FME: Defaults to depository institutions at the end of the 3rd quarter 2006

29.12.2006

The FME has processed figures showing defaul by borrowers of depository institutions at the end of the 3rd quarter of fiscal year 2006 and comparable figures for the preceding quarters. In this analysis, default is defined as having amortisation and interest payments in arrears for more than one month. The default figures are total figures, i.e. stock of specific provisions has not been subtracted. This analysis presents the development of these default rates from year-end 2000. The data compiled does not include the subsidiaries of the banks.

The figures show that the ratio of aggregate defaults to loans (default ratio) has increased by about 0.1% from just over 0.6% at the end of 1st and 2nd quarter 2006 to slightly less than 0.7% at the end of the 3rd quarter 2006. The ratio was 0.9% at the end of 3rd quarter 2005 which was the lowest figure during the period from year-end 2000. Furthermore, the table presents adjusted default ratios with both one-year and two-year lags, indicating the effects large increases in loans have on these ratios in the succeeding two and three years.  Defaults, using these time-lagged measurements, are 1.0% and 1.6% of loans, which are similar figures as for the preceding two quarters. Comparable figures at the end of 3rd quarter 2005 were 1.5% and 2.0%. Please note that recent increases in loans may result in increased defaults later. Furthermore attention is drawn to the fact that the depositary institutions' participation in the Icelandic housing market which commenced during the second half of the year 2004 may have influenced the development of defaults shown in the figures.
 
The default ratio for industries increased by about 0.1% or from just over 0.5% at the end of 1st and 2nd quarter 2006 to slightly less than 0.6% at the end of the 3rd quarter 2006. The ratio was 0.7% at the end of 3rd quarter 2005.  Default ratio for industries using one-year and two years lags are 0.9% and 1.4% which are similar figures as for the preceding two quarters Comparable figures at the end of 3rd quarter 2005 were 1.1% and 1.6.

The default ratio for households increased by  about 0.1% or from just over 0.9% at the end of the 2nd quarter 2006 to slightly less than 1.0% at the end of the 3rd quarter 2006. The ratio was 1.5% at the end of 3rd quarter 2005. Default ratios for households using one-year and two-year lags are 1.4% and 2.8% which are similar figures as at the end of 2nd quarter 2006. Comparable figures at the end of 3rd quarter 2005 were 3.1% and 3.8.

Please note that the total figures at the end of the 4th quarter of each fiscal year have been deducted by loans that have conclusively been written off which influences the comparison with the preceding quarters.

Defaults to depository institutions at the end of the 3rd quarter 2006

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