SOURCE: Icelandic Embassy in Copenhagen

January 15, 2008 13:33 ET

Icelandic FSA Director: The Icelandic Financial Market Well Equipped to Weather the Storm

COPENHAGEN, DENMARK--(Marketwire - January 15, 2008) - "The foundations of the Icelandic commercial banks are sound and the Icelandic financial market is well equipped to weather the storm that is now shaking the international markets". This was the conclusion the director of the Iceland Financial Supervisory Authority, Mr. Jónas Fr. Jónsson at a meeting organized by Icelandic Investor Relation Association this morning. He furthermore stated that he could to a large extent agree with analysts from Credit Sights recently saying that the CDS spreads for the Icleandic banks did not give an accurate picture of their true standing, and that the risk associated with them has been exaggerated.

The director said that the performance by Iceland's banks in recent years has been good and when looking only at core activities, in terms of profitability, Iceland's banks do not yield anything in comparison with banks in the other Nordic countries. He furthermore stated that the Iceland's banks have strong capital adequacy ratios (CAD ratios), and are able to withstand substantial setbacks.

With regards to credit risk of the Icelandic commercial banks, the FSA director said that most aspects of credit risk is well diversified by good spreads, and market risk is offset by high capital base levels and active management.

According to the Mr. Jónsson margin calls and the collaterals demanded by the banks in relation to loans backed by securities shows that their vigilance is in order and their risk consciousness is adequate. He also pointed out that the drop in share prices in Icelandic financial companies in recent months has not been greater than in the case of companies in the same sector in our neighbouring markets.

"While the situation is generally sound, there are plenty of tasks ahead in the financial sector. For the banks, the main challenges lie in financing and in integrating their activities in various countries" the director said.

Link to pdf: The Icelandic financial market well equipped to weather the storm http://hugin.info/138734/R/1182317/235976.pdf

http://www.fme.is/?PageID=146

http://www.fme.is/?PageID=581&NewsID=249

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