Iceland: Financial System Stability Assessment
IMF Staff Country Reports, June 23, 2023
Source details
- Canonical URL
- Iceland: Financial System Stability Assessment
Other formats
Bibliographic details
- Published: June 23, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400246128.002
Executive summary and key findings
- The paper presents Iceland’s Financial System Stability Assessment.
- Iceland has made solid progress since the 2008 crisis and the last Financial Sector Assessment Program update in restructuring banks and implementing important financial sector reforms.
- Iceland has transposed many EU Directives and Regulations into national law, improving the regulatory, supervisory, and crisis management frameworks.
- Banks are resilient to solvency stress under the adverse scenario but are sensitive to interest rate changes.
- Liquidity stress can generally be handled but there are vulnerabilities.
- The value of pension funds’ assets declines substantially in the adverse scenario, reducing future pension values materially.
- Iceland’s robust financial system has weathered the impact of the coronavirus disease pandemic well, owing to substantially improved macro-financial frameworks since the global financial crisis.
Stress testing and vulnerabilities
- Solvency: Banks remain resilient under the adverse scenario.
- Interest rate sensitivity: Banks are sensitive to interest rate changes.
- Liquidity: Liquidity stress is generally manageable, but specific vulnerabilities exist.
- Pensions: Pension funds’ asset values decline substantially in the adverse scenario, materially reducing future pension values.
Policy and regulatory developments
- Bank restructuring and financial sector reforms implemented since 2008.
- Transposition of many EU Directives and Regulations into national law.
- Improvements to regulatory, supervisory, and crisis management frameworks.
Context and systemic resilience
- The financial system’s robustness helped Iceland weather the impact of the coronavirus disease pandemic.
- Improvements reflect substantially stronger macro-financial frameworks since the global financial crisis.
Content in this bundle
- Iceland: Financial System Stability Assessment; IMF Country Report No. 23/220; May 25, 2023