Repeal of Guidance No. 2/2010 on Best Practice in Liquidity Management of Financial Undertakings

17 December 2025
Ref.: 2511190

Circular no.: 26/2025
To: Financial undertakings and Association of Companies in Financial Services

Subject: Repeal of Guidance no. 2/2010, on best practice in liquidity management of financial undertakings

The Central Bank of Iceland draws attention to the fact that Guidance no. 2/2010, on best practice in liquidity management of financial undertakings, has been repealed.1

According to Article 77 a of the Act on Financial Undertakings, no. 161/2002, a financial undertaking shall at all times have at its disposal a reliable risk management system in connection with all of its activities and have in place adequate internal processes covering the risk factors referred to in Articles 78 a – 78 i of the Act. The treatment of liquidity risk is discussed in more detail in Article 78 h of the Act. In its supervisory activities, the Financial Supervisory Authority has, among other things, taken into account Guidance no. 2/2010, which sets out certain principles on best practice in liquidity management, based on the Basel Committee on Banking Supervision's recommendations (Principles for Sound Liquidity Risk Management and Supervision)2 issued in September 2008. The repeal of Guidance no. 2/2010 is part of a simplification of the regulatory framework and the implementation of financial supervision. It also promotes increased consistency in the treatment of risk factors. The repeal of the guidance does not, however, entail a relaxation of the requirements for liquidity management of financial undertakings. The Financial Supervisory Authority will continue to look to the Basel Committee on Banking Supervision's recommendations regarding best practice in liquidity management and directs financial undertakings to take them into account in the management of liquidity risk. The Basel Committee on Banking Supervision revised the recommendations in 2019 and confirmed that they were still relevant.3

In assessing the management and supervision of liquidity and funding risk pursuant to Article 77 a and Article 78 h, the Financial Supervision of the Central Bank of Iceland also takes into account the guidelines of the European Banking Authority (EBA), in particular:

• Guidelines on the supervisory review and evaluation process (EBA/GL/2022/03)

• Guidelines on ICAAP/ILAAP (EBA/GL/2016/10)

• Guidelines on stress testing (EBA/GL/2018/04)

Financial undertakings shall take into account the aforementioned EBA guidelines, which are relied upon in supervisory activities and in assessing whether the requirements under the Act on Financial Undertakings are met.

Further information on the assessment of the management and supervision of liquidity and funding risk can be found on the Central Bank's website.

This circular will be published on the Central Bank's website.

[1] https://sedlabanki.is/library/log-og-reglur/leidbeinandi-tilmaeli/Leidbeinandi_tilmaeli_2010_2.pdf

[2] https://www.bis.org/publ/bcbs144.pdf

[3] https://www.bis.org/press/p190117.htm

Yours faithfully,
CENTRAL BANK OF ICELAND

Björk Sigurgísladóttir
Deputy Governor for Financial Supervision

Gísli Óttarsson
Managing Director
Prudential Supervision