The Central Bank of Iceland has released Financial Stability Report 2026/1, its semi-annual assessment of the financial system’s condition and key macroeconomic and operational risks. In the accompanying statement, the Financial Stability Committee (FSN) decided to keep the countercyclical capital buffer rate unchanged at 2.5%. The report highlights heightened global uncertainty, pointing to rising geopolitical risk linked to conflict in the Persian Gulf, disrupted supply chains, and surging oil and commodity prices, alongside elevated asset valuations and low bond market risk premia that could reprice if policy tightens. Domestically, it notes Iceland’s modest government debt, strengthened external position, and expanded international reserves in 2025, while describing households, businesses, and banks as broadly resilient with low non-performing loan ratios; vulnerabilities remain in tourism and construction if high interest rates and persistent inflation endure. In housing, unsold new builds and longer selling times have increased discounting, nominal house price growth has slowed, and real prices have begun to decline, with bank lending to construction firms rising and a growing share of such loans assessed as higher risk. On operational resilience, the Central Bank reports steps to strengthen financial infrastructure preparedness, including launching a financial infrastructure incident centre and reorganising SURF, the operational security cooperation forum, to support faster, more coordinated responses and information-sharing among key entities.
Central Bank of Iceland 2026-03-25
Central Bank of Iceland publishes Financial Stability Report 2026/1 and keeps countercyclical capital buffer at 2.5%
The Central Bank of Iceland's Financial Stability Report 2026/1 maintains the countercyclical capital buffer rate at 2.5%, amid global uncertainties like geopolitical risks and surging commodity prices. Domestically, Iceland shows resilience with low government debt and strong external positions, though vulnerabilities persist in tourism and construction sectors. The report also details efforts to enhance financial infrastructure resilience, including a new incident centre and reorganisation of the operational security forum.