Headquarters | Kalkofnsvegur 1, Reykjavík |
---|---|
Established | 7 April 1961 |
Ownership | 100% state ownership [1] |
Governor | Ásgeir Jónsson |
Central bank of | Iceland |
Currency | Icelandic króna ISK (ISO 4217) |
Reserves | 4.790 billion USD [1] |
Preceded by | Landsbanki Íslands |
Website | cb sedlabanki |
The Central Bank of Iceland (Icelandic : Seðlabanki Íslands) is the central bank or reserve bank of Iceland. It has served in this capacity since 1961, when it was created by an act of the Alþingi out of the central banking department of Landsbanki Íslands, which had the sole right of note issuance since 1927 and had conducted only limited monetary policy.
Seðlabanki Íslands is owned by the Icelandic government, and is administered by a governor and a seven-member supervisory board, elected by the country's parliament following each general election. [2] It has the sole right to issue notes and coins of Icelandic krónur and to manage the state's foreign currency reserves. The Central Bank Act of 1986 eliminated the ability of the Central Bank to regulate the interest rates of commercial banks and savings banks.
Though nominally independent, the Central Bank of Iceland was historically expected to follow the lead of the central government. In 2001, however, a floating exchange rate policy was introduced and since then the Central Bank has been empowered to adopt an inflation target and manage monetary policy so as to achieve price stability independent of the policies of the central government.
# | Governor | Took office | Left office | Tenure length |
---|---|---|---|---|
1 | Jóhannes Nordal | 1961 | 1993 | 31–32 years |
2 | Jón G. Maríasson | 1961 | 1967 | 5–6 years |
3 | Vilhjálmur Þór | 1961 | 1964 | 2–3 years |
4 | Sigtryggur Klemensson | 1966 | 1971 | 4–5 years |
5 | Davíð Ólafsson | 1967 | 1986 | 18–19 years |
6 | Svanbjörn Frímannsson | 1971 | 1973 | 1–2 years |
7 | Guðmundur Hjartarson | 1974 | 1984 | 9–10 years |
8 | Tómas Árnason | 1985 | 1993 | 7–8 years |
9 | Geir Hallgrímsson | 1986 | 1990 | 3–4 years |
10 | Birgir Ísleifur Gunnarsson | 1991 | 2005 | 13–14 years |
11 | Jón Sigurðsson | 1993 | 1994 | 0–1 years |
12 | Steingrímur Hermannsson | 1994 | 1998 | 3–4 years |
13 | Finnur Ingólfsson | 2000 | 2002 | 1–2 years |
14 | Ingimundur Friðriksson | 2002 | 2003 | 0–1 years |
15 | Jón Sigurðsson | 2003 | 2006 | 2–3 years |
16 | Eiríkur Guðnason | 1994 | 2009 | 14–15 years |
17 | Davíð Oddsson | 2005 | 2009 | 3–4 years |
18 | Ingimundur Friðriksson | 2006 | 2009 | 2–3 years |
19 | Svein Harald Øygard | 2009 | 2009 | 0 years |
20 | Már Guðmundsson | 2009 | 2019 | 9–10 years |
21 | Ásgeir Jónsson | 2019 | Incumbent | 3–4 years |
In 2015, after the 2008–2011 Icelandic financial crisis, the government of Iceland considered "a revolutionary monetary proposal" to abolish private money creation and to end to fractional-reserve banking. [3] Similar to the Swiss Sovereign Money Initiative, this plan would remove the power of money creation from the commercial banks and give it to the Central Bank of Iceland. [3]
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base. Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs, and in some cases also to enforce policies on financial consumer protection and against bank fraud, money laundering, or terrorism financing.
The European Central Bank (ECB) is the prime component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important central banks.
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System.
The króna or krona is the currency of Iceland. Iceland is the second-smallest country by population, after the Seychelles, to have its own currency and monetary policy.
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Fractional-reserve banking is the system of banking in all countries worldwide, under which banks that take deposits from the public keep only part of their deposit liabilities in liquid assets as a reserve, typically lending the remainder to borrowers. Bank reserves are held as cash in the bank or as balances in the bank's account at the central bank. Fractional-reserve banking differs from the hypothetical alternative model, full-reserve banking, in which banks would keep all depositor funds on hand as reserves.
In economics, the monetary base in a country is the total amount of money created by the central bank. This includes:
In macroeconomics, an open market operation (OMO) is an activity by a central bank to give liquidity in its currency to a bank or a group of banks. The central bank can either buy or sell government bonds in the open market or, in what is now mostly the preferred solution, enter into a repo or secured lending transaction with a commercial bank: the central bank gives the money as a deposit for a defined period and synchronously takes an eligible asset as collateral.
Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the commercial bank's reserve, is generally determined by the central bank on the basis of a specified proportion of deposit liabilities of the bank. This rate is commonly referred to as the reserve ratio. Though the definitions vary, the commercial bank's reserves normally consist of cash held by the bank and stored physically in the bank vault, plus the amount of the bank's balance in that bank's account with the central bank. A bank is at liberty to hold in reserve sums above this minimum requirement, commonly referred to as excess reserves.
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The Bank of Korea is the central bank of the Republic of Korea and issuer of Korean Republic won. It was established on 12 June 1950 in Seoul, South Korea.
Money creation, or money issuance, is the process by which the money supply of a country, or of an economic or monetary region, is increased. In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is termed base money. Central banks can increase the quantity of base money directly, by engaging in open market operations. However, the majority of the money supply is created by the commercial banking system in the form of bank deposits. Bank loans issued by commercial banks that practice fractional reserve banking expands the quantity of broad money to more than the original amount of base money issued by the central bank.
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Modern monetary theory or modern money theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. According to MMT, governments do not need to worry about accumulating debt since they can create new money by using fiscal policy in order to pay interest. MMT argues that the primary risk once the economy reaches full employment is inflation, which acts as the only constraint on spending. MMT also argues that inflation can be addressed by increasing taxes on everyone to reduce the spending capacity of the private sector.
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