First meeting of the Financial Stability Council in 2018

The first meeting of the Financial Stability Council in 2018 was held on Thursday 18 January at the Ministry of Finance and Economic Affairs.

On the whole, risks in the financial system are relatively limited. There are demand pressures in the real estate market, with prices at historical highs and beginning to deviate from underlying fundamentals. Indicators imply, however, that the pace of price increases has begun to ease. The tourism industry is still growing considerably but at a slower pace. Credit growth has begun to pick up, corporate lending in particular. Although the external trade surplus has narrowed in the recent term, the external balance of the economy still appears conducive to stability in the next few years. Households' and businesses' position is still strong, with increased leverage and robust private consumption counterbalanced by high asset prices. The commercial banks' resilience is still significant in spite of sizeable dividend payments in the recent past. Large dividend payments alongside subordinated debt issuance will tend to reduce the banks' resilience. Dividend payments must be made with an eye to the banks' liquidity.

Some of the country’s financial infrastructure will be renewed in the near future which can amplify stress and contagion if risk is realized. It is important that supervisors pay close attention as the replacement progresses and be prepared to act should complications in the infrastructure, or related areas, arise.

With regard to payment institutions and other parties which undertake payment services, the council discussed an ongoing review on the supervision of certain risks related to payment service providers, i.e. chargeback and concentration risk.

The Financial Stability Council’s next meeting will be held on 14 March 2018.