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Europe > Iceland

You are looking at 1 - 9 of 9 items for :

  • Type: Journal Issue x
  • Social Security and Public Pensions x
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Cover IMF Staff Country Reports
Iceland: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis
International Monetary Fund. Monetary and Capital Markets Department
This technical note on Iceland focuses on Stress Testing and Systemic Risk Analysis. The Financial Sector Assessment Program took place against the background of a strengthened financial sector in Iceland amid heightened uncertainty in the global economy. The Icelandic financial landscape has undergone significant structural transformation since the global financial crisis with a contracted banking sector. The banking sector is sound, but foreign exchange (FX) funding remains a vulnerability. The scenario-based bank solvency stress test confirmed the sector’s resilience to severe but plausible macro-financial shocks, with gross domestic product influence similar to the Global Financial Crisis. The adverse scenario confirms banks’ resilience to severe yet plausible adverse shocks. Although the adverse scenario produced a significant impact on bank capital ratios, no bank saw its capital ratios falling below the hurdle rates, owing to the high initial capital positions and adequate pre-provision income. The Liquidity Coverage Ratio-based stress test suggests that although the banking system on aggregate is broadly resilient to adverse liquidity conditions, it is not immune to additional liquidity outflows from pension and nonresident FX funding.
Keywords:
fair value; Bank-NBFI network; bank asset composition; bank liquidity position; Tier 1; top-down solvency stress test; stress test; interest rate projection; sensitivity analysis; Pension spending; Stress testing; Commercial banks; Liquidity; Global; Europe
Cover IMF Staff Country Reports
Iceland: Financial Sector Assessment Program-Technical Note on Pension Fund Regulation and Supervision
International Monetary Fund. Monetary and Capital Markets Department
This technical note analyses the key aspects of the regulatory and supervisory regime for pension funds in Iceland. Pension funds in Iceland play a vital role in the domestic financial sector, acting as investors and lenders. This Financial Sector Assessment Program (FSAP) reviews recent developments and the structure of the Icelandic pension fund sector. This technical note provides context on the Icelandic pension system, focusing in particular on the compulsory occupational scheme in Pillar II, the most important pillar of the system. The pension fund sector is large, well developed, and highly interconnected with the domestic financial system, mainly through exposures toward banks and domestic investment funds. A separate technical note summarizes the results of the risk analysis carried out for the pension fund sector and elaborates more on current market risk sensitivities. The governance and internal controls framework for pension funds is not aligned with the systemic role of the sector, and the underlying rules in the Pension Fund Act pre-date the corresponding provisions for other financial sectors. The Financial Supervisory Authority has adopted a risk-based and forward-looking supervisory model, however there is no minimum frequency set for on-site inspections. The FSAP recommends a strengthening of the legislative framework, especially regarding governance, internal controls and outsourcing.
Keywords:
pension fund regulation; finance disclosure regulation; insurance supervisor; staff team of the International Monetary Fund; pension supervisor; Pension spending; Financial stability assessment; Pensions; Internal controls; Pension fund supervision; Europe
Cover IMF Staff Country Reports
Iceland: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iceland
International Monetary Fund. European Dept.
The 2023 Article IV Consultation discusses that the Icelandic economy has shown remarkable resilience and rebounded quickly from the multiple shocks in recent years. The economy is currently operating well above potential, which, together with high import and house prices, has pushed inflation significantly above target, and contributed to external imbalances. While growth is expected to moderate to 3.2 percent in 2023 and 1.9 percent in 2024 on headwinds from abroad and tight macroeconomic policies, the medium-term outlook is favorable. In the near term, policy tightening coupled with headwinds from the deteriorating terms of trade will dampen domestic demand and reduce imbalances, though private consumption growth is likely to remain robust on a further drawdown of household savings and strong employment growth supported by continued immigration. Banks could face funding pressures if pension funds were to re-direct their investments from domestic to foreign markets.
Keywords:
inflation expectation; headline inflation; monetary policy horizon; deteriorating inflation outlook; cash flow; policy tightening; Inflation; Fiscal stance; Pension spending; Financial Sector Assessment Program; Government finance statistics; Global
Cover IMF Staff Country Reports
Iceland: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper presents Iceland’s Financial System Stability Assessment. Iceland has made solid progress since the 2008 crisis and the last Financial Sector Assessment Program update in restructuring banks and implementing important financial sector reforms. It has transposed many EU Directives and Regulations into national law, improving the regulatory, supervisory, and crisis management frameworks. Banks are resilient to solvency stress under the adverse scenario but are sensitive to interest rate changes. Liquidity stress can generally be handled but there are vulnerabilities. The value of pension funds’ assets declines substantially in the adverse scenario, reducing future pension values materially. Iceland’s robust financial system has weathered the impact of the coronavirus disease pandemic well, owing to substantially improved macro-financial frameworks since the global financial crisis.
Keywords:
coverage ratio; FSAP finding; bank Contagion analysis; E. risk analysis; bank stress tests; Pension spending; Stress testing; Financial Sector Assessment Program; Financial sector stability; Real estate prices; Global
Cover IMF Staff Country Reports
Chile: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
The Chilean economy has been hit by the pandemic while recovering from the social unrest in late 2019, requiring substantial adjustment of economic policies and the appropriate use of existing policy buffers. Following a sharp decline in mid-2020, economic activity started recovering in 2020H2 in the wake of ample policy stimulus. Inflation remains near the policy target, with inflation expectations anchored, and the current account balance has improved amid a sharp drop in imports and relatively resilient exports. Fiscal and monetary policies remain guided by the structural fiscal balance rule and the inflation-targeting framework, respectively. Beyond the pandemic-related risks, there is uncertainty stemming from a series of elections and the outcome of a New Constitution process—scheduled to finish in mid-2022—which are expected to shape the public discourse and influence the policy agenda.
Keywords:
liability positions vis-à-vis nonresident; money market rate; inflation expectation; policy target; I. Policy response; COVID-19; Pension spending; Fiscal stance; Credit; Global
Cover IEO Evaluation Report
IEO Evaluation Report
The IMF and Social Protection
International Monetary Fund. Independent Evaluation Office

