OREANDA-NEWS. Iceland's latest move towards removing capital controls continues the steady progress made in implementing the liberalisation strategy set out in June 2015, Fitch Ratings says. This process has been credit positive for the Icelandic sovereign, and further capital control liberalisation would improve the business environment, allowing Icelandic households and businesses to diversify their investments. Moving towards unrestricted capital flows still presents risks, although there are mitigants.

The Icelandic government introduced a bill on 19 August that would phase in provisions for outward FDI (subject to Central Bank of Iceland approval) and let individuals invest up to ISK100m in securities outside Iceland and purchase one piece of real estate per year, among other measures. Other restrictions, such as those on transfers of bank deposits, will be eased from 1 January 2017.

The measures mean that "capital controls should not place substantial restrictions on most individuals" and requests for exemptions should fall by 50%-65%, Iceland's Ministry of Finance and Economic Affairs said. This step follows June's foreign currency auction where the CBI offered non-resident holders of ISK assets 'locked in' by capital controls the chance to unwind their positions by exchanging ISK assets for FX at a discount on the onshore exchange rate. The CBI said that total offers to buy ISK83bn were accepted.