The Icelandic financial system is sound and is well prepared to withstand unforeseen shocks. The systemically important banks’ financial position is strong, and their access to market-based funding is good. Protracted global economic uncertainty, a worsening inflation outlook, and high interest rates could test the financial system’s resilience in the coming term. Private sector debt ratios are generally low, and arrears are limited. The Central Bank of Iceland’s stress test indicates that the three large banks could withstand substantial shocks without excessively curtailing the supply of credit to customers.
Real house prices have fallen, the number of homes for sale has increased, and selling times have grown longer, especially for newly built properties. Construction company debt has grown in the recent term and arrears show signs of increasing, although they are still relatively limited. Lenders must take account of elevated risk in the sector.
Risk in the operation of financial market infrastructure has increased. Technological advances, developments in artificial intelligence (AI), and increased global unrest have given rise to growing cyberthreats. It is important that the Central Bank of Iceland, other authorities, and financial market participants work together systematically to reduce risk and enhance preparedness, so that it will be possible to respond quickly and securely to severe operational incidents and ensure continuity in the provision of critical financial services. Coordinated preparedness for operational incidents is one of the foundations of financial stability.
The ability to use payment cards in the absence of an internet connection is a vital element in the resilience of payment intermediation. A solution enabling such offline payments will be implemented in mid-2026. The Financial Stability Committee (FSN) emphasises the need to expand the number of payment options with infrastructure for new payment solutions, including transfers between bank accounts. Diversity in payment intermediation enhances the robustness of the financial system and reduces the likelihood of widespread disruption in the event of a severe operational incident.
The FSN has decided that the following financial market infrastructure components shall be considered systemically important and of such a nature that disruption in their activities could affect financial stability: The Central Bank’s interbank payment system and the Nasdaq securities settlement system, defined as basic financial system infrastructure; and the Financial Market Data Centre’s deposit system and payment system, as well as Auðkenni ehf.’s electronic authentication for financial services, defined as core financial market infrastructure.
In its quarterly review of the countercyclical capital buffer (CCyB), the FSN decided to hold the buffer unchanged at 2.5%, in accordance with its policy on the application of the CCyB. As before, the Committee will apply the policy instruments at its disposal so as to preserve financial stability, thereby enabling the financial system to mediate credit and payments and redistribute risks appropriately.
Press release no. 7/2026
3 June 2026