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Iceland parliament summoned for capital controls vote

[REYKJAVI] Iceland's centre-right government has called parliament to vote late on Sunday on a bill that is part of a plan to unwind capital controls which have been in place since the financial crisis.

Social Democratic party leader and member of parliament Arni Pall Arnason said the late-night vote would be on tightening capital controls, to minimise the risk they would be circumvented ahead of their planned abolishment, newspaper MBL reported on its website.

Johannes Thor Skulason, assistant to the prime minister, earlier told Reuters the aim was for parliament to vote on certain parts of the plan as a security measure before financial markets open on Monday. He declined to give further details.

The main bill to unwind controls would be presented on Monday at a press conference hosted by the government, Mr Skulason said.

Capital controls have been in place in the North Atlantic island nation of 330,000 people since the 2008 global financial crisis, when Iceland's three main banks - Glitnir, Landsbanki and Kaupthing - all collapsed, sending the economy and the Icelandic crown into meltdown.

The central bank has said the book value of the assets of the failed banks that are denominated in Icelandic crowns is about 500 billion crowns (S$5.1 billion), corresponding to roughly a quarter of the country's gross domestic product.

With the economy starting to return to normalcy, Iceland has been planning for some time to remove the capital controls, which have stunted investment, while avoiding a new run on the crown that could hurt the economic recovery.

The government has said it plans to impose a tax on any debt recovered from the failed banks that investors take out of Iceland, to stem outflows and reduce the risk of the crown plunging again.

REUTERS