Icelandic banks pass the FME stress test
The FME has calculated the effects of simultaneous shocks on capital ratios of the largest Icelandic banks. The shocks imply that a financial undertaking must be in a position to take on certain setbacks that simultaneously may lead to changes in the value of shares, market bonds, non-performing/impaired loans and appropriated assets and the Icelandic krona without having its capital adequacy ratio drop below 8%.
It should be mentioned that the stress test is a point test. Consequently the capital ratios of the banks at the end of Q2 2008 reflect the effects of the turbulance in the financial markets in the second half of the year 2007 and the first half of the year 2008, i.e. before the calculation of the effect of the stress test. In addition to the formal stress tests the FME conducts various stress tests as deemed necessary in each case.
See further: www.fme.is