The story
The Central Bank of Iceland was created in 1961 by an act of the Alþingi out of the central banking department of Landsbanki Íslands, which had been the island's sole bank of issue since 1927 and had conducted only limited monetary policy.
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.
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. 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. The option was not implemented.
On 1 January 2020, the Central Bank of Iceland absorbed the Financial Supervisory Authority, previously an independent institution established in 1999.
On june 2025 it joined the Eurosystem’s TARGET Instant Payment Settlement (TIPS) system, after an agreement with the European Central Bank.
From Wikipedia’s article on Central Bank of Iceland, shared under CC BY-SA 4.0.5