Minutes of the meeting of the Financial Stability Council on December 17 2019

Meeting held at the Ministry of Finance and Economic affairs

In attendance were: Bjarni Benediktsson, Minister of Finance and Economic Affairs, chairman; Ásgeir Jónsson, 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; Haukur C. Benediktsson, Director, Financial Stability Department, Central Bank of Iceland; Jón Þór Sturluson, Deputy Director General of the Financial Supervisory Authority; Bryndís Ásbjarnardóttir, Head of Macroprudential Risk at the Financial Supervisory Authority; and Tinna Finnbogadóttir, Secretary to the Financial Stability Council.
The meeting was called to order at 13:06 hrs. on 17 December 2019.

1. Presentation by the chair of the Systemic Risk Committee on key aspects of the Committee’s report.
   The chairman of the Systemic Risk Committee presented the key aspects of the Committee’s report to the Financial Stability Council The committee considers that cyclical systemic risk has changed relatively little since the last meeting. The economy is still going through a contraction, but the latest national accounts presented a more favourable outcome than expected. The financial system’s resilience is still considerable. On January 1st 2020 a discount on capital requirements for lending to small and medium sized enterprises will come into effect. Overall, this is expected to lead to a reduction in capital requirements amounting to 0,2 – 0,4% with the banks. A discussion on cyclical systemic risk, the contraction in the economy and the systemic risk buffer took place.
2. Private sector credit
   The Central Bank presented the current situation and the outlook for financing of households and businesses and the Financial Supervisory Authority presented an analysis on the factors that can restrict lending by banks in Iceland.
3. Capital markets and systemic risk
   The Financial Supervisory Authority presented an analysis of financing through funds and pension funds as well as macroprudential tools that the EU is considering, reducing the systemic risk that can come with this type of funding.
4. A quarterly decision on the systemic risk buffer
   The Council approved a recommendation to the Financial Supervisory Authority to keep the countercyclical capital buffer unchanged.

Approval of press release.

The meeting was adjourned at 14:00 hrs.