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Iceland: Financial Sector Assessment Program-Technical Note on Macroprudential Policy
Author:
International Monetary Fund. Monetary and Capital Markets Department
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2023: Issue 279
Language:
English
Publication Date:
28 Jul 2023
DOI:
https://doi.org/10.5089/9798400249457.002
ISBN:
9798400249457
ISSN:
1934-7685
Pages:
39
Keywords:
capital markets department; Macroprudential decision making; housing market Mispricing; house price misalignment; CBI share; Financial sector stability; Macroprudential policy; Systemic risk; Loans; Mortgages; Global; Baltics
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This technical note highlights macroprudential policy in Iceland. Macroprudential policy in Iceland recently has centered on the property market, given the importance of this market for households’ balance sheets, banks’ loan portfolios, and the potential systemic risks. The Central Bank of Iceland (CBI) has a strong institutional framework for macroprudential policy, assuring the willingness to act. The macroprudential framework also promotes the ability to act promptly. As the financial supervisor, the CBI has control over prudential tools; it may exercise its power as necessary to ensure financial stability. The institutional arrangements encourage effective cooperation and coordination with other institutions. CBI surveillance and systemic risk assessment rely on comprehensive quantitative information and constructive dialogue with the industry as well as on various models and stress tests. The strong analytical capacity for systemic risk monitoring can be further enhanced by filling data gaps and enriching models. While recent measures go in the right direction, the authorities should stand ready to take further actions if vulnerabilities persist.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund