(Adds Gudmundsson comment, background)
By Ragnhildur Sigurdardottir
REYKJAVIK Aug 15 Iceland's Ministry of Finance
said on Friday it had re-appointed Mar Gudmundsson to a new
five-year term as governor of the country's central bank.
Gudmundsson will play a key role in removing capital
controls imposed after the country's top banks collapsed under a
mountain of debt in 2008. He will also be involved in deciding
how to handle the estates of the old banks.
"I think this is positive news for the markets, because the
central bank has been making good headway in terms of their
credibility - getting inflation under control and facilitating
more stability in the foreign exchange market," said
Islandsbanki senior economist Jon Bentsson.
"Changing the governor at this juncture with the lifting of
capital controls nearing us in time would probably have sent a
confusing message to both domestic and international markets."
In May, the government appointed a committee to review the
central bank. That committee may propose changes in how the
central bank is run.
If those changes meant senior personnel would need to be
re-appointed, Gudmundsson said in a statement on the central
bank's website, he might not re-apply for the job. He said he
was interested in working internationally before getting too
The finance minister said earlier this week that the
government was exploring the possibility of appointing more than
one governor to handle the job's increased workload.
Gudmundsson's renewed appointment comes after speculation
the government might replace him after his term ended, because
of what analysts said were tensions between him and the
government over economic policy.
Gudmundsson took over at the central bank in 2009, shortly
after Iceland's top three banks collapsed. Under Gudmundsson,
the central bank pursued a series of rate cuts that over two
years lowered the key borrowing rate to single digits from a
peak of almost 20 percent.
Iceland's central bank, which is due to announce its next
rate decision on Aug. 20, left its rate unchanged at 6.00
percent in May.
Iceland's economy has picked up sharply in the last couple
of years. It expanded 3.3 percent in 2013, and the central bank
expects growth to accelerate this year to 3.7 percent as
domestic demand recovers.
(Additional reporting by Mia Shanley, writing by Sven
Nordenstam; Editing by Larry King)