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Iceland’s Central Bank is shifting its approach to financial oversight, aiming for clarity, efficiency, and adaptability in a rapidly evolving financial landscape. This change follows six years of structural reforms resulting from the merger between the Central Bank and the former Financial Supervisory Authority.

Key updates include consolidating the bank’s supervisory departments from four to two main units—Conduct Supervision and Microprudential Supervision—each dedicated to overseeing a broad range of financial institutions through standardized, risk-aware processes. Teamwork and knowledge-sharing have been prioritized, reducing over-reliance on individual experts and aligning the supervision of banks, insurance firms, pensions, and funds under a common framework. The Central Bank has also strengthened its strategy-setting and decision-making by involving internal and external experts, and by emphasizing continuous annual review and stakeholder engagement.

Amid a growing list of new regulatory requirements and the complexity of financial markets, the Bank now prioritizes transparency, accessible information, and efficient supervision tailored to each entity’s size and risk level. Innovations include annual “Dear CEO” letters outlining regulatory priorities, the use of AI in supervisory activities, and expanded use of self-assessment tools. The Bank is also actively working with European and Nordic counterparts to streamline regulation—advocating for simplification that preserves resilience and public trust, rather than mere deregulation.

Initiatives to reduce reporting burdens and administrative overhead have already resulted in scrapping unnecessary data reports, creating a central data registry, and launching a task force to further simplify procedures. Planned educational programs and board outreach, along with updated online resources, underscore a commitment to predictability and transparency. The Bank, in collaboration with government ministries, will continue to pursue further reforms to clarify and reduce regulatory complexity, ensuring the stability and reliability of Iceland’s financial sector.

These ongoing changes highlight the Central Bank’s determination to balance robust oversight with practical simplicity, ensuring the nation’s financial market remains sound, well-regulated, and trustworthy as it adapts to future challenges.