Icelandic banks pass financial stress tests

coins1The four biggest Icelandic banks have all passed the latest ‘stress tests’ imposed on them by the Icelandic Financial Supervisory Authority, according to Reuters.

The stress tests hit the banks with simulated severe shocks that could in theory affect the value of shares, market bonds, appropriated assets, non-performing/impaired loans, and the Icelandic Krona.

“The results from the stress tests indicate that the capital ratios of the banks are solid and can withstand considerable financial shocks,” said Icelandic FSA director-general, Jonas Jonsson.

Glitnir, Kaupthing, Landsbanki and Straumur Burdaras banks all have capital ratios above the internationally required eight percent; and would be able to maintain their positions even in the event of severe simultaneous shocks, the FSA believes.

2008 has been a difficult year for the Icelandic economy, and especially its banks. Amid rumours of impending catastrophe, the country has embarked on an information campaign to reassure international investors.

The banks have repeatedly stated that they are built on solid foundations and do not deserve the high CDS ratios and low foreign confidence they have suffered in some quarters lately.

The results of the financial stress tests are the latest in a line of more positive headlines the banks hope will reinforce their claims of stability to the wider financial world.

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