31 March 2017

New Central Bank rules on Liquidity Coverage Requirements

Central Bank of Iceland

The Central Bank of Iceland has set new rules on credit institutions’ liquidity ratios. As before, the aim of the liquidity rules is to mitigate credit institutions’ liquidity risk by ensuring that they always have sufficient liquid assets to fulfil their obligations under stressed conditions over a specified period of time.

The liquidity rules are based on the Basel Liquidity Coverage Ratio (LCR) requirements, as were the Bank’s previous rules, which date from 2013. The new rules will not have a significant impact on the liquidity requirements made of banks. However, they aim at implementing the definitions and presentation requirements that have taken effect in the European Union, and they are the same as the EU rules in most respects. However, the Central Bank’s new rules still make specific requirements concerning minimum LCR ratio in foreign currencies that are not found in the EU liquidity rules.

The Rules are set on the basis of Article 12 of the Act on the Central Bank of Iceland, no. 36/2001. The new Rules on Liquidity Ratio, etc., no. 266/2017, take effect today, 31 March 2017, and supersede the previous Rules, no. 1031/2014.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, and Director Harpa Jónsdóttir at tel: +354 569-9600.

No. 11/2017
March 31, 2017