The Central Bank of Iceland’s Financial Stability Committee (FSN) published its latest stability assessment, judging the Icelandic financial system to be resilient and deciding to keep the countercyclical buffer unchanged at 2.5%. Systemically important banks were assessed as having strong capital and liquidity and ready access to market-based funding, with stress tests indicating they could maintain credit supply through a severe shock. The FSN highlighted risks from geopolitical uncertainty, higher long-term interest rates in many economies amid fiscal sustainability concerns, and elevated global asset prices that could correct sharply and tighten Icelandic firms’ access to foreign financing. Domestically, households and businesses were described as generally resilient despite persistent inflation and high real rates, with modest credit growth and a sound equity position helping keep arrears low; housing market pressures have eased as house price growth slows, supply is ample, and selling times lengthen, although turnover remains significant and first-time buyers have increased. The statement also flagged growing cyber and operational security threats to financial market infrastructure and called for continued work to bolster emergency preparedness and resilience in payment intermediation, while reiterating that the FSN will use its policy instruments as needed to preserve financial stability.
Central Bank of Iceland 2025-09-24
Central Bank of Iceland keeps countercyclical capital buffer at 2.5% while highlighting heightened global market and cyber risks
The Central Bank of Iceland's Financial Stability Committee assessed the financial system as resilient, maintaining the countercyclical buffer at 2.5%. Despite geopolitical risks and high global asset prices, systemically important banks show strong capital and liquidity, while domestic resilience is supported by modest credit growth and a sound equity position.