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Activation of capital buffers in Iceland

1.3.2016

The Financial Supervisory Authority, Iceland, has today, pursuant to Articles 84(b), (c) and (d) of Act on Financial Undertakings No. 161/2002, decided that credit institutions and credit undertakings shall hold systemic risk buffer (SRB), a capital buffer on other systemically important institutions (O-SII) and countercyclical capital buffer (CCyB).

Following its meeting on 22 January 2016 the Financial Stability Council put forth recommendations to the Financial Supervisory Authority to activate three capital buffers, the SRB, O-SII buffer and CCyB. Concurring with the recommendations of the Council, the Financial Supervisory Authority has decided to uphold the recommendations.

A SRB rate of 3 per cent of risk weighted assets shall apply to credit institutions. The buffer shall apply to domestic exposures only and be maintained on an individual and consolidated basis. A phase-in period is foreseen in the case of less significant credit institutions while the full buffer rate will apply to systemically important credit institutions as of 1 April 2016.

Three credit institutions have been identified as systemically important. An O-SII buffer rate of 2 per cent of risk weighted assets shall apply to Arion banki, Íslandsbanki and Landsbankinn as of 1 April 2016. The buffer shall be maintained on an individual and consolidated basis and take into account all exposures, domestic and foreign.

A CCyB buffer rate of 1 per cent shall apply to credit institutions, credit undertakings and other financial undertakings as of 1 March 2017, on an individual and consolidated basis, unless exempt pursuant to the Act on Financial Undertakings.

More information on applicable capital buffers in Iceland.

FSC-Recommendations
FSC-Rationale-Introduction
FSC-Rationale-SRB
FSC-Rationale-O-SII
FSC-Rationale-CCyB

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