The FME has processed figures showing defaults by borrowers of depository institutions at the end of the 1st 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), 0.6%, is the same at the end of the 1st quarter 2006 as it was at the end of the 4th quarter 2005. The ratio is lower than comparable figures for the last 5 years. The ratio was 1.5% at the end of 1st quarter 2005. 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 1.1% and 1.6% of loans, compared to 1.0% and 1.5% at the end of the 4th quarter 2005 showing a small increase during the 1st quarter of the year 2006. 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, beginning during the second half of the year 2004, may have influenced the development of defaults shown in the figures.

The default ratio for industries, 0.5%, is the same at the end of the 1st quarter 2006 as it was at the end of the 4th quarter 2005. The ratio was 1.3% at the end of the 1st quarter 2005. Default ratio for industries using one-year lag has increase by 0.1% from 0.8% at the end of the 4th quarter 2005 to 0.9% at the end of the 1st quarter 2006. Default ratio for industries using two-year lag has increased by 0.2% from 1.1% at the end of the 4th quarter 2005 to 1.3% at the end of the 1st quarter 2006. These ratios, however, are lower than comparable figures for the last three to four years.

The default ratio for households, 1.0%, is the same at the end of the 1st quarter 2006 as it was at the end of the 4th quarter 2005. The ratio was 2.1% at the end of 1st quarter 2005. Default ratios for households using one-year and two-year lags are 1.6% and 3.0%, which are similar ratios at the end of the 4th quarter 2005. These ratios, however, are lower than comparable figures for the last three to four years.

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.

Statistical material can be downloaded here.