meta_id 2961244

On March 9, 2026, the Central Bank of Iceland published the ninth edition of general guidelines and methodology for the supervisory review and evaluation process (SREP) and supervisory stress testing applicable to financial institutions. The guidelines establish the framework through which the Financial Supervision Authority of the Central Bank of Iceland assesses capital adequacy and liquidity requirements for financial institutions operating under Icelandic law. The guidelines outline a comprehensive supervisory framework encompassing risk classification of financial institutions, monitoring of key risk indicators, assessment of risk factors affecting capital and liquidity, and determination of total capital requirements. Financial institutions are classified into four impact categories (high, medium-high, medium-low, and low) based on their potential systemic importance. The supervisory review process is conducted annually for commercial banks and at varying intervals for other institutions depending on their classification. The guidelines detail supervisory benchmarks for assessing additional capital requirements across multiple risk categories: credit and concentration risk, market and interest rate risk, operational risk, and leverage risk. They also address environmental, social, and governance (ESG) risk integration, anti-money laundering and counter-terrorism financing considerations, and business model analysis. Two annexes provide detailed methodologies for calculating additional capital requirements under Pillar II and specify capital buffer requirements including systemic risk buffers, countercyclical buffers, and buffers for systemically important institutions. The guidelines align with European Banking Authority standards and provide the methodology for determining overall capital requirements that financial institutions must maintain to ensure adequate capital and liquidity buffers against identified risks.