The objective of financial supervision is to promote an efficient and secure financial market with the aim of reducing the risk of activities of regulated entities causing damage to the public and to promote confidence in the financial market. The Financial Supervisory Authority of the Central Bank of Iceland monitors the activities of regulated entities, such as credit institutions, investment firms, insurance companies and pension funds, as well as securities markets[GK1] , to ensure that they comply with laws and regulations, including sound and healthy business practices aimed at protecting consumers and investors.
What does Financial Supervisory Authority do?
The Financial Supervisory Authority of the Central Bank of Iceland supervises all financial activities conducted in Iceland. Financial markets are broadly divided into the banking market, securities market, insurance market and pension market.
The Financial Supervisory Authority sets rules and participates in domestic and international cooperation to ensure harmonised regulations and that supervision is carried out in a harmonised manner in the European financial market. The Authority also has a duty to provide guidance to the public and supervised entities.
What does financial supervision involve?
The Central Bank of Iceland's Financial Supervisory Authority carries out many and diverse supervisory tasks, including in the banking market, securities market, insurance market and pensions market.
The Financial Supervisory Authority applies risk-based supervision, which involves assessing specific risk factors in the activities of regulated entities that are considered to create the greatest risk for customers and can have the greatest impact on financial stability at any given time. These entities are therefore subject to tighter supervision and are called systemically important entities.
The Financial Supervisory Authority of the Central Bank of Iceland grants operating licences to supervised entities, with the exception of pension funds, which are issued with an operating licence by the Ministry of Finance and Economic Affairs, and monitors to ensure that the entities' activities comply with the conditions set for the operating licence. If there is suspicion that the law has been violated, the Authority may initiate an examination or investigation into the matter. When violations are serious and punishable by law, the Authority refers the matter to the police. In cases where an examination or investigation reveals a violation of laws or regulations that is not punishable by a fine or imprisonment, the Central Bank of Iceland has the authority to decide to impose an administrative fine on a supervised entity and require it to make changes in its operations that ensure that the violation does not recur.