Financial Crime World

Financial Regulation Updates in Iceland: A Comprehensive Guide

Iceland’s financial regulatory landscape has undergone significant changes in recent years, with new legislation, rules, and guidelines being introduced to strengthen the country’s financial sector. This guide provides an overview of the key updates in financial regulation in Iceland.

Legislation

In recent years, several laws have been enacted or amended to enhance financial stability and oversight. These include:

  • Act on Markets in Financial Instruments (115/2021): Enhances market supervision and strengthens investor protection.
  • Act on Undertakings for Collective Investment in Transferable Securities (UCITS), Investment Funds, and Professional Investment Funds (128/2011) [no longer in force]: Regulated the investment fund sector.
  • Act on Payment Services (120/2011) [no longer in force]: Governed payment services in Iceland.
  • Act on Insurance Activities (100/2016): Regulates insurance activities and ensures policyholder protection.
  • Act on Measures against Money Laundering and Terrorist Financing (140/2018): Strengthens anti-money laundering and counter-terrorism financing measures.

Rules

The Financial Supervisory Authority has issued various rules to implement the legislation. Some of these include:

  • Rules on appropriate and sound business practices, communications with customers, and handling of complaints (353/2022): Establishes guidelines for financial institutions to ensure fair treatment of customers.
  • Rules on Maximum Debt Service-to-Income Ratios for Mortgage Loans to Consumers (1268/2021): Regulates mortgage lending to prevent over-indebtedness.
  • Rules on Maximum Loan-to-Value Ratios for Mortgage Loans to Consumers (778/2021): Sets limits on the proportion of a property’s value that can be borrowed.

Guidelines

The Financial Supervisory Authority has also issued guidelines to provide clarity and guidance on various aspects of financial regulation. These include:

  • Guidelines on risks due to information systems operated by supervised entities (1/2019): Provides guidance on managing IT risks in the financial sector.
  • Guidelines on the Work of the Internal Audit Section of Financial Undertakings (3/2008): Establishes standards for internal auditing in financial institutions.

SREP Methodology and Benchmarks

The Financial Supervisory Authority has developed a common criteria and methodologies for Stress Risk Evaluation Process (SREP) and set supervisory benchmarks for Pillar 2 Additional Own Funds Requirements. This ensures that financial institutions have sufficient capital to withstand stress scenarios.

These updates demonstrate Iceland’s commitment to strengthening its financial sector and ensuring stability and transparency in the market. As the country continues to evolve, it is essential for stakeholders to stay informed about these developments to ensure compliance with regulatory requirements.