03 January 2024

Minutes of the Financial Stability Committee meeting of December 2023

The Financial Stability Committee

The Financial Stability Committee (FSN) of the Central Bank of Iceland takes decisions on the application of the Bank’s financial stability policy instruments. At the meeting of 20 and 28 November and 4-5 December 2023, presentations were given on economic developments and prospects and the state of the financial system and payment intermediation infrastructure. The Committee discussed the current situation and outlook for financial stability and the principal risks to financial stability, such as economic developments, the impact of seismic activity on Reykjanes peninsula on the financial system and the economy more broadly, risks in the operations of financial institutions and the financial system, developments in domestic financial markets, household and corporate debt, the real estate market, the efficacy of borrower-based measures, financial institutions’ capital position, and the financial cycle. The Committee also discussed the security, efficiency, and efficacy of financial market infrastructure and its importance for financial system stability. The Committee received information on pension funds’ investment strategies, asset composition, and returns, as well as a presentation on matters relating to the funds’ impact on financial stability. Furthermore, the Bank’s work on the assumptions underlying the 2024 stress tests were presented to the Committee. The FSN heard a presentation on the supervisory review and evaluation process (SREP) of the commercial banks in 2023, the results of which are used to determine their Pillar II-R capital requirements. The Committee also received information on matters pertaining to the Resolution Authority and related statutory amendments.

In the FSN’s quarterly review, it decided to keep the countercyclical capital buffer (CCyB) rate unchanged, as, in accordance with the Committee’s March 2023 decision, the CCyB will increase from 2% to 2.5% on 16 March 2024.

See the minutes here: Minutes of the Financial Stability Committee meeting December 2023 (19th meeting) Published: 3 January 2024.

See further information on the committee here: Financial Stability Committee