Statements by the Committees of the Central Bank due to the COVID-19
The Financial Supervision Committee, Financial Stability Committee, and Monetary Policy Committee of the Central Bank have issued statements following meetings held recently.
The statement of the Financial Supervision Committee emphasises that supervised entities must conduct their activities with the interests of their customers and the credibility of the financial markets as guiding principles; that entities must remain vigilant vis-à-vis money laundering and potential market fraud; and that banks and other credit institutions must participate actively in the measures adopted by the authorities, through lending to customers and financial restructuring of viable companies.
The statement also points out the fundamental principle of prudence and accounting; i.e., that short- and long-term risk must be accounted for accurately in financial institutions’ balance sheets. Furthermore, the Financial Supervision Committee statement stresses that financial institutions should exercise restraint in making dividend payments and other distributions of capital, and notes that the Financial Supervisory Authority (FSA Iceland) is authorised to block such payments under specified conditions.
The statement of the Financial Supervision Committee can be found here.
The statement of the Financial Stability Committee notes, among other things, that the capital buffers for systemic risk (3%) and systemic importance (2%) are to be held unchanged. A review of systemically important financial institutions confirmed the systemic importance of Arion Bank, Íslandsbanki, and Landsbankinn.
In addition, the Committee deems it appropriate to establish special temporary credit facilities in the form of collateralised loans with a temporarily expand the definition of eligible collateral. The financial institutions’ liquidity is sound, but due to the current uncertainty, the Committee considers it important that the Central Bank have such a measure at its disposal.
The statement of the Financial Stability Committee can be found here.
In the statement of the Monetary Policy Committee, the Committee agrees with the Financial Stability Committee that the Central Bank should establish special temporary credit facilities in the form of collateralised loans and that the list of securities eligible as collateral should be temporarily expanded.
The statement of the Monetary Policy Committee can be found here.
Information on special temporary collateralised loan facilities from the Central Bank can be found here.
No. 11/2020
8 April 2020