The Central Bank of Iceland published its semi-annual Financial Stability Report 2025/2 and, in a related statement, the Financial Stability Committee (FSN) decided to keep the countercyclical capital buffer rate unchanged at 2.5% to maintain banks’ resilience. The report reviews the financial system’s condition and highlights key macroeconomic and operational risks. It flags escalating geopolitical risk, concerns about fiscal sustainability in advanced economies and higher long-term interest rates, and uncertainty linked to protectionist trade policies, alongside high prices and low risk premia in global markets that could amplify the impact of an abrupt repricing. Domestically, the current account deficit has widened and is expected to persist, driven mainly by imports of investment goods for data centres financed by foreign entities; the króna has appreciated, and a high real exchange rate may challenge exporters, although the international investment position, national saving and international reserves are described as strong. The report notes resilient households and businesses, easing house price inflation and declining real prices year-on-year amid strong turnover and ample new-build supply, and well positioned domestic systemically important banks (D-SIBs) with capital above requirements, sound liquidity and stress test results indicating preparedness for near-term risks. It also highlights growing cyberthreats and the need to strengthen the resilience and operational security of domestic financial market infrastructure, with topical boxes covering foreign-denominated corporate lending, stablecoins, infrastructure investment and pension funds, and power outages and financial stability.

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