The Central Bank of Iceland has published its Annual Report for 2025, summarising the Bank’s activities across monetary policy, financial stability, supervision and other statutory tasks, alongside audited annual accounts. The report describes a year in which inflation averaged 4.1% and the Bank cut its key policy rate by a cumulative 1.25 percentage points to 7.25%, while also adjusting selected borrower-based measures following uncertainty in the mortgage market. The Annual Report records that the Central Bank intervened in the foreign exchange market seven times and ran a regular foreign currency purchase programme from April to December, buying a total of ISK 67.9bn in 2025. On financial stability policy, the Financial Stability Committee expanded lenders’ quarterly exemptions from borrower-based measures from 5% to 10% of issued loan volumes and raised the maximum loan-to-value ratio for first-time buyers to 90%, and later amended debt service-to-income calculations to include all payments associated with acquiring residential property. It also confirmed Arion Bank, Íslandsbanki and Landsbankinn as systemically important and kept the O-SII buffer at 3%, the countercyclical buffer at 2.5% of the domestic risk base and the systemic risk buffer at 2% for deposit-taking institutions’ domestic exposures. The Bank reports international reserves of ISK 968bn (EUR 6.6bn) at end-2025 and a net operating loss of ISK 11.8bn, with equity of ISK 76.7bn and a capital ratio of 7.7%, below the Bank’s capital benchmark of ISK 150bn, resulting in no dividend transfer to the Treasury for 2025. The Resolution Authority reviewed and updated resolution plans for Arion Bank, Íslandsbanki, Kvika banki and Landsbankinn, and noted that resolvability assessments for indó, Teya Iceland and Skagi were underway with completion set for 2026.
Central Bank of Iceland 2026-04-09
Central Bank of Iceland publishes 2025 Annual Report with policy rate cuts, macroprudential amendments and an ISK 11.8bn operating loss
The Central Bank of Iceland’s 2025 Annual Report covers monetary policy, financial stability, supervision and other statutory tasks, and reports a net operating loss of ISK 11.8bn, equity of ISK 76.7bn and a capital ratio of 7.7%, below its ISK 150bn capital benchmark, resulting in no dividend to the Treasury. Inflation averaged 4.1%, the key policy rate was cut by 1.25 percentage points to 7.25%, borrower-based measures were eased for first-time buyers, and foreign exchange interventions and purchases totalled ISK 67.9bn, with international reserves at ISK 968bn (EUR 6.6bn). The Resolution Authority updated resolution plans for Arion Bank, Íslandsbanki, Kvika banki and Landsbankinn, with resolvability assessments for indó, Teya Iceland and Skagi ongoing.