Iceland’s Financial System Rated Resilient Amid Economic Uncertainty

Iceland’s financial system remains well placed to withstand economic shocks, according to the Financial Stability Committee, although lenders have been urged to monitor growing risks within the construction industry. As reported by RÚV , the committee said household and business debt levels remain generally low, while loan defaults continue to be limited. However, it noted that debt among construction firms has increased in recent years and that signs of rising defaults have begun to emerge, despite remaining relatively modest. What's the Story? Financial Stability Committee says Iceland’s financial system can withstand unforeseen shocks Increased risk flagged in the construction sector amid falling real house prices, more homes for sale and longer selling times New solution for card payments during online outages due by mid-year, alongside efforts to expand payment options Ásgeir Jónsson, Governor of the Central Bank of Iceland. Photo: Golli. Iceland Review. Banking Risks Highlighted The committee said ongoing uncertainty in the global economy, combined with inflationary pressures and high interest rates, could test the resilience of the financial sector in the months ahead. Stress testing carried out by the Central Bank of Iceland found that Iceland’s three largest banks would be able to withstand a significant economic shock while continuing to provide credit to customers. Particular attention was drawn to the housing market. The committee said lenders should remain alert to risks linked to falling real house prices, a growing number of properties on the market and extended selling periods, particularly for newly built homes. The report also highlighted increasing risks to financial infrastructure. According to the committee, cyber threats are growing alongside advances in technology, artificial intelligence and international instability. It called for continued cooperation between the Central Bank, government authorities and financial institutions to strengthen preparedness and reduce risks. Icelandic króna. Photo: Golli. Iceland Review. “Card payments in online outages are a significant part of the resilience of payment transactions. The solution will be implemented by the middle of the year. The Financial Stability Committee emphasises the need to increase the number of payment methods through infrastructure for new payment solutions, such as payments through transfers.” “Diversification in payment services increases the resilience of the financial system and reduces the likelihood of widespread disruption in serious operating incidents.” The committee also pointed to ongoing efforts to improve payment system resilience and diversify available payment methods. For more on Iceland’s economy and financial sector, see Iceland Review’s coverage of economic developments . The post Iceland’s Financial System Rated Resilient Amid Economic Uncertainty appeared first on Iceland Review .