreign financial undertaking operating in Iceland, with or without a branch, is in violation of the provisions of this or other acts of law, the Authority shall notify the competent authority in the home country, provided that the violation involves provisions which are not subject to regulation by the Financial Supervisory Authority as a host state.
If the actions taken by the competent authority in the home country are insufficient to stop the unlawful conduct of the undertaking, the Financial Supervisory Authority, following notification of the competent authority of the home country, may take the actions necessary to protect investors and the sound operation of financial markets in Iceland.

This includes the authority to prevent the non-compliant undertaking from conducting further business in Iceland.
The Commission of the European Union shall be promptly notified of any such measures.

If the Financial Supervisory Authority has verified that the branch of a foreign financial undertaking with business operations in Iceland has violated the provisions of this Act or other legislation which is subject to regulation by the Financial Supervisory Authority as host state, the Authority shall require the immediate cessation of the conduct in question.
If the branch does not comply, the Financial Supervisory Authority shall take the actions necessary to prevent the unlawful conduct.

The Financial Supervisory Authority shall notify the competent authority in the home state of its actions.
If the branch persists in its unlawful conduct, the Financial Supervisory Authority shall, following notification to the competent authority in the home state, take all necessary action to prevent the conduct in question or impose appropriate sanctions and, as necessary, prevent the non-compliant undertaking from conducting further business in Iceland.

The Commission of the European Union shall be promptly notified of any such measures.
Article 35 Regulation The Minister shall issue a Regulation on authorisations of foreign financial undertakings to operate in Iceland and of Icelandic financial undertakings to operate abroad.
The Regulation shall include provisions on supervision of and specific requirements for the branches and agents' offices of foreign financial undertakings, on authorisations of undertakings connected with the financial sector and subsidiaries of financial undertakings to pursue financial activities in Iceland and on authorisations for Icelandic undertakings connected with the financial sector to pursue financial activities abroad.

B.
B.

Activities of Icelandic financial undertakings abroad Article 36 Notification of the establishment of a branch An Icelandic financial undertaking intending to operate a branch in another EEA member state, a member state of the European Free Trade Association or the Faeroe Islands shall notify the Financial Supervisory Authority of such intention in advance.
A notification as provided for in the first paragraph must include information as to the state in which a branch is to be established, a description of the activities of the branch, its structure and proposed activities, together with information on the address of the branch and the names of its management.
No less than three months after receiving the information provided for in the second paragraph, the Financial Supervisory Authority shall send a confirmation to the competent authorities of the host state that the proposed activities are in accordance with the undertaking's operating licence.
Furthermore, the Financial Supervisory Authority must send the competent authorities of the host state information on the undertaking's own funds, liquidity, deposit guarantees and compensation system to protect branch customers.

The undertaking in question must be notified concurrently that the above-listed information has been sent.
The Financial Supervisory Authority may prohibit the establishment of a branch as provided for in the first paragraph if it has legitimate grounds to presume that the management and financial status of the financial undertaking concerned is not sufficiently sound.

The position of the Financial Supervisory Authority must be notified to the undertaking as promptly as possible and no later than three months following the receipt of satisfactory information as provided for in the second paragraph.
A financial undertaking must notify the Financial Supervisory Authority and competent authorities of the state where it operates a branch of any changes which may occur to information previously provided in accordance with the second paragraph no later than one month before the proposed changes take effect.Also, the Financial Supervisory Authority shall be notified of any proposed closure of the branch within the same time limit.
Article 37 Notification of service without the establishment of a branch A financial undertaking, intending to provide services in accordance with this Act in another EEA member state, a member state of the European Free Trade Association or the Faeroe Islands without opening a branch, shall notify the Financial Supervisory Authority of such intention in advance.

The notification must indicate which state is concerned and what the proposed activities will involve.
No later than one month after receiving a notification as provided for in the first paragraph, the Financial Supervisory Authority must forward a notification to the competent supervisory authority in the state concerned together with a confirmation that the operating licence of the financial undertaking authorises the proposed activities.
The Financial Supervisory Authority may prohibit activities in accordance with this article if it has legitimate grounds to presume that the management and financial status of the financial undertaking concerned is not sufficiently sound.

The undertaking must be notified of the position of the Financial Supervisory Authority as promptly as possible.
Any changes to aspects previously notified in accordance with this article must be notified to the Financial Supervisory Authority and competent authority in the state concerned no later than one month prior to their implementation.
Article 38 Activities outside the EEA If a financial undertaking intends to commence activities in a state outside of the EEA it must notify the Financial Supervisory Authority in advance thereof, providing a description of the proposed activities together with other information which the Financial Supervisory Authority regards as necessary in this connection.
The Financial Supervisory Authority may prohibit activities as provided for in the first paragraph if it has legitimate grounds to presume that the management or financial status of the financial undertaking concerned is not sufficiently sound.

The undertaking must be notified of the position of the Financial Supervisory Authority as promptly as possible.
Article 39 Purchase of shares in a foreign financial undertaking If a financial undertaking intends to purchase or exercise a qualifying holding in a foreign financial undertaking, it must notify the Financial Supervisory Authority thereof in advance.

The Financial Supervisory Authority may prohibit such actions if it has legitimate grounds to presume that information provision for this activity or for the consolidation will not be sufficiently reliable or may impede supervision.
The undertaking must be notified of the position of the Financial Supervisory Authority and the grounds for such as promptly as possible.

Chapter VI.

Holdings and Exercising Holdings Article 40 Notification of the Financial Supervisory Authority A party intending to acquire, alone or in partnership with others, a qualifying holding in a financial undertaking shall notify the Financial Supervisory Authority in advance of its intentions.
The same applies if a party, alone or in partnership with others, intends to increase its holdings so that the qualifying holding exceeds 20%, 25%, 33% or 50%, or if it increases to the point where the financial undertaking becomes its subsidiary.
Article 41 Information in a notification The notification sent to the Financial Supervisory Authority pursuant to article 40 shall be accompanied by information on the following: 1. the name and address of the person intending to acquire or increase a qualifying holding; 2. the name of the financial undertaking which is the target of the investment; 3. the size of the holding or voting rights forming the target of the investment; 4. plans for changes in the pursuits or management of the financial undertaking; 5. financing of the investment; 6. the financial position of the person intending to acquire or increase a qualifying holding; 7. the current and proposed business ties of the person intending to acquire or increase a qualifying holding in the financial undertaking in question; 8. the financial experience of the person intending to acquire or increase a qualifying holding; 9. the ownership, service on the board of directors or other participation by the person intending to acquire or increase a qualifying holding in the business activities of other legal persons; 10. any penal sanctions to which the person intending to acquire or increase a qualifying holding may have been sentenced and whether he is subject to investigation; 11. close links of the person intending to acquire or increase a qualifying holding with other legal persons; 12. any other information which the Financial Supervisory Authority considers necessary and makes public.
If the party intending to acquire or increase a qualifying holding is a legal person the list of items in the first paragraph shall apply to the legal person itself, the members of its board, its managing director and individuals and legal persons owning qualifying holdings in the legal person.

Information shall furthermore be provided on the legal person's auditor.

This information shall be documented as appropriate.
The Financial Supervisory Authority may grant exemptions from submission of this information if the legal person does not have the means of obtaining it or if the person intending to acquire or increase a qualifying holding is subject to official financial regulation in another state and similar information can be obtained from the regulatory authority of that state.

The same applies if the person is subject to regulation by the Financial Supervisory Authority.
Article 42 Evaluating the qualification of applicants No later than two business days from the receipt of notification pursuant to article 40 the Financial Supervisory Authority shall confirm its receipt.
If the Financial Supervisory Authority is of the opinion that more detailed information needs to be obtained than the information listed in the first paragraph of article 41 from the party intending to acquire or increase a qualifying holding, the Authority may request such information from the party in question.

This request shall be made no later than fifty business days from the receipt of the notification.
The Financial Supervisory Authority has sixty business days to assess whether it considers the party intending to acquire or increase a qualifying holding qualified to exercise the holding.

If additional information is requested from the party in question, as provided in the second sentence, the wait for the information is added to the number of days pursuant to the fourth sentence up to a maximum of twenty business days.

The Financial Supervisory Authority may again request further information.
Such a request shall not extend the above time limits.

The Financial Supervisory Authority shall assess whether a party intending to acquire or increase a qualifying holding is qualified to own the holding, having regard to the sound and prudent operation of the financial undertaking.
The assessment of the Financial Supervisory Authority shall be based on the following: 1. the reputation of the party intending to acquire or increase a qualifying holding; 2. the reputation and experience of any person who will direct the business of the financial undertaking as a result of the proposed acquisition or increase in holdings; 3. the financial soundness of the party intending to acquire or increase a qualifying holding in the financial undertaking, in particular in relation to the type of business pursued and envisaged in the financial undertaking; 4. whether the ownership by the party intending to acquire or increase a qualifying holding could be expected to impede supervision of the financial undertaking in question or influence whether the undertaking will comply with the laws and rules applicable to its business activities.
In making this assessment consideration shall be had for earlier dealings of the party intending to acquire or increase a qualifying holding with the Financial Supervisory Authority and/or other public authorities, to whether its position in a group of undertakings to which it will belong could, in the estimation of the Financial Supervisory Authority, obstruct its normal regulatory work, and whether the laws or rules applicable to the party intending to acquire or increase a qualifying holding could obstruct normal supervision; 5. whether there are grounds to suspect that the proposed acquisition of or increase in qualifying holding could lead to money laundering or terrorist financing or that the proposed acquisition or increase could increase the risk of such activities being permitted in the financial undertaking in question.
If the party intending to acquire or increase a qualifying holding is a financial undertaking or insurance company possessing an operating licence in another Member State, or is the parent company of such a party or a natural person or legal person controlling such a party, and if the company in which such party intends to acquire a qualifying holding would become its subsidiary or subject to its control following the acquisition of the holding, the Financial Supervisory Authority shall consult with the competent regulatory authorities in accordance with the third paragraph of article 2 in the course of its assessment.
Article 43 Notification to a party who is not considered eligible Should the Financial Supervisory Authority conclude that a party intending to acquire or increase a qualifying holding is ineligible to exercise the holding, the party should be so notified.

The Financial Supervisory Authority shall provide reasoning for its conclusion to the party in question.
The conclusion of the Financial Supervisory Authority pursuant to the first paragraph shall be in writing and notified to the party intending to acquire or increase a qualifying holding no later than two business days after the conclusion was reached.
Should the conclusion of the Financial Supervisory Authority not be available before the time limit provided for in article 42 it may be concluded that the Financial Supervisory Authority has no objections to the plans of the party intending to acquire or increase a qualifying holding in the financial undertaking in question.

Article 44 Delay.
Article 44 Delay.

Renewal of notification If a party intending to acquire or increase a qualifying holding has not undertaken the investments notified to the Financial Supervisory Authority within six months from the time that its conclusion was made available, such party shall notify the Authority again of its proposed investment.

The provisions of articles 40-43 shall then apply to that notification and the response of the Financial Supervisory Authority.
Article 45 Notification not sent If a party intending to acquire or increase a qualifying holding fails to notify the Financial Supervisory Authority of its proposed acquisition or increase of a qualifying holding, despite the requirement to do so pursuant to article 40, the voting rights attached to the shares exceeding its previous holding shall be invalid.
The Financial Supervisory Authority shall notify the financial undertaking concerned of the invalidity of voting rights if the Authority receives knowledge of the acquisition or increase.

The Financial Supervisory Authority shall require the party in question to submit a notification pursuant to article 41.

Procedure shall in other respects be subject to articles 41 – 43.
If the Financial Supervisory Authority does not object to the acquisition or increase in qualifying holding by the party in question, the party shall acquire voting rights in proportion to its holdings.

If notification from the party in question is not received within four weeks from the time that the Financial Supervisory Authority called for notification the Authority may require such party to sell the holdings exceeding the holdings that were held before.
The Financial Supervisory Authority shall set a deadline for so doing, which shall be a minimum of two months.

Article 46 Acquisition of a holding by an ineligible party If a party acquires or increases qualifying holdings despite the conclusion of the Financial Supervisory Authority that the party was not eligible to acquire or increase its holdings, the voting rights of the party in excess of the minimum holding constituting a qualifying holding shall be suspended.
The party in question is required to sell the part of the holding which is in excess of its earlier holding and which was the subject of the conclusion of the Financial Supervisory Authority.

The Financial Supervisory Authority shall set a deadline for so doing, which shall be a minimum of two months.

The party will acquire its previous voting rights following the sale.
Article 46(a) Restrictions on the exercise of a holding during time limit The acquisition of a qualifying holding shall not take effect for the financial undertaking in question until the time limit for the Financial Supervisory Authority to consider the matter pursuant to article 42 has passed or the conclusion of the Financial Supervisory Authority is available, if the Authority has taken the notification of the proposed acquisition or increase under further consideration.
While the Financial Supervisory Authority has not notified of its conclusion, or the time limit pursuant to article 42 has not passed, the party intending to acquire or increase a qualifying holding is not permitted to participate in decisions on changes in financial position, asset structure, operation, business activities and internal rules, except with the express consent of the Financial Supervisory Authority.
However, the provisions of the second sentence do not apply to the disposal of the holding that was owned previously or does not exceed the qualifying holding.

Article 47 Notification by an owner of change of ownership Should the owner of a qualifying holding intend to reduce its shareholding or guarantee capital holding or voting rights so that the owner will no longer own a qualifying holding, the owner shall notify the Financial Supervisory Authority in advance, indicating what the holding will be.
Should the holding fall below 20%, 25%, 33%, 50%, or decrease to the extent where the financial undertaking ceases to be a subsidiary of the party concerned, notification thereof must also be given.

The same applies if the proportional holding or voting rights decrease as a result of an increase in share capital or guarantee capital.
Article 48 Notification by a financial undertaking of change of ownership When holdings of share capital or guarantee capital in a financial undertaking exceed or fall below the limits stated in article 40, the board of directors of the undertaking shall notify the Financial Supervisory Authority thereof without undue delay.
At least once a year, each financial undertaking must notify the Financial Supervisory Authority of shareholders who have qualifying holdings in the company and of the share held by each of them.

