* Cbank announces first easing of currency controls
* Proceeds from investments made from Nov 1 can be converted
* Further easing depends on success of first phase, economy
(Adds background, quotes)
STOCKHOLM, Oct 31 (Reuters) - Iceland's central bank announced its first easing of strict capital controls put in place a year ago with a decision on Saturday to allow investors to move proceeds from investments made after Nov. 1 overseas.
The measures will allow a freer flow of money into and out of the island's economy, which is struggling to get back on more normal footing following the collapse of the banking system and currency last year.
Ingibjorg Guddjartsdottir, head of the Capital Control Surveillance Unit at the central bank, told Reuters that all investments made after Nov. 1 would be "fully convertible and transferable" out of the country.
Previously, non-residents had been fully authorised to transfer foreign currency made from interest and dividends on investments in Iceland.
All new investments will have to be registered with the central bank for the transfer of proceeds out of Iceland to be authorised. This will help ensure that the Sedlabanki can track inflows and strengthen foreign exchange reserves through market intervention "if circumstances permit".
The central bank said in a statement it will have to strengthen surveillance of its controls as it eased restrictions.
"As opportunities for foreign exchange transactions related to movement of capital are expanded, new possibilities for circumventing the remaining capital controls may emerge," it warned.
It has said repeatedly that it would lift capital controls only gradually to ensure the stability of the Icelandic crown.
The central bank's announcement followed a deal reached earlier this month with Britain and the Netherlands on the repayment of money lost by savers holding Icelandic accounts after the country's top banks buckled under a weight of debt last October.
That agreement helped pave the way for an approval of a tranche of funds from the International Monetary Fund (IMF) which Iceland needs to buffer its reserves as its starts to remove capital controls.
The central bank said the decision to go ahead with the first phase of eased restrictions was made on the basis that several conditions had been met.
It said that both a long-term fiscal consolidation programme and a considerably restrained budget bill for 2010 had been prepared, while exchange rate stability had improved.
Also, the first review of the macroeconomic programme by the government the IMF had taken place, ensuring the central bank had access to increased foreign reserves.
The next phase of capital account liberalisation -- the removal of restrictions on capital outflows -- will be determined by the success of this phase and the progress made under the macroeconomic programme, it said.