Debt among companies in the construction industry has increased and there are signs of growing arrears, according to the Financial Stability Committee of Seðlabanki Íslands (Central Bank of Iceland).
The financial system in Iceland is considered strong and well placed to deal with shocks. Household and corporate debt is generally moderate and arrears are low, a statement from the Financial Stability Committee says.
The banks can withstand a substantial shock. On the other hand, continued inflation, high interest rates and uncertainty in the global economy could test the system, in the committee’s assessment. Nobody knows how long the state of uncertainty will last.
How well can the financial system in Iceland withstand such a situation in the long term?
“I think the financial system in Iceland can simply withstand a great deal. We have been carrying out a stress test intended to assess how severe a shock the banks can withstand. Over the last 10-15 years we have been building up a financial system that can withstand shocks and uncertainty, and we believe that has succeeded. We consider that this system will be able to withstand quite a lot,” says Ásgeir Jónsson, governor of the Central Bank.
At the same time, the housing market has cooled and there are signs of increased risk in the construction sector. Larger and new apartments are selling less well.
Ásgeir says, however, that the banks and contractors are able to handle the situation as it stands.
Seðlabanki Íslands has already taken action by lowering requirements for first-time buyers and by giving the banks more room for exemptions, for example for people who can show that they have managed high rent.
But we have not seen these exemptions being used, and perhaps more property buyers simply need to know about this. That you can, even if you are rejected in a payment assessment, go and talk to your bank and get an exemption, provided certain conditions are met.
Measures were also presented to respond to the growing threat accompanying technological development and unrest internationally: card payments during internet outages.
By the end of the year, it will be possible to use contactless payment solutions, such as watches and phones, even if the internet is down. From 1 July, people will be able to use payment cards in shops during internet outages.
We will present this [change]. People will be able to use the plastic cards that hopefully they have somewhere, with the PIN, even if the internet is down, but what needs to be done with cards that have already been issued is that people need to go into shops that sell necessities, such as grocery shops or pharmacies, and activate the cards after the middle of the year. That is done by [simply] paying for something in such a shop and using the PIN.
Source: Ruv.is
