With the passage of the Act on Resolution of Credit Institutions and Investment Firms, no. 70/2020 (the Resolution Act), the Central Bank was entrusted with powers of resolution. This entails the authorisation to take decisions on resolution procedures and apply resolution measures in the case of credit institutions and investment firms that are failing or likely to fail; i.e., those that are unable to service their liabilities or are highly likely to be unable to do so. According to Article 4 of the Act, the Central Bank of Iceland Resolution Authority shall be separate from other activities within the Bank’s organisational structure. The Central Bank’s Resolution Authority formally commenced operation in November 2020.
All decisions taken by the Resolution Authority are based on the objectives laid down in the Resolution Act. These objectives provide the foundation for an assessment of which measures should be taken and what resolution strategy is most suitable for financial institutions in Iceland. The purpose of the Act is divided into five parts in Article 1 of the Act: to preserve financial stability and minimise the adverse implications of financial shocks by protecting insured deposits and investors, customers’ assets, and vital company operations; and minimise the risk that capital contributions from the Treasury will be needed.