Iceland faces rising risk to financial stability, central bank says

(Reuters) – Risks to financial stability in Iceland have increased because of worsening external conditions, and the balance of risk is tilted to the downside, the Nordic country’s central bank said on Wednesday.

“The global economic outlook has deteriorated recently, which would adversely affect the Icelandic economy,” the bank’s financial stability committee said in a statement.

The country’s systemically important banks are highly resilient and their capital and liquidity are strong, it added.

“The Central Bank of Iceland’s stress test for 2022 shows that the banks are well prepared to respond to external shocks and simultaneously support households and businesses,” it said.

The financial stability committee did not make any further changes to the countercyclical capital buffer, a key tool to ensure resilience among banks.

Following a decision made last year, the buffer capital demand is officially set to rise to 2% on Thursday from 0% previously.

(Reporting by Terje Solsvik, editing by Essi Lehto)