The same applies to guarantee capital holders.


Article 49 Disclosure obligations The Financial Supervisory Authority may request documentation and information of any kind from natural or legal persons owning or exercising holdings in financial undertakings in order to evaluate whether they are subject to disclosure obligations under article 40 and whether they are eligible to exercise a qualifying holding pursuant to this Chapter.
The Financial Supervisory Authority may require the same information from natural persons or legal persons who have sold a share or intermediated in a transaction involving a share.

Provisions of law concerning confidentiality do not restrict the obligation to provide information and access to data.
Article 49(a) Beneficial owner If there is any doubt, in the opinion of the Financial Supervisory Authority, as regards the identity of the beneficial owner or prospective beneficial owner of a qualifying holding, the Authority shall notify the party who sent notification pursuant to article 40, or the financial undertaking itself if the former cannot be reached, that the Authority does not consider the party in question eligible to exercise the holding.
Article 49(b) Close links The provisions of articles 40-49 shall apply to close links, as applicable.

No close links may be formed unless it is demonstrated that they will not obstruct supervision of the company's activities.

Chapter VII.

Board of Directors and Personnel Article 50 General provision Unless otherwise provided for in this Act, the provisions of the Act on public limited companies shall apply to the board of a financial undertaking.
Article 51 Number of board members The board of directors of a financial undertaking must be comprised of at least three persons.

Boards of commercial banks, savings banks and credit undertakings must, however, be comprised of no less than five persons.

An equal number of regular members and alternates shall be appointed to the board of a financial undertaking.
Article 52 Eligibility of board members and managing director Members of the board of directors shall be resident in a Member State or a state party to the Organisation for Economic Co-operation and Development (OECD).

The managing director shall be resident in a Member State.

The Financial Supervisory Authority may grant exemptions from the residence requirements.
Members of the board of directors and the managing director shall be competent to manage their own affairs, have an unblemished reputation and shall not have been subjected to bankruptcy proceedings.
They shall not, in the preceding ten years, have been sentenced before a court of law for any criminal act in connection with the conduct of business under the Penal Code, Competition Act, legislation on public limited companies or private limited companies, the Accounting Act, Annual Accounts Act, Bankruptcy Act etc.

and the provisions of the Act on withholding public levies at source, as well as special legislation applicable to parties who are subject to official supervision of financial activities.
Members of the board of directors and managing directors shall be financially independent and they shall have completed a university degree which is relevant to their work.

The Financial Supervisory Authority may grant exemptions from the educational requirements of the first sentence on the basis of the experience and knowledge of the person in question.
Furthermore, members of the board of directors and managing directors shall possess sufficient knowledge and work experience to be able to carry out their functions in a satisfactory manner, including knowledge of the business activities engaged in by the financial undertaking in question.

They shall not have exhibited any conduct which gives occasion to doubt their ability to carry out sound and prudent operations or suspect that they might possibly abuse their position or harm the company.
The Financial Supervisory Authority shall establish rules on the financial independence of board members and managing directors and the conduct of the assessment of eligibility.
The board members of a financial undertakings shall not serve on the board of another regulated party or a party closely related to such regulated party, nor shall they be employees or auditors of another regulated party or a party closely related to such party.Board members of a financial undertaking shall not serve as legal counsels for another financial undertaking.

The employees of a financial undertaking are not permitted to sit on the board of the financial undertaking where they work.
Notwithstanding the provisions of the fourth paragraph, a board member or employee of a financial undertaking may serve on the board of directors of another financial undertaking, insurance company or financial conglomerate which is partly or wholly owned by the financial undertaking or a company which is partly or wholly owned by a company which exercises control over the financial undertaking.

The same applies to the attorney of a parent company.
Service on a board of directors pursuant to the fifth paragraph shall be subject to the condition that such service will not, in the opinion of the Financial Supervisory Authority, give rise to a risk of conflict of interest.

In this context, consideration should be given, among other things, to the holdings of the parties and the links of the company in question with other parties in the financial market, and whether the links could harm the sound and prudent operation of the financial undertaking.
Financial undertakings shall notify the Financial Supervisory Authority of the constitution of, and any subsequent changes in, their boards of directors and managing director, and the notification shall be accompanied by sufficient information to permit assessment of compliance with this article.

Article 52(a) The board of directors of a financial undertaking shall call the annual general meeting of the company.
The board of directors of a financial undertaking shall call the annual general meeting in accordance with statutory law, its articles of association or by a decision of an annual general meeting.

If the board of directors does not call a meeting in accordance with the first sentence the Financial Supervisory Authority shall call the meeting at the request of a member of the board, the managing director, an auditor or a party holding voting rights at an annual general meeting.
The Financial Supervisory Authority shall appoint a chairman of the meeting in such circumstances, and the board shall provide him with a list of parties with voting rights, the minutes of annual general meetings, and the auditors' records.

The company shall pay the cost of the annual general meeting.

Article 52(b) The board of directors of a parent company shall notify the Financial Supervisory Authority when a group of companies is formed or a financial undertaking gains control of another company.
Substantial changes in the organisation of a group of companies shall also be notified when they take effect.

Article 52(c) The board of directors and managing director shall alert the Financial Supervisory Authority without delay should they acquire knowledge of issues of decisive importance for the company's continuing activities.
Article 53 Eligibility of personnel in securities trading Personnel of a financial undertaking who are responsible for day-to-day activities connected with transactions in financial instruments, as provided for in point 6 of the first paragraph of article 3, must have passed an examination in securities trading.
In connection with the granting of an operating licence and as soon as any changes occur, the financial undertaking must notify the Financial Supervisory Authority of its personnel as referred to in this paragraph.

The Financial Supervisory Authority may adopt more detailed rules on the implementation of this provision.

The examination committee on securities trading shall be responsible for an examination in securities transactions which shall be normally held once each year.
The Minister shall appoint the examination committee for a four-year term.

To cover the costs of holding the examination, examinees shall pay a fee as determined by the Minister.

Decisions of the examination committee are final administrative rulings.

The examination committee on securities trading may entrust an independent party with grading an examination.

In addition, the examination committee on securities trading may appoint external examiners to review the examination of an examinee.
Details on the holding of the examination in securities trading, including the examination requirements and authorisation for granting exemptions from specific sections of such an examination or from the examination as a whole, shall be laid down in a regulation.

Article 54 Division of responsibility between the board and managing director.
Carrying out of the board's tasks The articles of association of a financial undertaking must provide for the division of responsibility between the board of directors and managing director, having regard for the provisions of the Act on public limited companies.

The board of directors shall adopt its own rules of procedure, prescribing the implementation of its tasks in detail.
These rules shall discuss in particular the authorisation of the board to take decisions on individual dealings, the implementation of rules on special eligibility of board members, handling of information on individual customers by the board, participation of board members in the boards of subsidiaries and affiliated companies, and the implementation of rules on handling business dealings with board members.

These rules shall be confirmed by the Financial Supervisory Authority.
The chairman of the board of directors of a financial undertaking is not permitted to assume duties for the company other than those which constitute a normal part of his work as chairman, with the exception of individual tasks entrusted to him by the board.

Article 55 Participation of board members in handling issues The board of directors of a financial undertaking may not involve itself in decisions on individual dealings, unless their scope is substantial in relation to the size of the undertaking.
Individual board members must not involve themselves in decisions on individual dealings.

Members of the board of a financial undertaking may not be involved in handling a question which concerns: 1. dealings with themselves or undertakings where they are board members, hold responsible positions or in other respects have substantial interests at stake; or 2. dealings with competitors of the parties referred to in point 1.
The same shall apply to dealings with parties personally or financially connected to board members.

Commercial dealings of board members, and of undertakings where they hold responsible positions, must be placed before the board of the financial undertaking, or the chairman of a company's board, for approval or refusal.
The board of a financial undertaking may, however, adopt general rules on handling of such cases, prescribing in advance what business proposals require, or do not require, special discussion by the board before they can be dealt with, cf.

article 54.

Article 56 Participation of personnel in business operations The managing director of a financial undertaking may not sit on the board of directors of a commercial undertaking or participate in business operations in other respects.
The board of directors of a[n] [financial] undertaking may grant authorisation for such on the basis of rules adopted by it and confirmed by the Financial Supervisory Authority.

A holding in an undertaking is deemed to be participation in business operations, except in the case of an insubstantial holding which confers no direct influence on the management of the undertaking.
Rules adopted in accordance with the provisions of article 54 shall apply to board membership of managing directors in a financial undertaking's subsidiaries or affiliated companies, and on the authorisation of other personnel to participate in business operations.
Article 57 Dealings of personnel with financial undertakings The board of directors of a financial undertaking shall establish rules, to be confirmed by the Financial Supervisory Authority, concerning the undertaking's transactions with the managing director and key employees.

An agreement by a financial undertaking concerning loans, guarantees, options or similar dealings with a managing director shall be subject to the approval of its board.
Any decision to such effect must be recorded and notified to the Financial Supervisory Authority.

The provisions of this article apply also to parties with close links to the managing director of a financial undertaking.

Business dealings between a financial undertaking and its employees shall be subject to rules established by the board of directors of the undertaking, which shall be publicly disclosed.
Such dealings should, to the extent possible, be subject to the same rules as transactions with regular customers in similar dealings.

Article 57(a) Wage bonus systems Taking into account the total financial results of a financial undertaking over the longer term, underlying risk and cost of capital, a financial undertaking is permitted to offer stock options or bonus payments in accordance with rules established by the Financial Supervisory Authority.
The earned entitlements of employees under a wage bonus system shall be charged to the accounts each year to the extent that accounting rules will permit, and they shall be specifically accounted for in the notes to the annual financial report.

Article 57 (b) Severance Agreements A financial undertaking is not permitted to enter into a severance agreement with a managing director or key employee unless the undertaking has shown a profit over the last three years of his/her term of employment.
A severance agreement in this article refers to any type of agreement made between a managing director or key employee, on the one hand, and a financial undertaking, on the other hand, which confers on the person ending his/her employment benefits or rights in excess of normal wage payments during a notice period.

If an undertaking has returned a profit over the last three consecutive years, severance agreements may be concluded with the persons specified in the first paragraph.
Such agreements shall take the form of direct wage payments and shall not have a term of more than 12 months following termination of employment.

The provisions of this article shall apply to severance agreements which have been concluded prior to the entry into force of this Act, but which have not taken effect.

Further provisions on the conditions and implementation of severance agreements may be established in a government regulation.
Such agreements shall be specifically accounted for in the notes to the annual financial report.
Article 58 Confidentiality The board of directors of a financial undertaking, managing directors, auditors, personnel and any persons undertaking tasks on behalf of the undertaking shall be bound by an obligation of confidentiality concerning any information of which they may become aware in the course of their duties concerning business dealings or private concerns of its customers, unless obliged by law to provide information.
The obligation of confidentiality shall remain even after their employment ceases.

Anyone receiving of information of the sort referred to in the first paragraph shall be bound by an obligation of confidentiality in the same manner as described therein.

The party providing information shall remind the recipient of the obligation of confidentiality.
Article 59 Exemption from the obligation of confidentiality due to risk management and supervision on a consolidated basis Notwithstanding the provisions of article 58, information may be communicated to the parent company of a financial undertaking if the parent company is also a financial undertaking in the understanding of this Act or a holding company in the financial sector, cf.
the fourth paragraph of article 97.Such communication of information may, however, only take place to the extent necessary for risk management and may not include the private affairs of individual customers.

The same shall apply to communication of information due to supervision on a consolidated basis.

The Financial Supervisory Authority shall set detailed rules on authorised communication of information as provided for in the first paragraph.
Article 60 Customer approval for communication of confidential information Information on customers, as referred to in article 58, may be communicated to outside parties after receiving the written approval of the customer involved.

The approval must state what information it applies to, to what parties information on this basis may be communicated and for what purpose the information is to be communicated.

Chapter VIII.
Chapter VIII.

Savings Banks Article 61 Definition A savings bank is a self-governing foundation operating as a financial undertaking pursuant to this Act.

It is required to use the term “savings bank” in its company name and must define its social role in its articles of association.

Guarantee capital owners of a savings bank shall be at least 30 in number.
However, the provision regarding a minimum number of guarantee capital owners shall not apply to savings banks which are subsidiaries of other savings banks or majority-owned by one or more municipalities or the State Treasury.

Guarantee capital owners are not liable for the obligations of a savings bank in excess of their guarantee capital and do not own a share in any capital of a savings bank other than its guarantee capital as entered in its books at any time.
They are entitled to payment of dividends on their guarantee capital in accordance with the provisions of article 68.

Except as otherwise provided for in this Act, the provisions of the Companies Act No.

2/1995 shall be applied to savings banks, as applicable.

Provisions of the Act on self-governing foundations engaging in commercial operations do not apply to savings banks.

Article 62 Establishment.


Board of directors At the initial meeting of a savings bank, each guarantee capital owner shall have one vote.

The initial meeting shall approve articles of association for the savings bank.

These must include provisions specifically relating to the savings bank in question, such as: 1.
The name of the savings bank; 2. the domicile of the savings bank and legal venue; 3. the total amount of guarantee capital and division into guarantee capital shares; 4. the election of the board of directors of the savings bank and its functions; 5. the savings bank's principal areas of focus with respect to its social role; 6. amendments to the articles of association; 7. winding-up of the savings banks and disposal of own funds in this connection.
A guarantee capital owners' meeting is the supreme authority in the affairs of a savings bank and elects a board of directors.

The board of directors shall appoint a managing director who is the chief executive officer of the savings bank and responsible for its day-to-day operations.

Article 63 Guarantee capital certificates The board of directors of a savings bank shall issue guarantee capital certificates to subscribers to guarantee capital.
Guarantee capital certificates may not be delivered until the share has been paid in full.

Guarantee capital certificates shall be issued in the name of the holder and specify: 1.

The name of the savings bank and its address; 2. the number and amount of the share; 3. the name, address and ID number of the guarantee capital holder; 4. the date of issue of the guarantee capital certificate; 5. specific points concerning the rights and obligations of guarantee capital owners.
The board of directors of the savings bank shall maintain a register of guarantee capital owners which shall be made accessible to the public.

The board shall update the register when changes occur in the ownership of guarantee capital certificates.

Article 64 ....

Article 65 ....


Article 66 Issue of and trading in guarantee capital holdings A guarantee capital owners' meeting can approve an increase in the guarantee capital of the savings bank in question through the issue of new guarantee capital shares.

For an annual general meeting or an extraordinary meeting of guarantee capital owners to be permitted to address an increase in guarantee capital, the meeting must have been called with at least two weeks' notice.
The notice of the meeting shall include a description of the board of directors' proposal for the issue of new guarantee capital, including the total number of shares; the nominal value and offering price of the shares; the payment terms, if any; the subscription period and subscription rights.

The minimum price of new guarantee capital shares shall be equal to the nominal price of guarantee capital shares in the savings bank in question.
The articles of association of a savings bank may provide for guarantee capital owners' pre-emptive rights to an increase.

Transfers and other disposal of guarantee capital shares in a savings bank are permitted without restriction, subject to the provisions of Chapter VI.

Savings banks shall establish rules on guarantee capital transactions, which shall be approved by the Financial Supervisory Authority.

The Authority may issue guidelines on such transactions.
New guarantee capital owners acquire rights under guarantee capital certificates when a change of ownership has been recorded in accordance with paragraph 3 of article 63.

If a savings bank has issued new guarantee capital, and if the issue is sold above nominal value, the amount paid in excess of nominal value shall be entered into a guarantee capital premium account, net of the costs incurred by the savings bank in connection with the issue.
The account shall be counted as part of the savings bank's retained earnings.

Article 67 Reduction of guarantee capital On the recommendation of the board of a savings bank, a guarantee capital owners' meeting may decide on a reduction of guarantee capital in order to set off a loss which cannot be set off in any other way.

For a meeting of guarantee capital owners to be permitted to address a reduction in guarantee capital, the meeting must have been called with at least two weeks' notice.
The notice of the meeting shall include a description of the proposal for the reduction of guarantee capital.

Such a decision requires the approval of two-thirds of the vote represented at a guarantee capital owners' meeting.

The notice of the meeting shall specify the reasons for the reduction and the manner in which it is to be carried out.

The Financial Supervisory Authority shall be notified in advance of any proposed reduction of guarantee capital.
A decision by a guarantee capital owners' meeting on a reduction in accordance with paragraph 1 shall take effect on its approval by the Financial Supervisory Authority.

A call to creditors is not a prerequisite for a reduction of guarantee capital pursuant to this Article.
Article 68 Disposition of profit The annual general meeting of a savings bank may authorise the board of directors of the savings bank to dispense up to 50% of its profit to increase the nominal value of guarantee capital and pay dividends to guarantee capital owners.

For the purposes of this article, “profit” shall mean after-tax profit for the preceding accounting year according to approved annual accounts.
An annual general meeting is not permitted to allocate dividends in excess of the amount proposed or approved by the board of directors of the savings bank.

Disposition of profit in accordance with the first paragraph is permitted only if retained earnings are available in the savings bank in question.

Article 69 Collaboration of savings banks Savings banks are permitted to collaborate on the following functions, provided that this is done on normal business terms: a.
Risk management consultancy; b. the operation of information systems; c. security surveillance; d. the activities of internal audit departments; e. back office, accounting, analysis and reporting to supervisory bodies; f. legal advice, contracts and relations with suppliers; g. product development and market co-operation on joint branding; h. training and dissemination of information; i. domestic and foreign payment intermediation and foreign transaction services.
In cases where multiple savings banks have outsourced functions pursuant to paragraph 1 to the same party, contracts shall be concluded between each individual savings bank and the provider of the service.

Such contracts do not set aside individual savings banks' obligations under laws and regulations or their obligations to supervisory bodies, guarantee capital owners or others.
Any dispute as to whether a function falls within the scope of the first paragraph shall be resolved by the Competition Authority.

Articles 70 – 77 Chapter IX.

Electronic Money Undertakings Article 78 Electronic money "Electronic money" shall mean monetary value, as represented by a claim on the issuer which is stored in an electronic medium, issued in exchange for an amount of funds not less than the monetary value issued and accepted as means of payment by undertakings other than the issuer.
Article 79 Redeemability of electronic money Acceptance of funds in exchange for electronic money shall not constitute a deposit or other repayable funds if the funds accepted are immediately exchanged for electronic money.

A bearer of electronic money may, during the period during which the electronic money is valid, request that the issuer redeem it at par value in coins or bank notes, or by a transfer to an account without other charge than is strictly necessary to carry out that operation.
The contract between the electronic money undertaking and the bearer of electronic money must clearly specify the conditions for redemption.

A contract as provided for in the third paragraph may stipulate a minimum threshold for redemption.

Such a threshold may not exceed ISK 500.

Article 80 Capital adequacy requirements Notwithstanding the provisions of article 84, the own funds of an electronic money undertaking must always amount to at least 2% of whichever of the following is higher: 1.
The current amount of its financial commitment due to outstanding electronic money; or 2. the average of its preceding six months' financial commitments due to outstanding electronic money.

If an electronic money undertaking has not operated for six months its own funds must amount to at least 2% of whichever of the following is higher: 1.
The current amount of its financial commitment due to outstanding electronic money; or 2. the six months' estimated total amount of its financial commitment due to outstanding electronic money.

The six months' estimated total amount of the financial commitments of the undertaking concerned must be indicated in the undertaking's business plan, subject to any adjustment to that plan as requested by the Financial Supervisory Authority.
An electronic money undertaking must send the Financial Supervisory Authority calculations twice each year showing that the provisions of this article have been complied with, together with the necessary accompanying documents in accordance with detailed rules adopted by the Financial Supervisory Authority.

Article 81 Limitations on investments Investments of electronic money undertakings must at least correspond to its financial commitments due to outstanding electronic money.
An electronic money undertaking may only invest in liquid assets or claims in accordance with rulesset by the Financial Supervisory Authority on limits to investments of electronic money undertakings.

The rules shall, for instance, specify what assets and claims an electronic investment undertaking may invest in, evaluation of the value of assets, limits on market exposure and maximum investments.
If the value of assets or claims as referred to in the first paragraph drops below an amount equal to the financial commitments of the electronic money undertaking due to outstanding electronic money, the electronic money undertaking in question must rectify the situation without delay and provide the Financial Supervisory Authority with an account of the measures taken to this end.
An electronic money undertaking must send the Financial Supervisory Authority calculations twice each year showing that the provisions of this article have been complied with, together with the necessary accompanying documents in accordance with detailed rules adopted by the Financial Supervisory Authority.
An electronic money undertaking may not own a holding in other undertakings unless they handle operating aspects connected with the electronic money which the electronic money undertaking issues or distributes.

Article 82 Limits to scope of application The Financial Supervisory Authority may exempt an electronic money undertaking from individual or all provisions of this Act if a maximum of ISK 6000 can be stored on the electronic medium and one of the following conditions is satisfied: 1.
The electronic money issued by the undertaking is accepted as means of payment only by subsidiaries of the undertaking, by a parent undertaking or other subsidiaries of the parent undertaking; or 2. the electronic money issued by the undertaking is only accepted as means of payment by a limited number of undertakings which can be closely distinguished by their location in the same operating region or other limited area of the operating region of an electronic money undertaking, or by their close financial or business relationship.
An electronic money undertaking covered by the first paragraph must submit an annual report on its activities to the Financial Supervisory Authority in accordance with detailed rules adopted by the Financial Supervisory Authority and including information on the total amount of financial commitments due to unredeemed electronic money.

The report must be received by 1 April each year.

Chapter X.
Chapter X.

Liquid Assets and Own Funds Article 83 Liquid assets Financial undertakings must at all times strive to have sufficient liquid assets available to be able to pay out withdrawals of deposit funds and other payments involved in the activities of the undertaking concerned.

Article 84 Definition of own funds The capital base of a financial undertaking as defined in the fourth paragraph shall at any time correspond to a minimum of 8% of the risk base.
The board of directors and managing director of a financial undertaking shall regularly assess the equity requirements of the undertaking taking into account its level of risk, and the conclusion of such assessment, which shall not fall below the provisions of the first sentence of this paragraph, shall constitute the ratio of the capital base to the risk base.
The Financial Supervisory Authority may require a financial undertaking which does not meet the provisions of this Act and regulations and rules based thereof to take corrective action in a timely manner.

In order to ensure compliance, the Financial Supervisory Authority may require: a.
A capital base in excess of 8% of the risk base; b. improvements of internal processes; c. depreciation of assets in the calculation of the capital base; d. restrictions or limitations on the business activities of the financial undertaking; e. reduction of the risks entailed by the business activities of a financial undertaking.
The risk base is the aggregate of weighted risk factors, such as credit risk, equity risk, interest rate risk, currency risk, commodity risk and operating risk, entailed by the business activities of a financial undertaking.

The Financial Supervisory Authority issues detailed ruleson risk factors, risk weightings and the calculation of risk base.
Securities undertakings which are not licensed pursuant to sub-sections (c) and (f) of point 1 in the first paragraph of article 25, securities brokerages and management companies of undertakings for collective investment in transferable securities are exempted from assessment of operating risk pursuant to this article.
Financial undertakings are permitted, with the approval of the Financial Supervisory Authority, to employ internal assessment procedures in assessing risk factors in the calculation of their risk base.

The Financial Supervisory Authority will establish further rules on requirements that financial undertakings are required to meet in order to be permitted to employ internal assessment procedures.

The capital base requirement provided for in the first paragraph shall also apply to consolidated accounts.
The Financial Supervisory Authority issues rules on the calculation of capital base and risk base for financial groups based on Council Directive 2002/87/EC on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate.

The capital base pursuant to the first paragraph shall consist of three factors, tier 1 capital, tier 2 capital and tier 3 capital, and deductible items pursuant to article 85.
If asset items are based on financial statement an interim financial statement, the report shall be endorsed as audited or examined by an auditor.

The following restrictions shall apply to the individual tiers: 1.

Tier 1 capital shall amount to a minimum of one-half of the capital base prior to deductions according to article 85.

2.

Tier 2 capital shall amount to a maximum of 50% of tier 1 capital.

3.

Tier 3 capital shall amount to a maximum of 50% of tier 1 capital.
Furthermore, tier 3 capital shall amount to a maximum of 4.8% of the risk-weighted base with respect to market exposures of trading book items, as provided in article 28, and currency risk.
Tier 1 capital comprises paid-in share capital, paid-in guarantee capital, reserves, share premium account, guarantee capital premium account, the revaluation account pursuant to inflation accounting principles, and retained earnings, net of the book value of own shares or guarantee capital certificates, goodwill, deferred tax credit and other intangible assets, as well as any loss and approved dividend allocations.
In addition, account shall be taken of the minority share in the equity of subsidiaries in accordance with consolidated accounting principles.

If discounting obligations leads to the formation of equity, this equity shall be deducted from tier 1 capital.Own funds items shall only be included as Tier 1 capital if they can be used to absorb the losses of a financial undertaking in a going concern situation.
In the event of bankruptcy or liquidation, paid-in share capital and share premium accounts shall rank after all other claims.

.

Tier 2 capital shall be the total of points 1 and 2: 1.
Subordinated loans taken by a financial undertaking against the issue of special debt instruments which state clearly that the repayment period of the loan is not less than five years and that, in the event of the bankruptcy of the financial undertaking concerned or its winding-up, repayment may be obtained following all claims against the financial undertaking other than the repayment of share capital or guarantee capital.
When five years of the loan period remain, the amount of the loan shall be scaled down by 20% for each of the years, or proportionally for part of a year, passing of these five years.

In the case of a loan which is to be paid off in instalments over the loan period, the remaining payments for each year shall be scaled down in a similar manner.

Only paid-up amounts may be included.

2.

The revaluation account, according to cost-basis accounting principles.
Tier 3 capital shall consist of short-term subordinated loans taken by a financial undertaking against the issue of special debt instruments which state clearly that the repayment period of the loan is not less than two years and that, in the event of the bankruptcy of the financial undertaking concerned or its winding-up, repayment may be obtained behind all claims against the financial undertaking other than the repayment of share capital or guarantee capital.
Furthermore, a provision shall be made to the effect that payments may neither be made nor interest paid on the loan if the capital adequacy ratio of the financial undertaking falls below the required minimum provided for in the first paragraph or if the repayment of principal or payment of interest results in a fall of the capital adequacy ratio below the cited minimum.
The Financial Supervisory Authority shall be notified if such payment has the result that the capital base as a ratio of the risk base falls below a limit which is 2% above the minimum provided for in the first paragraph.

The Financial Supervisory Authority may authorise particular financial undertakings to include profits from trading book transactions in tier 3 capital, net of foreseeable charges and net losses on other activities, provided none of these amounts has been included in tier 1 capital.
The accelerated repayment of subordinated loans is permitted if a borrower so requests, provided the approval of the Financial Supervisory Authority has been obtained and that such repayment will not unacceptably affect the [borrower's] capital adequacy ratio in the estimation of the latter.
Notwithstanding the provisions of the first to seventh paragraphs, the capital base of a securities undertaking, securities brokerage and UCITS management company shall never amount to less than the equivalent of 25% of its fixed operating expenses for the preceding accounting year.

The Financial Supervisory Authority may grant exemptions from this requirement if the operations of the undertaking have been changed fundamentally between years.
During its first year of operation, the capital base of a securities undertaking, securities brokerage and UCITS management company shall never amount to less than the equivalent of 25% of its budgeted fixed operating expenses.

The Financial Supervisory Authority may require a change to be made to the operating budget if it is of the opinion that the budget does not properly reflect the activities proposed.
The Financial Supervisory Authority may prescribe in its rules that items other than those listed in the fifth to seventh paragraphs may be included in a financial undertaking's capital base.

The Financial Supervisory Authority may prescribe in its rules that items other than those listed in the fifth paragraph should be deducted from a financial undertaking's capital base.

Financial undertakings shall report publicly on their risks, risk management and capital adequacy.
The Financial Supervisory Authority issues more detailed rules on such reporting.

The Financial Supervisory Authority is permitted to establish rules on disclosures by financial undertakings to clients concerning their credit rating when a decision on lending is based on such a rating and the rating is also used to assess credit risk in calculating the risk base using the internal assessment method.
Article 85 Deductions from own funds The book value of equity holdings and subordinated claims in any other financial undertakings, undertakings connected to the financial sector or payment institutions shall be deducted from the capital base provided for in the fourth paragraph of article 84.
If an investment in holdings in other financial undertakings or undertakings connected to the financial sector, an insurance company or a holding company in the insurance sector is a temporary measure and intended as financial assistance in restructuring or to save the undertaking concerned, the Financial Supervisory Authority may grant an exemption from the provisions of the first paragraph.
Shareholdings and subordinated claims in other financial undertakings, in undertakings connected with the financial sector or payement institutions, cf.

the first paragraph, or in insurance companies or holding companies in the insurance sector, cf.
the fourth paragraph, which are included in the consolidated accounts of the financial undertaking in question or in the exercise of provisions on the surveillance of financial conglomerates, shall not be deducted from the capital base of the undertaking in question.

Holdings and subordinated claims in insurance companies and holding companies in the insurance sectors, as well as items listed in points 4 and 5 of the first paragraph of article 29 of Act No.
60/1994, which the financial undertaking owns as a result of holdings in the above companies, shall be deducted from the capital base pursuant to article 84.

However, the deduction relating to holdings in insurance companies shall be limited to an amount corresponding to the share in the minimum solvency margin of the insurance company in question.

In the case of financial conglomerates, however, the provisions of the third paragraph of article 84 on the calculation of capital adequacy ratio shall apply.
Shareholdings in companies which are in excess of the limits stated in the first paragraph and the first sentence of the third paragraph of article 28 shall be deducted from the capital base provided for in article 84.

Any negative balance of a financial reporting conclusion and a conclusion pursuant to the internal assessment procedure, cf.
the second paragraph of article 84, on expected loss amounts on assets and liabilities other than securitised positions shall be deducted from the capital base provided for in article 84.

Furthermore, the part of the securitised positions assessed by 1,250% risk weighing in the calculation of the risk base shall be deducted from the capital base pursuant to article 84.
A 50% part of the aggregated total of the deducted items pursuant to this article shall be deducted from the results of the calculation of tier 1 capital pursuant to article 84 and 50% shall be deducted from the result of the calculation of tier 2 capital pursuant to article 84.

If the deduction pursuant to the first sentence exceeds the amount of tier 2 capital, the excess shall be deducted from tier 1 capital.
Article 86 Initial measures due to insufficient own funds If the board of directors or managing directors of a financial undertaking have reason to expect that its capital base will be less than the minimum required by law, they must immediately notify the Financial Supervisory Authority.

The auditor of the undertaking concerned has a comparable obligation if he/she has reason to expect that its management has not fulfilled their obligations as provided in the first sentence of this paragraph.
If the Financial Supervisory Authority receives a notification as provided for in the first paragraph, or has other reason to believe that the capital base of a financial undertaking may be less than the minimum provided for in article 84, the Financial Supervisory Authority shall call for a financial statement immediately from the board of directors of the undertaking, which must submit the statement within a reasonable time limit.
The Financial Supervisory Authority may prescribe that such a financial statement be endorsed by an auditor.
If, in a financial statement of the type mentioned in the second paragraph, it is revealed that the capital baseof a financial undertaking does not meet the requirements of article 84, the board of directors of the undertaking shall immediately convene a meeting of shareholders or guarantee capital holders to take a decision, and shall then submit to the Financial Supervisory Authority a report stating the measures they propose to take in response to the situation.
The report shall be submitted within a time limit set by the Financial Supervisory Authority.

Once the Financial Supervisory Authority has received the documentation provided for in the third paragraph, the Authority may grant the financial undertaking concerned a time limit of up to six months to increase its capital base to the minimum provided for in article 84.

If there are cogent reasons for so doing, the Financial Supervisory Authority may extend this period by up to an additional six months.
If the report provided for in the third paragraph is not received within the specified time limit, if the remedies proposed in the report are not satisfactory in the opinion of the Financial Supervisory Authority, or if the time limit provided for in this paragraph expires, the operating licence shall be revoked, cf.

article 9.

Chapter XI.


Annual Accounts, Auditing and Consolidated Accounts Article 87 Compilation and attestation of annual accounts The board of directors and managing director of a financial undertaking must compile annual accounts for each accounting year.

The annual accounts must include a profit and loss account, balance sheet, statement of cash flow and explanatory notes.

A report shall also be compiled by the board, which shall be an integral part of the annual accounts.
The accounting year for financial undertakings shall be the calendar year.

The annual accounts shall be signed by the board of directors and managing directors of financial undertakings.

If a member of the board or managing director of a financial undertaking has objections concerning the annual accounts, he/she must make a written explanation accordingly when signing them.
The annual financial report shall include information on wage payments and any other payments or benefits to each individual member of the board of directors and the managing director.

Furthermore, the annual financial report shall include information on total payments and benefits to key employees and on their number.

Article 88 Good accounting practices The annual accounts must give a clear picture of the financial position and operating performance of the financial undertaking.
They must be compiled in accordance with law, rules and good accounting practices and include, among other things, a profit and loss account, a balance sheet, explanatory notes and information on off- balance-sheet items.
The Financial Supervisory Authority shall, after consultation with the Icelandic Accountancy Council, set ruleson the form of annual accounts, the contents of individual items of the profit and loss account and the balance sheet, and of off-balance-sheet items and on the assessment of individual items.
In collaboration with the Icelandic Accountancy Council, the Financial Supervisory Authority shall ensure that a definition of state-of-the-art in good accounting practices in compiling annual accounts and interim accounts of a financial undertaking is always available.

Article 89 Report of the board of directors.


The report of the board of directors must include an overview of the activities of the financial undertaking concerned during the year, as well as information on aspects of importance in assessing the financial position of the undertaking concerned and its performance during the accounting year which does not appear in the annual accounts.
The report of the board shall, in addition, provide information on the following: 1. events of significance following the end of the accounting period; 2. expected future development of the undertaking; and 3. actions which will be of significance for its future development.
The report of the board must also provide information on the average number of employees during the accounting year, total wages, commissions or other remuneration to employees, the managing director, board of directors and others in the service of the financial undertaking in question.

If a share of the profits is paid to the board of directors or managing director this shall be specifically indicated.
The report of the board must give information on the number of shareholders or guarantee capital owners at the end of the accounting year.

In other respects the provisions of the Act on public limited companies shall apply as appropriate.

In their reports, boards shall make proposals on the disposition of profits in the undertaking concerned or measures to meet losses.

Article 90 Auditing The annual accounts of a financial undertaking shall be audited by an auditor or audit firm.
The auditor or audit firm shall not perform other functions for the financial undertaking.

An auditor or audit firm provided for in the first paragraph shall be elected for a term of five years at the annual general meeting of a financial undertaking.

The same auditor or audit firm shall not be re-elected until five years have passed from the time that its term pursuant to the first paragraph was concluded.
Notwithstanding the provisions of the first sentence, a financial undertaking may dismiss an auditor or audit firm before the conclusion of a five year term following consultation with the Auditors' Council.

If at all possible, the same party shall be elected as auditor of a parent company, affiliate and subsidiary.

The auditor of the parent company shall, in addition, audit the consolidated accounts.
The company's auditors shall be entitled to attend board of director' and shareholders' meetings of a financial undertaking and are obliged to attend the annual general meeting.

Article 91 Qualifications of auditors An auditor may not be a member of the board of directors, an employee of the financial undertaking or work on its behalf in any respect except auditing.

An auditor may not be in debt to the undertaking whose accounts he/she audits, neither as principal debtor nor as loan guarantor.
The same shall apply to his/her spouse.
Article 92 Disclosure requirements of auditors If an auditor becomes aware of substantial flaws in operations or matters concerning internal control, loan collateral, or other matters which could weaken the financial position of the undertaking in question, or aspects which could result in his/her refusal to endorse the accounts, or in an endorsement with reservations, or if an auditor has reason to believe that there has been any violation of laws, regulations or rules which apply to the undertaking, the auditor must notify its board of directors and the Financial Supervisory Authority.
This applies also to comparable issues that come to the knowledge of an auditor in the course of auditing for a company with close links to the financial undertaking in question.

Notification of an auditor pursuant to the first paragraph does not constitute a breach of confidentiality, whether statutory or contractual.

The person notifying shall not be subject to any liability with respect to the notification.
Article 93 Good auditing practices In collaboration with the Association of Certified Public Accountants and other parties concerned, the Financial Supervisory Authority shall ensure that a definition of state-of-the-art in good auditing practices in auditing financial undertakings is always available.

The Financial Supervisory Authority shall set rules on auditing accounts of financial undertakings.
Other than as provided for in this Act, auditing of financial undertakings shall be in accordance with the provisions of Chapter VII of Act No.144/1994, on Annual Accounts, as subsequently amended.

The provisions of the first paragraph shall also apply to subsidiaries of a financial undertaking, as well as to holding companies in the financial sector or mixed holding companies as referred to in article 97 and subsidiaries of such companies.
Article 94 Special auditing The Financial Supervisory Authority may have a special audit of a financial undertaking carried out if the Authority deems there is reason to expect that an audited financial statement does not provide a clear picture of the financial position and operating results of the undertaking.

The Financial Supervisory Authority may require the undertaking concerned to bear the cost of such an audit.
The provisions of the first paragraph shall also apply to subsidiaries of a financial undertaking, as well as to holding companies in the financial sector or mixed holding companies as referred to in article 97 and subsidiaries of such companies.
Article 95 Submission and publication of annual accounts The audited and endorsed accounts of a financial undertaking, together with the report of the board of directors, must be submitted to the Financial Supervisory Authority within ten days of their signing, and no later than three months after the end of the accounting year.
If amendments to the endorsed annual accounts are approved at the annual general meeting, the amended annual accounts must be submitted to the Financial Supervisory Authority within ten days of the meeting with an explanation of the amendments that have been made.
The annual accounts of a financial undertaking, together with the report of the board of directors, shall be available at the place of business of the undertaking concerned and be given to any party with commercial interests who requests them within two weeks of its approval by the annual general meeting.

Article 96 Interim financial statements A financial undertaking must compile and publish interim financial statements in accordance with rules set by the Financial Supervisory Authority.
The Financial Supervisory Authority may grant exemptions from provisions on compiling interim financial statements.

Article 97 Consolidated accounting An undertaking shall be considered as a parent undertaking if it: 1.
Controls the majority of votes in another undertaking; 2. has holdings in another undertaking and has the right to appoint or dismiss the majority of members of the board or executives; 3. has holdings in another undertaking and the right to exercise decisive influence on its activities on the basis of the company's articles of association or agreements with it; 4. has holdings in another undertaking and controls the majority of votes in that undertaking on the basis of an agreement with other shareholders or other owners; or 5. has holdings in another undertaking and holds a dominant position in it.
An undertaking which is connected to a financial undertaking or holding company in the financial sector, as described in the first paragraph, shall be regarded as a subsidiary.

An undertaking which is a subsidiary of a subsidiary, shall also be regarded as a subsidiary of the parent company.

The parent company and its subsidiaries form a consolidation.
A “holding company in the financial sector” shall mean an undertaking linked to the financial sector, which is not a mixed holding company with financial activities, whose subsidiaries are either exclusively or principally financial undertakings or undertakings linked with the financial sector and at least one subsidiary is a financial undertaking.
A “mixed holding company” shall mean a parent company which is not a holding company in the financial sector, a financial undertaking or mixed holding company with financial activities, having at least one subsidiary is a financial undertaking.
A “mixed holding company with financial activities” shall mean a parent company which is not subject to supervision but which together with its subsidiaries, at least one of which is subject to supervision and has its head office in a Member State, and other entities forms a financial conglomerate.

In assessing voting rights and rights to appoint or dismiss directors or management, the rights controlled by both parent companies and subsidiaries shall be combined.
In assessing voting rights in a subsidiary, voting rights deriving from the own shares of the subsidiaries and its subsidiaries shall not be included.

Provisions of articles 87-92 and 95-96 shall apply as appropriate to both a consolidation, where the parent company is a financial undertaking or holding company in the financial sector, and to individual undertakings of the consolidation.
The Financial Supervisory Authority shall, after consultation with the Icelandic Accountancy Council, set detailed ruleson the compilation of consolidated accounts for consolidations where the parent company is a financial undertaking or holding company in the financial sector.

The Financial Supervisory Authority may set rules on consolidated statements for consolidations where the parent company is a mixed holding company.

Chapter XII.
Chapter XII.

Financial Reorganisation, Winding up and Merger of Financial Undertakings.

A.
A.

Financial reorganisation of credit institutions Article 98 Financial reorganisation Financial reorganisation of credit institutions shall mean measures intended to maintain the credit institution's financial position or to restore it to normal and which could affect prior rights of third parties, including measures which could conceivably involve a suspension of payments, suspension of enforcement measures or a reduction of claims.
If a credit institution's head office is in Iceland, financial reorganisation shall mean an authorisation for suspension of payments or to seek debt composition as provided for in the Act on bankruptcy etc., No.

21/1991.

The Act on Bankruptcy etc., No.

21/1991, shall apply to a credit institution's authorisation to seek suspension of payments and debt composition and to the implementation of such measures, unless otherwise provided for in this Act.
If a financial undertaking has been granted a debt moratorium, it is sufficient to publish a meeting notification, as provided for in the second paragraph of article 13 and the fifth paragraph of article 17 of the Act on Bankruptcy etc., in an advertisement in at least two daily newspapers in Iceland and in each state where branches have been operated.

Article 99 Financial reorganisation of a credit institution with head offices in Iceland and branches in another EEA state.
If a court of law in Iceland grants to a credit institution permission for suspension of payment or composition with creditors such permission shall automatically extend to all branches operated by the credit institution in another member state.

Icelandic law shall apply concerning the legal effect, procedure and implementation of the decision, with the following exceptions: 1.
An employment contract shall be governed by the law of the state which applies to the employment contract and employment relationship.

2.

A contract for the use or purchase of real property shall be governed by the law of the state where the property is located.

3.

Rights of a credit institution in respect of real property, a vessel or aircraft shall be governed by the law of the state where official registration has been effected.

4.
4.

Permission granted for the financial restructuring of a financial undertaking shall not affect the property rights, including lien rights, of creditors or others to assets located in another member state.

The same shall apply to the right to dispose of a mortgaged property, either by assignment or other means, and the right to receive dividends on the property.
All rights which are recorded in a public register and enforceable against a third party shall be regarded as property rights in the understanding of this provision.

5.

6.

If the credit institution has acquired an asset with a reservation of title to ownership, the credit institution's authorisation for financial reorganisation shall not affect the seller's right based on the reservation of title, provided the asset is situated in another member state.
If a credit institution has sold an asset, the authorisation for financial reorganisation shall not affect the buyer's rights, provided the asset is in another member state and delivery has already taken place when the authorisation is granted.

7.
7.

The legitimacy of a credit institution's disposal of real property, a vessel or an aircraft, which is subject to official registration, as well as of transferable securities or other securities registered in a central securities depository, shall be governed by the law of the state where the asset is located or where official registration has been effected.

8.
8.

The legal effect of a ruling on financial reorganisation on pending lawsuits, concerning an asset or other right which a credit institution has disposed of, initiated before the ruling on financial reorganisation was rendered, shall be governed by the law of the state where the lawsuit was initiated.

9.

The enforcement of right to title, including rights to mortgaged financial instruments, which are electronically registered shall be governed by the law of the state where the registration is effected.
10.

A netting agreement shall be governed by the law of the state which applies to such agreement.

11.

Without prejudice to sub-paragraph i, a repurchase agreement shall be governed by the law of the state which applies to such agreement.

12.

Without prejudice to sub-paragraph i, transactions on a regulated securities market shall be governed by the law of the state which applies to such transactions.

13.
13.

Payment and settlement instructions in payment and settlement systems shall be governed by the law of the state which applies to the system concerned.

14.

Notwithstanding the provisions of sub-paragraphs d and e, the provisions of Chapter III of the Act on conclusion of contracts, power of attorney and invalid legal instruments, No.7/1936, on invalid legal instruments, may be applied unless the law of the host state does not allow this.
A legal instrument may not, however, be invalidated if the party benefiting from the continuing validity of such a legal instrument provides satisfactory evidence that the law of another state should apply to the legal instrument and that the respective law does not include an invalidating rule which applies to the instance in question.
The court shall ensure that the Financial Supervisory Authority is notified immediately of any request received from a credit institution for authorisation to suspend payments or seek composition with creditors.

The Financial Supervisory Authority shall forward information on the request and the response to it to the competent authorities and creditors of the credit institution in the states concerned, as provided for in rules set by the Minister.
Mandatory notifications to known foreign creditors of a credit institution in connection with suspension of payments or composition with creditors shall be as provided for in rules set by the Minister.

Article 100 Financial reorganisation of a credit institution with its head office abroad and a branch in Iceland A branch which is operated in Iceland by a credit institution with a head office in another member state will not be automatically granted authorisation for financial reorganisation in Iceland.
If the competent authority in another member state decides on the financial reorganisation of a credit institution holding an operating licence and established in that state, the decision will automatically extend to branches operated by the institution in Iceland.

Should it be deemed necessary to carry out financial reorganisation of the Icelandic branch of a credit institution established in another member state, notice of such reorganisation shall be sent to the Financial Supervisory Authority.
The Financial Supervisory Authority shall forward the notification to the supervisory authorities of the home state.

The legal effect, procedure and implementation of the decision shall be governed by the law of the home state, with those exceptions listed in the second paragraph of article 99.
A case may arise where application is made for authorisation to suspend payment, or for authorisation to seek composition with creditors, on the basis of the second paragraph of article 6 of the Act on bankruptcy etc., for a branch which a credit institution, established in a state outside of the European Economic Area, operates in Iceland.

The District Court judge shall then notify the Financial Supervisory Authority of such request.
If the credit institution concerned operates branches in other states of the European Economic Area, the Financial Supervisory Authority shall notify the supervisory authorities in those states of the request.

The courts shall endeavour to co-ordinate actions with the authorities of other host states.
Article 100 a Takeover of a financial undertaking by a provisional Board of Directors If a financial undertaking faces such financial or operating difficulties as make it probable that it will not be able to fulfil its commitments or satisfy minimum capital requirements, its board of directors may on its own accord request that the Financial Supervisory Authority take over direction of the undertaking.

The Financial Supervisory Authority must decide on such request without delay.
If the Financial Supervisory Authority accedes to such request, the power of the financial undertaking's board of directors is dissolved, together with rights of shareholders or guarantee capital owners to take decisions in the undertaking's affairs by virtue of their holdings.
The Financial Supervisory Authority shall concurrently appoint a provisional board of directors of three or five persons to exercise those rights provided for by law and the undertaking's articles of association which its board of directors and shareholders´ meeting or meeting of guarantee capital holders would otherwise have held, cf.

however point 4 of the second paragraph of article 101.
The provisional board of directors must, as soon as possible, take the necessary measures to obtain an overview of the financial undertaking's financial situation.

While the provisional board of directors controls the undertaking the same limits shall apply concerning execution or other enforcement remedies against the undertaking as would apply under a debt moratorium.
The provisional board of directors may only take actions which concern material interests of the undertaking if they are urgently necessary.

Control of the financial undertaking by the provisional board of directors concludes automatically once three months have elapsed from its appointment unless: 1.
The provisional board of directors has already submitted a request for the winding-up of the undertaking to a District Court as provided for in point 3 of the second paragraph of article 101; in such case, its mandate remains in force until a final decision has been reached on the request; 2.
3. the undertaking has been granted a debt moratorium or authorisation to seek composition with creditors; in such case the mandate of the provisional board of directors remains in force until one month after the expiry of such authorisation; or the provisional board of directors has previously, with the approval of the Financial Supervisory Authority, held a shareholders' meeting or meeting of guarantee capital owners and a new board of directors has been elected for the company to replace the provisional board of directors.
If the control of a financial undertaking by a provisional board of directors concludes automatically when its mandate period expires, without the undertaking having been wound up, the undertaking's operating license shall be revoked immediately unless a new board of directors has been previously elected as provided for in point 3 of the third paragraph.
B. Winding up Article 101 Conditions for and initiation of winding-up proceedings The estate of a financial undertaking may not be subjected to bankruptcy proceedings in accordance with general rules.

A financial undertaking shall be wound up: 1.
At the request of the Financial Supervisory Authority, if the latter has revoked the undertaking's operating license or refused to grant a time limit as provided for in the fourth paragraph of article 86, or the time limit granted pursuant to this provision has expired without the undertaking having increased its capital base above the minimum provided for in article 84; 2. at the request of the Financial Supervisory Authority, the undertaking's board of directors or the provisional board of directors, if it must be wound up pursuant to its articles of association; 3. at the order of the undertaking's board of directors or provisional board of directors if it cannot completely fulfil its obligations to creditors when they fall due and the undertaking's payment difficulties are not deemed to be temporary in nature; 4. at the request of the undertaking's board of directors and with the approval of the Financial Supervisory Authority if a decision has been taken by a shareholders' meeting or meeting of guarantee capital owners to wind up the company with a motion to this effect supported by at least 2/3 of votes cast and by shareholders or guarantee capital owners controlling at least 2/3 of the share capital or guarantee capital represented by voters at the meeting.
A request for the winding-up of a financial undertaking must be submitted to the District Court where a civil suit against it would be heard in its legal venue.

The request must be presented to the court and handled by the court in the same manner as a petition for bankruptcy proceedings.

Once the court has passed its verdict that the financial undertaking is to be wound up, a District Court judge will appoint a winding-up committee comprised of up to five persons.
Upon its appointment the committee shall assume the rights and obligations held by the undertaking's board of directors and shareholders' meeting or meeting of guarantee capital owners, cf.

however, the third paragraph of article 103.

Unless otherwise provided for in this Act, the rules concerning administrators in bankruptcy proceedings shall apply to the winding-up committee, its tasks and the members of the committee.
Persons appointed to a winding-up committee or a provisional board of directors must also fulfil the qualification requirements of the second paragraph, the fourth sentence of the third paragraph and the fourth paragraph of Art.

52.

The reference date [deadline date; Icel.
frestdagur] in winding-up a financial undertaking shall be determined by the same rules as apply to general bankruptcy procedures; however, it may also be determined by the date upon which the Financial Supervisory Authority set the undertaking a time limit, pursuant to the fourth paragraph of article 86, or appointed it a provisional board of directors as provided for in article 100 a, or the date when the District Court received a winding-up request, as provided for in the second paragraph, if no prior event has occurred to determine the reference date.
Article 101a Special supervision by the Financial Supervisory Authority.

The Financial Supervisory Authority shall supervise the operations of a financial undertaking managed by a winding-up committee, regardless of whether the undertaking concerned has an operating licence or limited licence to operate, or its operating licence has been revoked.
A subsidiary of a financial undertaking in winding-up proceedings, which is administering its assets, shall furthermore be subject to supervision by the Financial Supervisory Authority.

The supervision shall, among other things, include the business practices of the financial undertaking which includes among other things that its practises towards its customers shall be in accordance with normal business practices of financial undertakings holding an operating licence.
The business dealings and the disposition of the assets of a financial undertaking managed by a winding-up committee or the business of a winding-up committee with individual parties appointed to winding-up committees, or parties having close links with such persons, shall comply with rules on proper and sound business practices and customs.

The Financial Authority shall, on its own initiative or by indication from creditors, supervise such business dealings.
Refusal to comply with a request from the Financial Supervisory Authority for delivery of documentation may be liable to dismissal from a winding-up committee.

The same shall apply if a person appointed to a winding-up committee does not satisfy general qualification requirements which apply to him/her.

The Financial Supervisory Authority shall submit such a petition to a District Court which shall receive it for a resolution immediately.
The Financial Supervisory Authority may submit a petition to a District Court that the entire or part of the winding-up committee shall be dismissed in instances where the winding-up committee concerned is not considered to have performed its tasks in accordance with the first and second paragraph of this article or, where applicable, in accordance with other statutory provisions.

A District Court shall receive the petition for a resolution immediately.
The provisions of this article shall, where applicable, apply to the operations of a financial undertaking managed by a resolution committee or a provisional board of directors.

Article 102 Processing of claims etc.


The same rules shall apply to the winding-up of a financial undertaking as apply generally to bankruptcy proceedings concerning reciprocal contractual rights and claims against it, with the exception that a court order for its winding-up shall not automatically result in claims against it falling due.

Upon the winding-up of a financial undertaking, the rules of Art.

74 of the Act on Bankruptcy etc.


shall apply, including providing for any person who neither knew nor should have known of the winding-up proceedings to acquire rights against the financial undertaking in connection with dispositions made prior to the publication of an announcement of winding-up proceedings.

The party concerned shall be presumed to have been unaware of the commencement of winding-up proceedings, if such an announcement has not been made, unless otherwise demonstrated.
The party concerned shall furthermore be presumed to have been aware of the commencement of winding-up proceedings, if such an announcement has been made, unless otherwise demonstrated.

Once a winding-up committee has been appointed for a financial undertaking, the committee must without delay publish a notice to creditors of the winding-up in the Legal Gazette (Icel.

Lögbirtingablað).
Lögbirtingablað).

The same rules shall apply concerning the contents of the notice to creditors, the time limit for submitting claims and notices or advertisements for foreign creditors as apply to general bankruptcy proceedings.
The same rules apply to the winding-up of a financial undertaking as apply to priority of claims against any estate under bankruptcy proceedings, with the exception that claims to deposits, as defined in the Act on Deposit Guarantees and an Investor Compensation Scheme, shall be included in priority claims as referred to in the first and second paragraphs of article 112 of the Act on Bankruptcy etc.
To the extent that the priority of claims can be determined under that Act by the date the court ruling on bankruptcy proceedings is issued, the date of the court ruling on the winding up of a financial undertaking shall apply.

Provisions of Chapter XVIII and Part 5 of the Act on Bankruptcy etc.
shall apply concerning processing of claims against a financial undertaking upon its winding-up, including the effect of failure to submit claims; meetings held by the winding-up committee to discuss recognition of claims submitted are called creditors' meetings.
If, following the expiration of the time limit for submission of claims, the winding-up committee considers it probable that the undertaking's assets will suffice to fully cover its debts, the committee is not obliged at that point to make a decision as to the ranking of claims by priority.

Once the time limit for submission of claims has expired, the winding-up committee shall assess whether it appears that a financial undertaking's assets will suffice to cover its obligations.
A report on this assessment must be submitted and presented to the first creditors' meeting held after the expiry of the time limit for submission of claims.

Following the conclusion of the first creditors' meeting held after the expiry of the time limit for submission of claims, the winding-up committee may pay recognised claims, as provided for in Articles 109-112 of the Act on Bankruptcy etc., No.
21/1991, in full or in part, in one or more payments, insofar as it is ensured that the assets of the financial undertaking are sufficient to cover a payment of at least as much to all other claims with the same priority of rank which have not been finally rejected in the winding-up.
Care must also be taken to ensure that all creditors holding recognised claims with the same priority receive payment at the same time, although derogations may be permitted with the approval of those who do not receive payment or pursuant to a decision by the winding-up committee if a creditor offers to waive its claim in return for partial payment thereof, the amount of which is regarded as definitely lower than other creditors of equal rank will receive at a later stage, taking into consideration for instance whether their claims will bear interest until paid.
If the resolution committee exercises its authority pursuant to the above to pay claims in part or in full, but a dispute on recognition has not been resolved regarding a claim which could rank equally in priority, the winding-up committee shall deposit in a separate custody account an amount corresponding to the payment of that claim or toward the claim in its maximum amount according to the claims submitted by the creditor in question.
Once a final conclusion has been reached on the dispute, the share of this claim of the amount on deposit in the escrow account, together with accrued interest, shall be paid to the creditor to the extent the claim has been recognised; any funds remaining shall revert to the financial undertaking.

If interim distributions are made in more than one currency, a special escrow account may be established for each currency.
Upon each interim distribution which is made with a deposit into special escrow accounts, creditors receiving payment shall be sent notification; with deposit to such an account an interim distribution shall be deemed to have been made to the creditor concerned.

