nordic cooperation from the icelandic ......8 key indicators are positive »unemployment at all-time...

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NORDIC COOPERATION FROM THE ICELANDIC PERSPECTIVEBenedikt Jóhannesson

Minister of finance and economic affairs

NFU conference, 20th June 2017

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ICELANDIC FINANCIAL SECTOR:2007-2017

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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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AaaMoody’s Foreign LT bank deposits rating of Kaupthing and its predecessor

The rise and fall og Icelandic banksThe rating of Kaupthing and total banks’ assets as a multiple of Iceland's GDP

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Government ownership in commercial banks‘ equity in terms of GDP

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The government owns two of three biggest banks

and considerable share in the third

Landsbankinn hf. Íslandsbanki hf. Arion Banki hf.

Icelandic StateFinancial Investments:

98%

Icelandic StateFinancial Investments:

100%

ISFI:13%

Foreign investors

29,1%

Kaupþing100%

Kaupskil57,9%

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Book value of governement ownership in banks as % of GDP

2% 2%4% 5%

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KEY INDICATORS ARE POSITIVE

» Unemployment at all-time low

» Tourism boom drives strong growth

» Low inflation

» Government debt going down

» Credit ratings improving

» Currency controls abolished

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Government debt is falling

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% of GDP

Central Government Municipalities Debt rule

Projected

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BUT CHALLENGES REMAIN

»Overheating risks

» Strong króna claims casualties

» Although going down, interest rates are high

» Housing prices on the rise

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Jobs in finance and insurance are as many as they were in 2000

30% fewer than in 2008

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Number of jobs in finance and insurance (left axis)

Total workforce participation (right axis)

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ICELANDIC FINANCIAL SECTOR IN EUROPEAN CONTEXT

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We want close cooperation with theNordic countries and Europe as a whole

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EUROPEANCONTEXT

Iceland is a part of theEuropean Economic Area(EEA)

Wikimedia Commons

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INTEGRATION INTO EUROPEAN REGULATORYFRAMEWORK

» Last milestone: European surveillance authorities

» Next: i.a. securities markets

» Much work ahead in adopting EU directives into EEA and integrating into domestic law

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Dual status of government: regulator and owner

ICELANDIC FINANCIAL SECTOR: GOING FORWARD

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SHOULD INVESTMENTBANKING BE SPLIT FROMCOMMERCIAL BANKS?

Report in June 2017

Commission of experts torecommend next steps withdeadline November 2017

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OWNERSHIP POLICY: DIVESTMENT PLANS

Arion banki hf. (13% share)

Sell when conditions are favourable, probably following market registration by majority-stake owner

Íslandsbanki hf. (100% share)

Sell when conditions are favourable

Landsbankinn hf. (98,2% share)

Long-term ownership of 34-40%

Registration on market and divestment when conditions are favourable

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FUTURE CHALLENGES AND OPPORTUNITIES

Technical innovation making existing banks redundant?

Fintech, blockchain

Icelandic banks still too big?

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www.fjr.is | twitter.com/MoFIceland