Abstract

This paper analyzes that the IMF has moved beyond its traditional fiscal-centric approach to recognize that social protection can also be macro-critical for broader reasons including social and political stability concerns. Evaluating the IMF’s involvement in social protection is complicated by the fact that there is no standard definition of social protection or of broader/overlapping terms such as social spending and social safeguards in (or outside) the IMF. In this evaluation, social protection is understood to include policies that provide benefits to vulnerable individuals or households. This evaluation found widespread IMF involvement in social protection across countries although the extent of engagement varied. In some cases, engagement was relatively deep, spanning different activities (bilateral surveillance, technical assistance, and/or programs) and involving detailed analysis of distributional impacts, discussion of policy options, active advocacy of social protection, and integration of social protection measures in program design and/or conditionality. This cross-country variation to some degree reflected an appropriate response to country-specific factors, in particular an assessment of whether social protection policy was macrocritical, and the availability of expertise from development partners or in the country itself.

Keywords:
IEOR; IEO; protection; staff; evaluation; policy; country; IMF staff; social protection; core area; IMF-ILO stocktaking; protection policy; IMF's mandate; Social assistance spending; Social protection spending; Pension reform; Energy subsidies; Global; Africa; Europe; Asia and Pacific
Cover IMF Staff Country Reports
Iceland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyses the impact of a potential rebalancing of Icelandic residents’ investment portfolios as capital controls are lifted. It applies optimal portfolio theory to calculate the potential rebalancing toward foreign assets, and then makes an estimate of the cumulative impact on the balance of payments and international reserves. Conclusions for the authorities’ capital account liberalization strategy are drawn. This paper also measures the potential budgetary savings from improving the efficiency of public spending in health and education in Iceland. A Data Envelopment Analysis is used to estimate an efficiency frontier by comparing across Organization for Economic Cooperation and Development countries the transformation rates of public spending into valuable social outcomes.
Keywords:
ISCR; CR; portfolio; optimal portfolio; asset holding; saving; balance of payments; OECD mean; investment assets; health care saving; asset position; Health care spending; Pension spending; Foreign direct investment
Cover IMF Staff Country Reports
Spain: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes household savings ratio in Spain. The household savings ratio has fallen to its lowest historical rate in 2012, as households cut back savings to support consumption in response to negative income shocks. Household savings fell across all households, but the declines were likely more material among lower income and highly indebted groups. Declining household income and savings slowed deleveraging and put household balance sheets under pressure. Looking ahead, households may need to restrain consumption further to free resources for repaying debt. Household savings rates will likely stay below historical levels for some time then slowly increase.
Keywords:
ISCR; CR; insolvency; saving; Spain; household saving; AIReF; insolvency regime; financial market spillover; AIReF staffing; AIReF president; Solvency; Disposable income; Pension spending; Fiscal law; Personal income; Global; Europe; North America; Africa
Cover IMF Staff Country Reports
Iceland: Financial System Stability Assessment Update, including Report on the Observance and Standards and Codes on the following topics: Banking Supervision, Insurance Regulation, Securities Regulation, Payment Systems, and Monetary and Financial Policy Transparency
International Monetary Fund
The 2001 financial system stability assessment identified risks of financial sector instability, as rapid increases in foreign and domestic currency indebtedness, accumulating external imbalances, and inflation accompanied Iceland's expansion of the late 1990s. The insurance sector, composed of 15 domestic insurance companies including four life insurance companies and three larger companies that dominate the nonlife market, is the smallest sector in the financial system. The authorities monitor banks' long-term foreign exchange refunding needs and the outcomes of refunding operations.
Keywords:
ISCR; CR; FME action; FME examination process; stress scenario; enforcement power; FME data; FME power; FME staff; operating budget; FME supervision; FME resource; FME board; return on assets; Commercial banks; Loans; Pension spending; Financial Sector Assessment Program; Capital adequacy requirements