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Ministry of Finance and Economic Affairs

Minutes of the Meeting of the Financial StabilityCouncil of 22 January 2016

Minutes of the Meeting of the Financial Stability Council, 22 January 2016.

The meeting was held in the Ministry of Finance and Economic Affairs.

Members of the Council: Minister of Finance and Economic Affairs Bjarni Benediktsson, Chairman; Már Guðmundsson, Governor of the Central Bank; Unnur Gunnarsdóttir, Director General of the Financial Supervisory Authority

Others attending: Guðrún Þorleifsdóttir, Director General of the Department of Economic Affairs and Financial Services at the Ministry of Finance and Economic Affairs; Harpa Jónsdóttir, Assistant Director of Financial Stability at the Central Bank; Jón Þór Sturluson, Deputy Director General of the Financial Supervisory Authority; and Tinna Finnbogadóttir, secretary of the Financial Stability Council.

The meeting commenced at 1:08 pm.

1. Report from the Systemic Risk Board

The Chairman of the Systemic Risk Board gave a review of its report to the Financial Stability Council, discussing the main risk factors in the financial system in the Board's assessment. There is a probability of increased imbalance in the economy and lending has increased, although this remains within moderate limits. The interplay of macroeconomic imbalances and credit growth could have a negative impact on the economy. The banks' resilience is strong, as is evident from their capital adequacy and liquidity ratios. Their liquidity position was being monitored closely in connection with the settlements of insolvent estates and offshore ISK auction. Capital inflows in the bond market this summer and autumn were not considered a threat to financial stability.

2. Capital buffers

The Financial Stability Council discussed proposals from the Systemic Risk Board to impose capital buffers on financial undertakings. These include a systemic risk buffer, a buffer for systemically important financial undertakings and a counter-cyclical buffer. A detailed analysis by the Systemic Risk Board was presented to the meeting in support of these proposals; the Financial Stability Council agreed to direct the Financial Supervisory Authority to implement these capital buffers.[1] There was discussion of the impact of the implementation of capital buffers on those financial undertakings affected and of how capital buffers had been applied in neighbouring countries. Council members subsequently discussed the interplay of monetary policy, central government fiscal policy and macroprudential tools, and the experience in other states of applying such tools.

3. Other matters

The news announcement was approved with amendments.

Meeting adjourned at 2:35 pm.


[1] Detailed arguments for this decision were presented in the proposals themselves, which were published on the FSC's website on 25 January 2016, see for details: https://www.ministryoffinance.is/news/first-meeting-of-the-financial-stability-council-in-2016

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