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Notification of an unchanged capital buffer for systemic risk and an on-going capital buffer for other systemically important financial institutions

24.5.2018

The Financial Supervisory Authority announced on 15  May an unchanged capital buffer for systemic risk and an on-going capital buffer for other systemically important financial institutions pursuant to the recommendations of the Financial Stability Council from 13 April 2018.

Pursuant to Article 86(b)(1) of the Act on Financial Undertakings, the Financial Stability Council shall review its recommendation on the systemic risk buffer within two years of its implementation. Non-cyclical systemic risk has only changed minimally in the preceding two years as this type of risk tends to be inelastic. The Council, therefore, recommended to the Authority that the systemic risk buffer be unchanged. The Authority has thus announced, with reference to the Council’s recommendations, that its decision on the systemic risk buffer from 1 March 2016 continues to apply unchanged. The rate of the systemic risk buffer will, therefore, remain 3% of deposit-taking institutions’ domestic exposures. However, the rate of the systemic risk buffer for non-systemically important financial institutions shall increase from the current 2% to 3% as of 1 January 2020, and not 1 January 2019 as had previously been decided. In addition, the capital buffer requirements shall continue to be maintained on a consolidated basis.

The annual review of the systemic importance of financial institutions identified Arion Bank hf., Islandsbanki hf., and Landsbankinn hf. as systemically important financial institutions in Iceland. The three financial undertakings shall, therefore, maintain a 2% capital buffer on a consolidated basis, due to their systemic importance, covering all exposures of the undertakings.

Further information on the capital buffer is available here.

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