Stress Test 2026

Stress Test 2026 financial stability report Listen

Stress Test 2026 has been published on the Central Bank of Iceland’s website. The report presents the results of the stress test conducted on Iceland’s systemically important banks and discusses the impact of regulatory amendments on the assessment of the banks’ loan portfolios. It also explains the perspectives and metrics used to design scenarios for the Bank’s system-wide stress test.

Stress Test 2026 (3.95 MB) Stress Test 2026 data (391.17 KB) In a nutshell

The Central Bank of Iceland’s stress test indicates that the three systemically important banks (also referred to as other systemically important institutions, O-SII) would be resilient enough to maintain the supply of credit and thereby support the economy in the event of a severe shock. The shock assumed in this stress test is based on potential severe developments associated with changes in overstretched foreign asset markets. The shock leads to a contraction in GDP, elevated unemployment, and a steep drop in asset prices.

According to the scenario in the Central Bank’s assessment, the O-SIIs’ combined loan losses would total 147 b.kr., or 3.2% of the claim value of their loan portfolio at the beginning of the stress test. The banks’ strong core operations offset the loan losses, reducing their after-tax losses to only 3 b.kr. during the most difficult year of the scenario.

The common equity Tier 1 (CET1) capital ratio declines by 2.1 percentage points from the start of the scenario to the low point. The overall capital requirement and the CET1 capital requirement are satisfied in all years of the scenario. Based on the results of the stress test, the O-SIIs are not expected to need to curtail lending significantly in order to protect their capital ratios, which would cause an even deeper economic contraction.

A comparison between the results of this year’s test and the stress test published in 2025 indicates that to some extent, the implementation of the CRR III regulatory framework has made the O-SIIs’ risk base more risk-sensitive, thereby amplifying its potential fluctuations during shocks and thereby the decline in capital ratios.

Boxes

In the Stress Test 2026 report the following three boxes can be found, as well as an overview of previously published boxes .

Boxes Pages Risk sensitivity has increased with amendments to the regulatory framework

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Connections between pension funds and banks during a shock

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Calibrating the severity of scenarios in Central Bank stress tests

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