Björk Sigurgísladóttir: Financial Supervision From the Perspective of the Deputy Governor for Financial Supervision

Why It Matters

The measures protect Icelandic consumers, reinforce financial stability and reduce regulatory burden, setting a benchmark for small‑open economies navigating EU reforms and digital risk.

Key Takeaways

• Over 1 bn ISK (~$7.2 m) transferred in fraud 2024‑25
• Pension insurance sales practices under review; regulatory amendments proposed
• 14 entities tested for sanctions screening; new feedback process launched
• Supervisory guidelines cut from 14 to 7; reporting requirements reduced
• AI and cyber‑risk expertise prioritized for next supervisory cycle

Pulse Analysis

Iceland’s central bank used its annual Financial Supervision Day to showcase a 2025 agenda that blends traditional prudential oversight with emerging consumer‑protection challenges. While risk‑based supervision remained focused on systemically important institutions, the Bank highlighted a targeted review of foreign insurers’ pension‑product distribution, urging regulatory tweaks to safeguard retirees. A striking data point was the detection of more than ISK 1 billion (about $7.2 million) moved through fraudulent transfers in a single year, with only a third recovered, prompting coordinated fraud‑awareness campaigns and proposals to let users block cross‑border transfers.

Beyond fraud, the Bank is actively simplifying its regulatory footprint. A thematic sanctions‑screening exercise involving 14 obliged entities tested the robustness of anti‑terrorism and human‑rights safeguards using simulated data, resulting in actionable feedback. Concurrently, the supervisory framework was trimmed: fourteen guidelines were retired, leaving seven core rules, and several reporting obligations were eliminated. These moves dovetail with a Europe‑wide consultation on banking competitiveness, where Iceland’s input aims to reduce the regulatory load while preserving resilience. Capital requirements for Icelandic banks have been modestly lowered, reflecting improved risk management and a shift of certain exposures from Pillar 2 to Pillar 1.

Looking forward, the Bank flags technology and cyber risk as priority areas. It plans to embed artificial intelligence into data‑analysis workflows, enhancing early‑warning capabilities without compromising oversight rigor. The evolving threat landscape, combined with the influx of new EU directives—over a hundred in the past five years—necessitates clearer guidance, a revamped website search engine, and more predictable supervisory calendars. By balancing simplification with heightened digital vigilance, Iceland aims to sustain public trust and financial system resilience amid global uncertainty.