Can Iceland’s Economy Weather the Storm? Skip to content

Can Iceland’s Economy Weather the Storm?

Director of the Icelandic Financial Supervisory Authority (FSA) Jónas Fr. Jónsson said at a meeting earlier this week that the Icelandic financial market is well-equipped to cope with current turbulences, contradicting other views expressed in recent media reports.

“The foundations of the Icelandic commercial banks are sound and the Icelandic financial market is well-equipped to weather the storm that is now shaking the international markets,” Jónsson said, according to a press release.

Jónsson also stated that he agreed to a large extent with analysts from Credit Sights saying that the CDS spreads for the Icelandic banks did not give an accurate picture of their true standing, and that the risk associated with them has been exaggerated.

The director pointed out that the performance by Iceland’s banks in recent years has been good in comparison to banks in the other Nordic countries, adding that Iceland’s banks have strong capital adequacy ratios (CAD ratios), and are thus able to withstand substantial setbacks.

“While the situation is generally sound, there are plenty of tasks ahead in the financial sector. For the banks, the main challenges lie in financing and integrating their activities in various countries,” Jónsson concluded.

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