Pub­lished yes­ter­day in the Law and Min­is­terial Gaz­ette are new Cent­ral Bank of Ice­land Rules on Sys­temic Risk Buf­fers for Fin­an­cial Un­der­tak­ings, no. 1414/2024, and new Rules on Cap­ital Buf­fers for Sys­tem­ic­ally Im­port­ant Fin­an­cial Un­der­tak­ings, no. 1415/2024. Both sets of rules were ap­proved at a meet­ing of the Fin­an­cial Sta­bil­ity Com­mit­tee (F­SN) on 3 Decem­ber 2024.

With Rules no. 1414/2024, the sys­temic risk buf­fer (SyR­B), which ap­plies to all do­mestic ex­pos­ures of de­pos­it-­tak­ing fin­an­cial in­sti­tu­tions, is re­duced from 3% to 2%. With Rules no. 1415/2024, the cap­ital buf­fer for other (non-­g­lob­al) sys­tem­ic­ally im­port­ant fin­an­cial in­sti­tu­tions (O-SII) has been in­creased from 2% to 3% of all ex­pos­ures.

In the FS­N’s opin­ion, sys­temic risk in the do­mestic eco­nomy has sub­sided since the sys­temic risk buf­fer was first in­tro­duced in 2016. The fin­an­cial sys­tem has grown more re­si­li­ent, as can be seen in re­duced volat­il­ity of key eco­nomic vari­ables des­pite vari­ous shocks. Fur­ther­more, new mac­ro­pruden­tial tools have proven their value, and the fin­an­cial sta­bil­ity frame­work is stur­dier than be­fore. As a res­ult, the Com­mit­tee de­cided to lower the sys­temic risk buf­fer rate.

Ac­cord­ing to the FSN, the in­crease in the O-SII buf­fer rate aims to cap­ture more ef­fect­ively the risk fa­cing the eco­nomy as a res­ult of the size and scope of sys­tem­ic­ally im­port­ant fin­an­cial in­sti­tu­tions.

The sys­temic risk buf­fer is re­viewed every two years, and the O-SII buf­fer is re­viewed an­nu­ally.

More de­tailed in­form­a­tion on the back­ground to the FS­N’s de­cisions can be found here: