04 April 2006

Moody´s says that Iceland´s solvency and liquidity are not at risk

 In a report published today, Moody’s Investors Service concludes that Iceland, which it rates Aaa, is not experiencing undue risk to solvency or liquidity as result of recent volatility in the nation’s business and financial cycles.  

      “While we have warned of the risks that may accompany increased leverage in the economy, Iceland has our top rating with a stable outlook, and we believe these concerns have recently been exaggerated,” said Moody’s Joan Feldbaum-Vidra, author of the report. 

     A sizable accumulation of banking system external debt and large short-term payments falling due are among the recent events that have ignited concerns about systemic risk in the banking system.

     “Iceland is a very wealthy country engaged in a major process of economic diversification. It possesses ample sources of alternative external liquidity above and beyond the banks’ own liquidity positions that should enable the government and banking system to weather a period of market turbulence,” said Ms. Feldbaum-Vidra. 

      She pointed out that strong government finances with general government debt equivalent to about 30% of GDP and 60% of revenues are about half the size of Germany and France

      Iceland is well positioned to deal with any potential claims on government resources that might emanate from a systemic problem in any sector of the economy,” said the analyst. “Our Aaa rating for Iceland is compatible with such an extreme scenario.”

     The report is titled, Special Comment: Iceland’s Solvency and Liquidity Are Not At Risk, and is available on moodys.com.


NOTE FROM MOODY'S TO JOURNALISTS ONLY: For a copy of this report, please contact Daniel Piels in London +44-20-7772-5456; New York Press Information +1-212-553-0376; Juan Pablo Soriano in Madrid +34-91-310-1454; Henry MacNevin in Milan +39-02-58-215-580; Eric de Bodard in Paris +331-5330-1076; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7095-514-1670; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Melinda Keating in Sydney +612 9270 8102; Luiz Tess in São Paulo +55-11-3443-7444; Alberto Jones Tamayo in Mexico City +5255-9171-1824; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; or Reynold Leegerstee in Johannesburg +27-11-217-5471 or the web site at www.moodys.com

April 4, 2006