Minutes of the meeting of the Financial Stability Council on October 5 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 Financial Services, Ministry of Finance and Economic Affairs; Harpa Jónsdóttir, Director, Financial Stability Department, Central Bank of Iceland; Jón Þór Sturluson, Deputy Director-General of the Financial Supervisory Authority; and Tinna Finnbogadóttir, Secretary to the Financial Stability Council.

The meeting was called to order at 15:00 hrs. on 5 October 2018
1. Presentation by chair of the Systemic Risk Committee on key aspects of the Committee’s report
a. The current main risk factors to the financial system are elevated real estate prices, the rapid growth in tourism for the past few years and the interplay between these two factors and others. A slowdown in the real economy is to be expected. There is considerable uncertainty in the tourism sector while bank credit to the sector has been increasing. The main external risk factors are increased unrest in global markets and rising risk premia. The resilience of the banks and the economy as a whole is still considerable.
2. Domestic flight operators and financial stability
a. The meeting discussed analyses of domestic flight operators which were put forth at the meeting of the Systemic Risk Board on 24 September. Based on the findings presented at the meeting, possible shocks to the flight operations sector would not jeopardise financial stability.
3. A quarterly decision on the countercyclical capital buffer
a. The Council approved a recommendation to the Financial Supervisory Authority to keep the countercyclical capital buffer unchanged at 1,75%.
4. The Financial Stability Council’s policy on the application of the countercyclical capital buffer.
a. The Council approved a policy outlining the general guidelines of the application of the countercyclical capital buffer.
5. Other business.
a. Approval of press release

The meeting was adjourned at 16:20 hrs. on 5 October 2018.