A special escrow account in the understanding of this provision is a trust deposit account in the name of the financial undertaking which is opened for the purpose of depositing interim distributions.
Article 103 Disposition of the interests of a financial undertaking etc.

When winding-up a financial undertaking, the winding-up committee shall dispose of its interests observing the same rules as apply to administration of an estate by an administrator during bankruptcy proceedings, with the exceptions resulting from the provisions of this article.

Any disputes arising concerning such dispositions shall be resolved in accordance with provisions of the Act on Bankruptcy etc.
The winding-up committee shall endeavour to obtain as high a value as possible for the financial undertaking's assets, for instance, by waiting if necessary for outstanding claims to mature rather than realising them at an earlier date, unless it is deemed evident that the interests of creditors and, as the case may be, of shareholders or guarantee capital owners are better served by disposing of such rights at an earlier stage to enable the conclusion of winding-up proceedings.
To this end the winding-up committee may disregard a resolution by a creditors' meeting which it considers contrary to this objective.

The winding-up committee shall call a creditors' meeting for the same purpose as an administrator holds a meeting with creditors of an estate during bankruptcy proceedings.
If the winding-up committee has concluded, in the report referred to in the fifth paragraph of article 102, that the assets of a financial undertaking appear likely to be sufficient to cover its obligations, the winding-up committee shall, in tandem with creditors' meetings, hold meetings with shareholders or guarantee capital owners to seek their opinions on disposition of the undertaking's assets.
A winding-up committee or a resolution committeeis furthermore obliged to inform creditors of all major actions involving the sale or disposition of assets or other rights of a financial undertaking at meetings convened by a winding-up committee in the normal manner.
If it is not evident that the financial undertaking's assets will be sufficient to fulfil its obligations in full, rescission may be demanded pursuant to the same rules as apply to the rescission of measures in the course of bankruptcy proceedings.

In such an event all the provisions of Chapter XX of the Act on bankruptcy etc.

No.
No.

21/1991 shall apply to the winding-up proceedings in the same manner as they apply to bankruptcy proceedings, with the exception that the time limit to take legal action for rescission pursuant to the first paragraph of Article 148 of the cited act shall be 30 months instead of six months.
A lawsuit initiated by a winding-up committee pursuant to this provision shall be filed before the District Court in question where the financial undertaking was wound-up, as provided for in paragraphs 3 and 4 of article 101.
Article 103a Conclusion of winding-up proceedings If a winding-up committee has completed payment of all recognised claims against a financial undertaking and, as the case may be, put aside funds for payment of disputed claims and realised its assets as necessary, it shall conclude the winding-up proceedings either by: 1.
Returning the undertaking to control of its shareholders or guarantee capital owners, if a meeting of these parties called by the winding-up committee has, with the votes of parties controlling at least 2/3 of its share capital or guarantee capital, approved, that the undertaking recommence its activities and a new board of directors has been elected to take over from the winding-up committee, provided that the Financial Supervisory Authority has given its consent thereto and that the undertaking fulfils other legal requirements to recommence its activities; or 2. paying to the shareholders or guarantee capital owners their portion of the remaining value of assets, in accordance with a scheme for distribution which shall comply with the provisions of Chapter XXII and Part 5 of the Act on Bankruptcy etc.
; in the case of a savings bank, however, assets remaining following payment of guarantee capital shall be disposed of in accordance with its articles of association and these assets may not be distributed to guarantee capital owners.

Winding-up proceedings may be concluded as referred to in point 1 of the first paragraph even if payment of all recognised claims has not been completed if creditors who have not yet received satisfaction agree to this.
If the financial undertaking's assets do not suffice for full payment of claims which have not been finally rejected in the winding-up proceedings, the winding-up committee may, when it considers the time ripe to do so, seek composition with creditors to conclude the proceedings.

The winding-up committee shall then draft a composition proposal, following the rules of article 36 of the Act on Bankruptcy etc.

and call for a creditors meeting to vote on the proposal.
In other respects endeavours to seek composition with creditors shall comply, as appropriate, with the provisions of thesecond paragraph of Art.

149 and Articles 151 to 153 of the same Act, however, with the difference that the time limit provided for in the first paragraph of Art.

51 of the same Act shall be eight weeks; the Winding-up Board shall perform the tasks otherwise incumbent upon a trustee and hold meetings with creditors concerning these endeavours.
If a composition proposal is approved, the winding-up committee shall request confirmation of the proposal in accordance with the rules of Chapter IX of the same Act.

If the composition proposal is confirmed the winding-up committee shall, as necessary, fulfil any obligations to creditors it includes and conclude the winding-up proceedings as provided for in the first and second paragraphs.
A composition proposal for a financial undertaking shall be considered to be approved if it receives the same proportion of votes, weighted with the claims amounts of voters, as the proportional reduction of contractual claims proposed under the scheme, but no less than a minimum of 60% of these votes.

Furthermore, it must be approved by 70% of the votes of those voters exercising their voting rights on the composition.
If it is established that a financial undertaking's assets are insufficient to fulfil its obligations completely, and the winding-up committee considers it evident that there will be no basis for seeking composition with creditors, as referred to in the third paragraph, or a composition proposal has not been approved or a request for its confirmation has been rejected, then the winding-up committee shall demand that the District Court which appointed it place the undertaking's estate in bankruptcy proceedings.
A creditor may do the same if its claim has been recognised in winding-up proceedings and either attempts by the winding-up committee to seek composition with creditors have been unsuccessful or the creditor demonstrates that the legal conditions for seeking composition with creditors do not exist, or such a large number of creditors are opposed to composition that there is no possibility of achieving composition based on available information on the undertaking's financial situation.
To advance such a claim, however, a creditor must demonstrate that it has legally protected interests in achieving bankruptcy rather than allowing the winding-up of the undertaking to continue.
If the estate of a financial undertaking is declared bankrupt, all actions taken during the winding-up proceedings concerning claims against the undertaking, including the notice to creditors and the processing of claims submitted shall remain valid, but the administrator shall have an advertisement published in the Legal Gazette stating that the estate has been placed in bankruptcy proceedings.
In other respects the general rules on bankruptcy proceedings shall apply, with the exceptions that provisions of the second paragraph of article 103 shall apply mutatis mutandis, and that the date the court ruling on the winding-up of the financial undertaking was issued shall replace, with regard to legal effect, the date the ruling on bankruptcy was issued.
Article 104 Winding up of a credit institution with head offices in Iceland and branches in another EEA state Should an Icelandic court decide on the winding up of a credit institution which is established and licensed to operate in Iceland, this authorisation shall automatically apply to any branches operated by the credit institution in other member states.
The legal effect, procedure and implementation of the decision shall be governed by Iceland law, with those exceptions listed in the second paragraph of article 99.

The court shall ensure that the Financial Supervisory Authority is notified immediately of the decision on winding up.
If a credit institution operates branches in other member states, the Financial Supervisory Authority shall forward information on the request to the competent authorities in the states concerned, as provided in rules established by the Minister.

If a known creditor of the credit institution is resident in another member state, the administrator shall, without delay, inform the creditor of the commencement of the winding up.
The notification shall state the time limits for lodging claims, where lodgement of claims shall be made and the consequences of failure to lodge claims, as provided for in rules set by the Minister.

Article 105 Winding up of a credit institution with its head office abroad and branches in Iceland A branch operated in Iceland by a credit institution with its head office in another member state cannot be granted independent authorisation for winding up in Iceland.
If the competent authority in another member state decides on the winding up of a credit institution which is resident and established in that state, the decision will automatically extend to branches operated by the institution in Iceland.

The winding up of a credit institution as provided for in this article shall mean collective proceedings opened and supervised by an administrative or judicial authority in another member state, intended to realise assets under the supervision of those authorities.
The legal effect, procedure and implementation of the decision shall be governed by the law of the home state, with those exceptions listed in the second paragraph of article 99.
Should a petition for bankruptcy proceedings be advanced, based on the second paragraph of article 6 of the Act on bankruptcy etc., for a branch which a credit institution, established in a state outside of the European Economic Area, operates in Iceland, the District Court judge shall notify the Financial Supervisory Authority of such petition.
If the credit institution concerned operates branches in other states of the European Economic Area, the Financial Supervisory Authority shall notify the supervisory authorities in those states of the petition.

C. Merger Article 106 A merger of a financial undertaking with another undertaking is permitted only with the approval of the Financial Supervisory Authority.
The transfer of individual operating units of financial undertakings to other undertakings by other means, such as sale, is also subject to the approval of the Financial Supervisory Authority.

For the purposes of this provision, “operating units” shall mean viable units of a financial undertaking, e.g.

branches.
A merger of a financial undertaking with another undertaking shall only be authorised if a decision thereto has received the approval of a shareholders meeting or meeting of guarantee capital owners in the undertaking taken over with at least two-thirds of the votes cast, and furthermore the approval of shareholders or guarantee capital owners in the undertaking taken over controlling at least two-thirds of the share capital or guarantee capital represented at a the meeting of shareholders or guarantee capital owners.
If the undertaking taken over is completely owned by the company taking it over, voting as provided for in the first sentence of this paragraph in the company taken over is not required.

A savings bank may be merged with another financial undertaking which has been granted an operating license pursuant to point 1 of the first paragraph of article 4 with the result that the savings bank is wound up.
On the merger, guarantee capital owners will receive shares in the merged financial undertaking in proportion to the share of guarantee capital in the savings bank's capital.

Consideration paid for the savings bank's retained earnings, if any, shall be allocated to a separate self-governing foundation whose purpose shall be to carry out and promote the discharge of the social responsibilities set out in the savings bank's articles of association.
The payment made to the self-governing foundation shall be in the form of cash or a bond with a maturity of no more than 10 years.

Prior to completion of the merger an independent party shall confirm the proportional division of guarantee capital and other capital of the savings bank and assess the value of the payment to be made to the self-governing foundation and whether it is reasonable, fair and appropriate, having regard to the value of the shares accruing to the guarantee capital owners.
The assessment shall be confirmed by the Financial Supervisory Authority.

The board of directors of a self-governing foundation under this paragraph shall be composed of one representative of the municipalities in which the savings bank operates, one representative appointed by the Minister in charge of municipality affairs, who shall serve as chairman, and one representative nominated by the Minister handling educational matters.
The self-governing foundation's articles of association shall be jointly confirmed by the Minister of in charge of municipality affairs and the Minister handling educational matters.

Mergers of financial undertakings shall otherwise be subject to provisions of the Act on public limited companies, as appropriate, and agreements between the parties concerned.

A financial undertaking which is wound up as the result of a merger is not obliged to issue a call to creditors or to keep its assets separate.
Amendments to the registration of ownership in mortgage registers resulting from mergers of financial undertakings shall be exempt from stamp duties.

The Financial Supervisory Authority shall announce mergers or transfer of operating units of financial undertakings in the Legal Gazette.
The announcement must specify when the merger or transfer takes effect, the names of the undertakings concerned, the time limit for submitting objections to the transfer of deposits, conceivable changes to the payment locations for debt instruments and other aspects which need be made known to customers in particular.
When two or more financial undertakings merge, the own funds formed by the merger shall not be less than the combined own funds of the undertakings concerned at the time the merger took place, if the minimum provided for in article 14 has not been reached.

Upon a merger, the merged savings bank's retained earnings may not be lower than the combined retained earnings of the merging savings banks prior to the merger.

Chapter XIII.

Supervision A.


General authorisations for supervision Article 107 The Financial Supervisory Authority The Financial Supervisory Authority shall supervise the activities of financial undertakings and undertakings connected to the financial sector to which the provisions of this Act apply, as well as activities of Icelandic financial undertakings abroad, unless otherwise provided for by law or international agreements to which Iceland is a party.
Furthermore, the Financial Supervisory Authority shall supervise subsidiaries, affiliated undertakings and funds pursuing the activities listed in Chapter IV, to the extent required by activities subject to supervision, in addition to supervising the owners of qualifying holdings pursuant to Chapter VI.

The supervision shall be as provided for in this Act and the Act on the official supervision of financial operations.
The Financial Supervisory Authority may demand any sort of documentation or information from subsidiaries or affiliates, or from other parties regarded as having close connections with a financial undertaking, which the Financial Supervisory Authority regards as necessary in the course of its supervision of the financial undertaking concerned.
The Financial Supervisory Authority may demand any sort of data or information from holding companies in the financial sector or mixed holding companies, provided the Financial Supervisory Authority deems such information to be necessary for its supervision of financial undertakings which are subsidiaries of these holding companies.
The Financial Supervisory Authority shall oversee dealings by a financial undertaking with its subsidiaries and affiliated companies, companies which control or have holdings in the financial undertaking, and other subsidiaries and affiliated companies of such companies.

Furthermore, the Financial Supervisory Authority shall keep track of dealings between a financial institution and individuals with holdings of 20% or more in the above- mentioned companies.
Financial undertakings shall provide the Financial Supervisory Authority with a report on such dealings in accordance with its specific instruction.

Where the dealings are made with enterprises or individuals in other states, co-operation between supervisory authorities shall be as provided for in international agreements to which Iceland is a party and co-operation agreements concluded by the Financial Supervisory Authority on their basis.
The Financial Supervisory Authority may, at the request of supervisory authorities in another state, verify information from parties in Iceland subject to supplementary supervision of financial conglomerates.

The supervisory authorities concerned may participate in efforts to verify such information.
Should the Financial Supervisory Authority be of the opinion that activities covered by this Act are pursued without the required authorisation, it may demand from the parties concerned or parties subject to supervision such data and information as are necessary to determine whether such is the case.

It can demand that such activities be ceased immediately.

In addition, it may make public the names of parties regarded as offering services without the required authorisation.
Provisions of the Act on the Official Supervision of Financial Operations on daily fines and on searches and seizure of documents may be applied for obtaining information and carrying out supervision as provided for in this article.
Article 108 Assistance to authorities of other EEA states Supervisory authorities in a state within the European Economic Area shall be authorised to carry out checks in Icelandic branches of undertakings established in their countries upon prior notification of such to the Financial Supervisory Authority.
If a financial undertaking, which has received an operating licence in Iceland and pursues activities in another state of the European Economic Area, violates the laws of that state and the competent authorities of that state take measures comparable to those listed in article 34, the Financial Supervisory Authority shall assist the authorities in that state in their exchanges with the management of the financial undertaking concerned.
The provisions of the first and second paragraphs apply to Swiss and Faeroese supervisory authorities, as applicable, provided that a co-operation agreement has been concluded between the Financial Supervisory Authorities and the competent Swiss or Faeroese authorities.
The Financial Supervisory Authority shall notify the appropriate foreign authorities of suspension of payments, composition with creditors or bankruptcy of domestic credit institutions operating branches in other states of the European Economic Area.

B.

Supervision on a consolidated basis Article 109 The provisions of Part C of Chapter IV and of Chapter X shall apply to consolidations where the parent company is a financial undertaking or a holding company in the financial sector.
The parent company shall be responsible for implementing this provision.

The provisions of article 52 on eligibility of board members and managing directors, and of articles 84 and 85 on own funds shall also apply to holding companies in the financial sector.

The provisions of article 30 and articles 84-86 shall also apply to financial conglomerates, as referred to in the third paragraph.
If a financial undertaking or holding company in the financial sector, alone or jointly with other undertakings in the consolidation, owns a holding in an affiliated company, which is a financial undertaking or undertaking in the financial sector, and that undertaking is operated in co-operation with other undertakings, which are not part of the consolidation, in applying the provisions of the first paragraph on own funds a proportional consolidation method shall be used, having regard for the size of the holding in the undertaking in question.
If the responsibility of the financial undertaking or holding company for the affiliated company in question is not limited to the share of its holding or voting rights, the provisions of traditional consolidated accounting shall apply.
An "affiliated company" as referred to in this paragraph shall mean a company, not a subsidiary, in which another company and its subsidiaries own a holding and have substantial influence on, or in which the direct or indirect holding amounts to 20% or more of own funds or voting rights.

The Financial Supervisory Authority shall monitor that financial conglomerates comply with the provisions of this Act.
A financial conglomerate shall mean a group of companies, or companies which have close connections, cf.
article 18, where there is a regulated entity at the head of the group and at least one entity within in the group operates in the financial sector and another entity operates in the insurance sector and where the consolidated and/or aggregated activities in the financial sector, on the one hand and, on the other hand, comparable activities in the insurance sector are both considered significant according to rules set by the Financial Supervisory Authority.
Where there is no regulated entity at the head of the group, but the group's activities occur primarily within the financial or insurance sector, as defined in rules set by the Financial Supervisory Authority, the group shall be considered a financial conglomerate.

Each sub-group which fulfils the conditions of the second sentence shall be regarded as a financial conglomerate.

The Financial Supervisory Authority shall set detailed rules on the definition of financial conglomerates and their supervision.
The Financial Supervisory Authority may decide that the provisions of the first paragraph of this article and the ninth and tenth paragraphs of article 97 shall also apply in other instances involving a financial undertaking which alone or jointly with another party has such ownership links to an undertaking that it is deemed necessary to apply these provisions.
The provisions of the first paragraph of this article and the ninth and tenth paragraphs of article 97 shall not apply to undertakings in which a financial undertaking has temporarily acquired a holding, either to ensure the enforcement of a claim or due to reorganisation of the undertaking, nor to enterprises pursuing insurance activities.

The Financial Supervisory Authority may decide, however, that the provisions in question shall apply.
The Financial Supervisory Authority may grant an exemption from the provisions of the first and second paragraphs of this article and the ninth and tenth paragraphs of article 97.

Chapter XIV.

Penalties Article 110 Administrative fines The Financial Supervisory Authority may impose administrative fines on any party violating the following provisions of this Act and rules established hereunder.

: 1.
Article 3 to the effect that activities which are subject to an operating licence shall not be conducted without an operating licence; 2. article 8 on notification of changes in previously submitted information on a financial undertaking; 3. the first paragraph of article 12 on the exclusive right of financial undertakings to use in their company name, or as a clarification of their activities, the name of the type of financial undertaking for which the undertaking has been granted an operating licence; 4.
Article 17 on risk management systems.

; 5. article 17(a) on the obligation to maintain a separate register of obligations and reporting to the Financial Supervisory Authority; 6.
7. the second paragraph of article 17(b) on compliance by a regulated party with the instructions of the Financial Supervisory Authority; the first and second paragraphs of article 19 on operating in accordance with normal and sound business practices in the financial market, compliance with the rules of the Financial Supervisory Authority, or making accessible information on regulatory and legal remedies; 8. the second paragraph of article 21 on the obligation to report ancillary activities; 9. article 22 on temporary activities and take-over of assets; 10. the third paragraph of article 27 providing that a management company shall not acquire securities with voting rights which enable it to significantly influence the management of the securities issuer; 11. article 29 on ownership and the obligation to report to the Financial Supervisory Authority; 12. the first and second paragraph of article 29 prohibiting lending or other credit; 13. article 29(b) on exposures to transferred credit risk.
14. article 29(c) on securitisation disclosure requirements.
15. article 30 on limits to large exposures; 16. the first paragraph of article 31, article 32 and article 33 on the activities of foreign financial undertakings in Iceland; 17. the first and fifth paragraphs of article 36 and the first and fourth paragraphs of article 37, the first paragraph of article 38 and article 39 on the activities of Icelandic financial undertakings abroad; 18. article 40 on the notification of a qualifying holding; 19. article 46 on restrictions on the exercise of a holding; 20. article 47 on notification by an owner; 21. article 48 on notification by a financial undertaking; 22. article 49 on the disclosure requirements; 23. the second, third, fourth and seventh paragraphs of article 52 on eligibility criteria, service of directors on the board of another financial undertaking and notification of the Financial Supervisory Authority; 24. article 52(b) on notification by the board of directors of a parent company; 25. article 52(c) on notification by the board of directors and managing director to the Financial Supervisory Authority; 26. the first and second sentences of the first paragraph of article 53 on the qualifications of employees of financial undertakings responsible for day-to-day business activities in connection with transactions in financial instruments and reporting of changes in personnel; 27. the second and third paragraphs of article 54 on rules of procedure and prohibition of executive chairmen of the board; 28. the second and third paragraphs of article 55 on the participation of directors in handling issues; 29. article 56 on the participation of personnel in business operations; 30. article 57 on rules of procedure; 31. article 57 on bonus systems; 32. article 57 on severance agreements; 33. article 58 on confidentiality; 34. the third paragraph of article 63 on maintaining and updating a register of guarantee capital holders; 35. the third paragraph of article 66 on establishing and observing rules on trading in guarantee capital; 36. article 68 on the disposal of
 dividends; 37. the second paragraph of article 69 on the obligations of savings banks; 38. the third paragraph of article 80 on the disclosure obligations of electronic money undertakings; 39. article 81 on limitations on the investments of electronic money undertakings; 40. the third sentence of the seventh paragraph of article 84 on disclosures to the Financial Supervisory Authority; 41. the first paragraph of article 86 on initial measures due to insufficient own funds; 42. article 87 on the drafting and attestation of annual accounts; 43. the first paragraph of article 88 on accepted accounting standards; 44. article 89 on the report of the board of directors; 45. article 91 on qualifications of auditors; 46. article 92 on the disclosure requirements of auditors; 47. article 95 on the submission of annual financial reports to the Financial Supervisory Authority; 48. article 106 on the merger of a financial undertaking with another undertaking or its individual operating units; 49. article 107 on the supervisory powers of the Financial Supervisory Authority; 50. settlements between the Financial Supervisory Authority and parties pursuant to article 111.
Fines imposed on a natural person may range in amount from ISK 100 thousand to ISK 20 million.

Fines imposed on a legal person may range in amount from ISK 500 thousand to ISK 50 million.

The determination of fine amounts shall, inter alia, take account of the seriousness of the violation, its duration, the extent of co-operation of the violating party and whether the violation is repeated.
Decisions on administrative fines shall be made by the board of directors of the Financial Supervisory Authority and are enforceable by law.

Fines shall accrue to the State Treasury, net of collection costs.

If administrative fines are not paid within a month from the decision of the Financial Supervisory Authority, penalty interest shall be paid on the amount of the fine.

The determination and calculation of the penalty interest shall be governed by the Act on Interest and Price Indexation.
Administrative fines will be imposed regardless of whether a violation was committed by intent or negligence.

Article 111 If a party has violated the provisions of this Act, or the decisions of the Financial Supervisory Authority based on the Act, the Authority is permitted to conclude the matter by a settlement with the consent of the parties to the case, provided that no major violation is involved which is subject to punitive sanctions.
A settlement is binding for the party involved once it has been accepted and its substance confirmed by the party's signature.

The Financial Supervisory Authority will establish further rules on the implementation of this provision.
Article 112 In proceedings directed against a natural person which may potentially conclude with the imposition of an administrative fine or formal charges to the police, a person reasonably suspected of violation of the law is entitled to refuse to answer questions or surrender documents or any other effects unless it is possible to exclude the possibility that this may have significance for the determination of his or her violation.
The Financial Supervisory Authority shall advise the suspect of this right.

Article 112 a The power of the Financial Supervisory Authority to impose administrative fines pursuant to this Act shall lapse when five years have passed from the time that the conduct ceased.

The limitation pursuant to the first paragraph is interrupted when the Financial Supervisory Authority notifies the party of the start of an investigation of the alleged violation.
The interruption of the limitation has legal effect for all the parties involved in a violation.

Article 112 b Fines or imprisonment Violation of the following provisions of this Act and rules established hereunder is subject to fines or up to two years' imprisonment, if there are no more severe penalties under other legislation: : 1.
Article 3 to the effect that activities which are subject to an operating licence shall not be conducted without an operating licence; 2. the second paragraph of article 17(b) on disclosures the Financial Supervisory Authority; 3. the second paragraph of article 19 on compliance with rules adopted by the Financial Supervisory Authority; 4. the second paragraph of article 21 on the obligation to report ancillary activities; 5. article 22 on temporary activities and take-over of assets; 6. the third paragraph of article 27 providing that a management company shall not acquire securities with voting rights which enable it to significantly influence the management of the securities issuer; 7. article 29 on ownership and the obligation to report to the Financial Supervisory Authority; 8. the first and second paragraph of article 29 prohibiting lending or other credit; 9. article 29(b) on exposures to transferred credit risk.
10. article 29(c) on securitisation disclosure requirements.
11. article 30 on limits to large exposures; 12. the first paragraph of article 31, article 32 and article 33 on the activities of foreign financial undertakings in Iceland; 13. article 40 on the notification of a qualifying holding; 14. article 46 on restrictions on the exercise of a holding; 15. article 49 on the disclosure requirements; 16. the second and third paragraphs of article 54 on rules of procedure and prohibition of executive chairmen of the board; 17. the second and third paragraphs of article 55 on the participation of directors in handling issues; 18. article 56 on the participation of personnel in business operations; 19. the first paragraph of article 57 on the dealings of personnel with a financial undertaking; 20. article 57 on bonus systems; 21. article 57 on severance agreements; 22. article 58 on confidentiality; 23. article 68 on the disposal of dividends; 24. the first, second and fourth paragraphs of article 81 on limits to the investments of electronic money undertakings; 25. the first paragraph of article 86 on initial measures due to insufficient own funds; 26. article 87 on the drafting and attestation of annual accounts; 27. the first paragraph of article 88 on accepted accounting standards; 28. article 89 on the report of the board of directors; 29. articles 91 and 92 on the qualifications of auditors and their responsibility to report flaws in operations.
Furthermore, knowingly supplying false or misleading information on the financial position of a financial undertaking or other information on the undertaking, publicly or to the Financial Supervisory Authority, other official bodies or customers, is subject to the same sanctions.

Article 112 c Violations of this Act which are subject to fines or imprisonment are subject to sanctions whether committed by intent or negligence.
Direct or indirect profit gained by a violation of the provisions of this Act which is subject to fines or imprisonment may be confiscated by a judgment of a court of law.

Attempted violations or participation in violations pursuant to this Act are punishable under the provisions of the General Penal Code.

Article 112 d Violations of this Act are subject to criminal investigation only following charges submitted by the Financial Supervisory Authority to the police.
If an alleged violation of this Act is subject to both administrative fines and penal sanctions, the Financial Supervisory Authority shall assess whether the case should be referred to the police or concluded by an administrative decision of the Authority.

If the violations are major, the Financial Supervisory Authority is required to refer them to the police.
A violation is major if it involves significant amounts, if the violation is of a particularly gross nature or under any conditions that significantly aggravate the criminality of the violation.

Furthermore, the Financial Supervisory Authority may, at any stage of an investigation, refer a case involving violation of this Act for criminal investigation.

Consistency shall be maintained in the resolution of comparable cases.
Referrals of the Financial Supervisory Authority shall be accompanied by the documents on which the suspicion of violation is based.

The provisions of Chapters IV-VII of the Administrative Procedure Act shall not apply to any decision of the Financial Supervisory Authority to refer a case to the police.
The Financial Supervisory Authority is permitted to supply the police and prosecuting authorities with information and documents obtained by the Authority and relating to the violations specified in the second paragraph.

The Financial Supervisory Authority is permitted to participate in police actions relating to their investigation of the violations specified in the second paragraph.
The police and prosecuting authority are permitted to supply the Financial Supervisory Authority with information and documents obtained by the police and relating to the violations specified in the second paragraph.

The police is permitted to participate in actions taken by the Financial Supervisory Authority relating to investigation of the violations specified in the second paragraph.
If the prosecutor is of the opinion that there are no grounds for legal action in relation to alleged criminal conduct which is also subject to administrative sanctions, the prosecutor may refer the case back to the Financial Supervisory Authority for process and decision.

Chapter XV.
Chapter XV.

Miscellaneous provisions Article 113 Registration of accounts by name All deposit accounts, custody accounts and safety deposit boxes must be registered in the name of the customer together with his/her address and identification number.
Article 114 Lost documents If a deposit certificate or acceptance receipt issued by a financial undertaking for a pledge or assets taken into custody is lost, the board of the financial undertaking may summon the bearer of the documents in question with three months notice from the final publication of such a summons, which must be published in the Legal Gazette three times.
If no one answers the summons before the time limit elapses, all claims on the financial undertaking based on the deposit certificate or acceptance receipt shall be cancelled.

The financial undertaking shall then, at the request of the person who formerly received the deposit certificate or acceptance receipt from the undertaking in question, issue the party or such person who proves his/her legal right derived from this party, with a new one with the same terms and conditions as the previous one.
Article 115 Exemption from stamp duty Deposit certificates, cheques and any type of obligation issued in the name of financial undertakings, obligations giving them right to a pledge, dividend coupons of their bonds and assignments shall be exempt from stamp duties.

Article 116 Exempted funds and exemption from legal form Despite the authorised activities of the Harbour Improvement Fund in accordance with the Harbours Act, No.

23/1994, of the Housing Financing Fund in accordance with Act No.
44/1998, on Housing Affairs, and the Tourism Fund in accordance with Act No.

117/1994, on the Organisation of Tourism Affairs, these funds shall not be considered as financial undertakings in accordance with this Act.

Public investment funds which are in operation upon the entry into force of this Act shall be exempt from the requirements of article 13 on operating as a limited-liability company.

Chapter XVI.

Entry into force, etc.


Article 117 Transposition This Act introduces into Icelandic law provisions of the Directives of the European Parliament and the Council Nos.
2000/12/EC, relating to the taking up and pursuit of the business of credit institutions, 93/6/EEC, on the capital adequacy of investment firms and credit institutions, 2004/39/EC on markets in financial instruments, 86/635/EEC, on the annual accounts and consolidated accounts of banks and other financial institutions, 107/2001/EC, amending Directive 85/611/EEC on undertakings for collective investment in transferable securities (UCITS), 95/26/EC, amending various Directives in the field of financial services, with a view to reinforcing prudential supervision, 2000/28/EC, amending Directive 2000/12/EC concerning the definition of a credit institution, and 2000/46/EC, on the taking up and pursuit of the business of electronic money institutions, Directive 2001/24/EC of the European Parliament and of the Council, Directive 2006/48/EC of the European Parliament and of the Council, Directive 2006/49/EC of the European Parliament and of the Council, Directive 2007/44/EC of the European Parliament and of the Council and Directive 2009/111/EC of the European Parliament and of the Council.Article 118 Entry into force.
This Act shall enter into force on 1 January 2003.

The words "financial instrument" in this Act shall mean securities as defined in Act No.

13/1996, on Securities Transactions.

Article 119 ....

Article 120 .... Interim provisions I.-IV.

........ V. The following special rules shall apply to financial undertakings benefiting from a moratorium upon the entry into force of this Act.

1.
1.

The authorised debt moratorium shall continue in spite of the entry into force of this Act and may be extended as provided for in the rules referred to in the third paragraph of article 98.

2.

The moratorium shall be subject to the provisions of the first paragraph of article 101 and articles 102, 103 and article 103(a) of the Act, as if the undertaking had be placed in winding-up proceedings pursuant to a court ruling on the date of entry into force of Act No.
44/2009; the winding-up proceedings shall, however, be referred to as an authorised debt moratorium for as long as that authorisation remains valid, cf.

point 1.

The provisions of Chapter IV of the Act on bankruptcy etc.

shall not apply to a debt moratorium of the kind referred to in this Act; the appointee shall, however, monitor dispositions of the resolution committee as provided for in article 103 of the Act.
Before the authorisation of the undertaking for a moratorium on its debts expires, the resolution committee and the winding-up committee may jointly petition for the undertaking to be subjected to winding-up proceedings under normal rules, cf.

however points 3 and 4, by a court ruling, provided that the substantive conditions of point 3 of the second paragraph of article 101 of the Act are fulfilled.
Such petition shall be submitted at the latest on the day that the authorisation of the undertaking for a moratorium on its debts expires.

The handling of such a petition is in other respects subject to the provisions of the third paragraph of article 101 of the Act.

If the court approves the petition, measures taken in the course of the undertaking's moratorium on debts after the entry into force of Act No.

44/2009 shall remain unaltered.


To the extent that the ranking of claims and other legal effects are determined by the date that a ruling on winding-up proceedings is pronounced, the reference date shall to the same effect be determined by the date of entry into force of that Act [i.e.

No.

44/2009].
No.

44/2009].

From the time that a petition for winding-up proceedings pursuant to general rules is received by a judge and until a ruling is pronounced the rules on winding up proceedings shall apply provisionally to the undertaking.

The authorisation for a moratorium on debts shall expire automatically when a final ruling on winding up of the undertaking is pronounced.

3.
3.

The Resolution Committee of a financial undertaking, appointed by the Financial Supervisory Authority prior to the entry into force of this Act based on article 5 of Act No.

125/2008, shall continue its work with its name unaltered and fulfil the role intended for the winding-up committee in the third paragraph of article 9, the second sentence of the fourth paragraph of article 101, the first sentence of the fifth paragraph of article 102 and the first to third paragraphs of article 103 of the Act.
Unless otherwise provided for in this Act, the rules concerning trustees in bankruptcy proceedings shall apply to a resolution committee, its tasks and the members of the committee.

Persons appointed to a resolution committee must also fulfil the qualification requirements of the second paragraph, the fourth sentence of the third paragraph and the fourth paragraph of Art.

52 of the Act.
52 of the Act.

This provision shall be repealed as of 1 January 2012, after which time the tasks handled by resolution committees shall be assumed by winding-up committees.

Once a winding-up committee has taken over the tasks of a resolution committee a District Court judge may, at the request of the winding-up committee, appoint additional members to the winding-up committee, but they may never exceed five, however.

4.
4.

To carry out tasks of the winding-up committee other than those referred to in point 3, a district court judge shall, following a written request from the resolution committee, appoint such a committee in accordance with the instructions in the first and third sentences of the fourth paragraph of article 101 of the Act, cf.

Art.

5 of this Act.


The person serving as the undertaking's appointee during the debt moratorium shall also automatically take a seat on this committee and shall remain in this position even after the debt moratorium has concluded.

5.

The supervisory role of the Financial Supervisory Authority as provided for in Art.

101 a shall also include the work of a resolution committee operating in accordance with this provision and the persons appointed to it.

VI.
VI.

In order to limit damage or risk of damage to financial markets, the Financial Supervisory Authority may take special measures in accordance with the instructions in this provision if it considers such necessary in view of exceptional circumstances or events.
Exceptional circumstances or events refers to particular financial and/or operational difficulties experienced by a financial undertaking, including the probability that it will not be able to fulfil its commitments to customers or creditors, the probability that the premises for revocation of its operating license exist, or the likelihood that the undertaking cannot satisfy minimum capital requirements, and other remedies available to the Financial Supervisory Authority are unlikely to prove successful.
Exceptional circumstances can also apply where a financial undertaking has requested or been granted a debt moratorium or authorisation to seek composition with creditors.

In the circumstances or events specified in the first paragraph, the Financial Supervisory Authority may call a shareholders' meeting or a meeting of guarantee capital owners.

The Financial Supervisory Authority's representative shall chair the meeting and have the right to speak and make proposals.
Under these circumstances, the Financial Supervisory Authority is not bound by provisions of the Act on Public Limited Companies or of a financial undertaking's articles of association on calling meetings, advance notice of meetings or proposals to amend the articles of association.
In extreme circumstances, the Financial Supervisory Authority may assume the powers of a shareholders' meeting or meeting of guarantee capital owners for the purpose of taking decisions on necessary measures, including limiting the decision-making power of the board of directors, dismissing the board of directors in whole or in part, taking over the assets, rights and obligations of a financial undertaking in whole or in part, or disposing of such an undertaking in whole or in part, including merging it with another undertaking.
Such measures shall not be subject to provisions of the Act on Securities Transactions on mandatory bid obligations, nor the provisions of the Act on Financial Undertakings on advertisement of financial undertakings' mergers in the Legal Gazette.

The Financial Supervisory Authority is authorised to transfer all rights insofar as necessary in such instances.
Should the Financial Supervisory Authority conclude that a merger of the financial undertaking concerned with another optimally safeguards the interests at stake, the provisions of the Competition Act and merger provisions of this Act shall not apply to such merger.

A decision by the Financial Supervisory Authority to take over the operations of a financial undertaking shall be notified to the board of directors of the latter and grounds given in writing.
The Financial Supervisory Authority must make the announcement public.

If the financial undertaking operates branches or has services in another country such notification must be sent to the competent supervisory authorities in that country.

If the Financial Supervisory Authority dismisses the entire board of directors of a financial undertaking, a provisional board of directors must be appointed for the undertaking immediately.
In other respects the provisions of article 100 a shall apply to such a board of directors and its tasks.

If necessary, the Financial Supervisory Authority may limit or prohibit disposal of a financial undertaking's capital or assets.

The Financial Supervisory Authority is authorised to take custody of assets that are to satisfy the financial undertaking's obligations, have their value assessed and dispose of them as necessary for payment of claims fallen due.
Furthermore, the Financial Supervisory Authority may cancel sale of assets executed within one month prior to special measures taken by the Authority as provided for in this article.

Provisions of Chapters IV-VII of the Administrative Procedure Act shall not apply to the above proceedings and decisions of the Financial Supervisory Authority.

The Treasury shall be liable for costs of implementing actions by the Financial Supervisory Authority based on this provision.
This provision shall expire as of 1 July 2012.

VII.

Notwithstanding the provisions of the sixth paragraph of article 102, the winding-up committee of a financial undertaking which had already been granted a moratorium on debts on the entry into force of Act No.

44/2009, amending Act No.

161/2002 on financial undertakings, cf.


Interim Provision II, is permitted, during the period from the entry into force of this Act until conditions are present for the satisfaction of claims under the sixth paragraph of article 102, to pay debts in respect of wages, including wages for notice periods, and in respect of deposits granted priority under article 6 of Act No.

125/2008, cf.
125/2008, cf.

the third paragraph of article 102 of the Act on financial undertakings, insofar as it is ensured that there are sufficient assets to cover full payment, or pro rata payment, of claims which might enjoy the same or higher priority in rank.

On the same conditions the resolution committee of a financial undertaking is permitted to pay debts in respect of wages, including wages for notice periods, from the time of entry into force of this Act until 31 December 2010.
Unnumbered interim provision pursuant to Act No.

75/2010 (amending the Act No.

161/2002, on financial undertakings): Financial undertakings are granted a time limit until their next annual general meeting following the adoption of this Act to meet the eligibility requirements of members of their boards of directors.

Managing directors and heads of internal audit divisions have until 31 December 2010 to meet the eligibility requirements under this Act.

Interim provisions pursuant to Act No.


75/2010 l.Notwithstanding article 48 of this Act (75/2010), cf.

article 90 of the Act (161/2002), an auditor or auditing firm which has provided service to a financial undertaking for three years or less prior to the entry into force of this Act is permitted to provide services to that company for five years from the time entry into force.
If services have been provided for more than three years before the entry into force of this Act an auditor or auditing firm is permitted to provide services to a financial undertaking for three years following the entry into force of this Act.

II.

Notwithstanding the provisions of article 56 of this Act, the following provisions shall take effect as follows: 1.
The second paragraph of article 8 (amending article 16) on the eligibility requirements for the director of the internal audit section shall take effect on 1 January 2011; 2. article 10 (on article 17(a) and article 17(b)) shall take effect on 1 January 2011; 3. article 13 (on article 19(a)) shall take effect on 1 January 2011; 4.
5. the third paragraph of article 39 (amending article 52) on the eligibility requirements for members of the board of directors and managing director shall take effect on 1 July 2011; the fourth paragraph of article 39 (amending article 52) on service on the board of directors of another regulated party shall take effect on the following annual general meeting of the financial undertaking in question, but no later than 1 April 2011.

III.

Notwithstanding the provisions of article 57(a) of the Act, cf.
subsection (a) of article 43 of this Act, financial undertakings are prohibited until 1 January 2012 from entering into contracts with managing directors and key employees which constitute the equivalent of bonus contracts if such contracts exceed 10% of the total annual wage expenditures of the financial undertaking or if they increase the salaries of individual employees by more than 25% on an annual basis in excess of the total salary of the person in question net of the bonus.
IV.The periods of limitation provided for in subsections (a), (b) and (c) of article 136 of the Companies Act No.

2/1995 shall not apply to a financial undertaking which has been subjected to winding up proceedings or which has received an equity contribution from the State Treasury, debt restructuring with the involvement of the State Treasury or the Central Bank of Iceland or other similar assistance on the part of those parties.
The same applies to a financial undertaking over which the Financial Supervisory Authority has taken control and assigned a winding-up committee and which had been granted permission for a moratorium on its debt on the entry into force of Act No.

44/2009.

This provision applies to events and conduct which occurred prior to the entry into force of this Act , even if the period of limitation had passed.
V.On the winding up of a financial undertaking which has been subjected to winding-up proceedings and falls within the scope of Interim Provision V of the Act the winding-up committee shall, notwithstanding the provisions of the third paragraph of article 119 of the Act on bankruptcy etc., provide, on request, a list of claims submitted or disclose the list of claims publicly.

A winding-up committee is permitted to require payment to the estate for the cost of preparing the copy.
In such public disclosures, however, information should not be granted on the names of creditors holding a legal position pursuant to article 112 of the Act on bankruptcy etc.
VI.The Minister of Economic Affairs shall appoint a committee with the role of formulating a policy on the future organisation of the financial system which takes into account the recommendations in the Report of the Special Investigation Commission of the Althing concerning necessary legal reforms and the changes that have been made in the legislative environment of the financial sector following the fall of the banks.
Among other things, the committee shall investigate the position and operating environment of savings banks, the ownership by financial undertakings of insurance companies and vice versa, rules on maximum holdings in financial undertakings and the most feasible means of ensuring dispersed ownership, and whether the operations of investment banks and commercial banks should be separated.
IX The provision of Article 29(b) applies to securitisation that occurs after the entry into force of this Act; however, after 31 December 2014, the provision shall apply to all securitised positions taken before the enactment of this Act, provided that assets have been replaced or assets added to the underlying asset portfolio after that time.
Before 31 December 2011, the Financial Supervisory Authority shall publish information on general criteria and procedures used in assessing compliance with the conditions of Article 29(b) or the rules of the Financial Supervisory Authority pursuant to Article 29(d).