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Internal Market: Iceland must lift ban on exchange rate indexation of loans in ISK



Iceland is in breach of the EEA Agreement by maintaining in force a total ban on the granting of exchange rate indexed loans in ISK. This is the conclusion of a reasoned opinion delivered by the EFTA Surveillance Authority today. 

It is the Authority's opinion that an index loan ban will dissuade Icelandic financial institutions from financing their loans in other currencies than the national currency and therefore restrict the free movement of capital. 

The Authority acknowledges that loan agreements with exchange rate indexation may involve risk for consumers. Consumers usually have their income in the national currency and are therefore not prepared to react to fluctuation in the value of other currencies. Furthermore, consumers may not have the ability to assess the risk involved in such loan agreements. 

According to the Authority it can be lawful to restrict the granting of such high risk financial products to consumers. However, a total ban on granting such loans to individuals and companies goes beyond what can be considered necessary in order to protect consumers. 

The Authority believes that Iceland could introduce other less restrictive measures in order to protect consumers. Iceland could, for example, require financial institutions to inform consumers in an adequate and clear manner about the risks involved before contracting a loan with an exchange rate indexation. Alternatively, consumers could be granted the right to retract within a certain time period from a signed loan contract. 

The same does not apply to companies. Contrary to the situation relating to consumers, legal persons should have the necessary means and resources to be able to adequately assess any risks involved when considering contracting a loan with an exchange rate indexation. 

A reasoned opinion is the second stage in infringement proceedings. The Authority may bring the matter before the EFTA Court if Iceland fails to take the measures necessary to comply with the reasoned opinion within two months. 

For further information, please contact:
Mr. Ólafur Einarsson
Director, Department of Internal Market Affairs
tel. (+32)(0)2 286 18 73

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