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: