Cross-border payments in foreign currency

In order to facilitate cross-border payment transactions, the Central Bank of Iceland has adopted a temporary alternative routing procedure.

The Central Bank of Iceland has adopted a temporary method for international payment intermediation. This method involves routing banking institutions’ payments to and from Iceland through the Central Bank’s own accounts with its foreign counterparties, which generally have no involvement with the operations of Icelandic banks.

The Central Bank of Iceland has requested that central banks in other countries instruct their commercial banks to route payments to Iceland through the Central Bank’s accounts if they fear that they will be held liable for non-delivery of payments sent via the conventional channels.

On October 16, the Central Bank issued a statement announcing that it would guarantee that foreign payments routed through its accounts would not be stopped (the statement can be found here). Therefore, the Central Bank has guaranteed that all payments routed through its accounts to the accounts of domestic credit institutions will be delivered to the account owners in those credit institutions.

The Central Bank ensures that payments are received by the appropriate domestic parties with the assistance of domestic banks or savings banks. This method has proven successful in transactions with Denmark, and it is hoped that transactions with other countries will prove equally successful very soon.

Reference: Nov. 18, 2008.
Central Bank of Iceland.
Status of domestic and international payment intermediation.
http://www.sedlabanki.is/?PageID=926