Third Meeting of the Financial Stability Council in 2015

The third meeting of the Financial Stability Council in 2015 was held on Friday, 2 October, in the Ministry of Finance and Economic Affairs. At its meeting the Council reviewed risk in the financial system and how it has changed since the Council's last meeting in the spring. The outlook for the short term has not changed much, but in the Council's estimation longer term risk to the financial system has grown with the increasing probability of macroeconomic imbalances. The banks' resilience to shocks is considered to be good, as both their capital ratios and liquidity are high. While the large banks reported substantial 6-month profits, these can be attributed to a considerable extent to one-off items. Settlements of the estates of the failed banks and currency auctions for offshore ISK could have some negative effects on the banks' liquidity, but this should be within acceptable limits. The preparation of prudential rules in connection with risk arising from cross-border capital movements must be completed, as the relaxing of currency controls is approaching.

The following matters were on the meeting agenda:

Confirmation of systemically important infrastructure, capital buffers, cross-border capital flows and other matters were on the meeting agenda.

The Systemic Risk Committee requested that the Financial Stability Council confirm its definition of systemically important infrastructure, cf. subparagraph d of the second paragraph of Art. 4 of Act No. 66/2014, on the Financial Stability Council. It was proposed that three systems be considered systemically important infrastructure, i.e. the real-time gross settlement (RTGS) of the Central Bank of Iceland, the netting system of Greiðsluveitan ehf. and the clearing system of the securities depository NASDAQ verðbréfamiðstöð hf. The proposal is based on the scope of activities and significance of these three systems for Icelandic financial market infrastructure and on international guidelines which apply to them, Principles for Financial Market Infrastructure (PFMI). The Financial Stability Council confirmed that the above-mentioned three systems would be defined as systemically important infrastructure.

It was decided that the Financial Stability Council would hold a fourth meeting this year, which will be scheduled in just over a month's time.