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Ministry of Finance and Economic Affairs

Minutes of the meeting of the Financial Stability Council on June 26 2018

Meeting held at the Ministry of Finance and Economic Affairs

In attendance were: Bjarni Benediktsson, Minister of Finance and Economic Affairs, chairman; Már Guðmundsson, Governor of the Central Bank of Iceland; Unnur Gunnarsdóttir, Director General of the Financial Supervisory Authority; Guðrún Þorleifsdóttir, Director General, Department of Economic Affairs and Financial Services, Ministry of Finance and Economic Affairs; Harpa Jónsdóttir, Director, Financial Stability Department, Central Bank of Iceland; Einar Jón Erlingsson, Head of Macroprudential Policy of the Financial Supervisory Authority; and Tinna Finnbogadóttir, Secretary to the Financial Stability Council.

The meeting was called to order at 14:06 hrs. on 26 June 2018
1. Presentation by chair of the Systemic Risk Committee on key aspects of the Committee’s report
a. The positive output gap is closing and there are many signs that the economy will experience a soft landing. However, there are signs, such as growth in private sector credit, that risk in the financial system is on the rise. Real estate prices have been high and there is risk that households might become too indebted, relying on the current price of real estate. Developments in the tourism industry have had effects on the real estate market as demand for lodging in local apartments has been high. The commercial banks’ resilience is good. Capital ratios have declined but are still above requirements. The Systemic Risk Committee chair briefly summarized discussions of the Committee’s meeting on the Central Bank’s stress test which will be made public in the fall. The Committee chair also informed the Council that the Systemic Risk committee had discussed digital threats and the current operating environment for the payment service providers as the payment system infrastructure is now undergoing a major renewal.
2. A recommendation that the Housing Financing Fund no longer be considered a systemically important supervised entity
a. A review of analyses on the systemic importance of the Housing Financing Fund as the fund’s main objective has changed since it was identified as a systemically important supervised entity and its loan portfolio keeps getting smaller. The Council approved a recommendation that the fund no longer be considered a systemically important supervised entity.
3. Imposition of capital buffers
a. Countercyclical capital buffer
i. A recommendation to the Financial Supervisory Authority to keep the capital buffer unchanged at 1.75% was approved.
4. Other business.
a. Approval of press release

The meeting was adjourned at 15:00 hrs. on 26 June 2018.

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