Skuldabréf

Skuldabréf is the Icelandic term for a debt instrument that represents a formal obligation by a borrower to pay a fixed sum of money to a lender, typically with interest, at a specified date or over a schedule. It is a negotiable instrument used by governments, municipalities, and corporations to raise capital, and it is traded on financial markets.

Common forms include promissory notes and bonds. A skuldabréf specifies terms such as the principal (face value), interest rate (coupon), payment dates, and maturity. It may be issued in bearer form or in a registered form, and ownership is transferred through endorsement or entry in a security register.

Characteristics include transferability, negotiability, credit risk, and, in many cases, eligibility for collateral arrangements or repurchase agreements. Coupons may be paid periodically, with the principal repaid at maturity, unless the instrument is perpetual or callable.

Legal framework: In Iceland, skuldabréf are governed by contract law and capital market regulation. The Financial Supervisory Authority (Fjármálaeftirlitið) oversees issuers and markets to ensure disclosure and fair trading. The Icelandic central bank and the securities settlement infrastructure support issuance and settlement.

Usage and market: Skuldabréf are used to fund public investment and corporate expansion, and form part of investment portfolios for institutions and individuals. They can serve as collateral or as instruments for yield-oriented investing, depending on credit quality and structure.