By agreement with the Ministry of Finance and Economic Affairs, the Central Bank of Iceland undertakes tasks relating to management of the Treasury’s domestic and foreign debt, as well as Treasury guarantees and relending. The agreement on Government debt management and other contractual agreements can be found here: Agreements and collaborators

Information on the tasks undertaken by Government Debt Management can be found on the Government Debt Management website: Government Debt Management

The Republic of Iceland's sovereign credit ratings

Three rating agencies issue credit ratings for the Republic of Iceland: Moody’s Investors Service, Fitch Ratings and Standard & Poor’s. By agreement with the Ministry of Finance and Economic Affairs, the Central Bank of Iceland undertakes tasks relating to management of the Treasury’s domestic and foreign debt, as well as Treasury guarantees and relending. Whereas the Bank previously handled regular contacts with the credit rating agencies on behalf of the Government, the Ministry of Finance and Economic Affairs now handles such contacts. 

The Central Bank stopped posting information on Iceland’s sovereign credit ratings at the end of 2021. Information on Iceland’s sovereign credit ratings can be found on the Government of Iceland website: The Republic of Iceland's sovereign credit ratings

The role of sovereign credit ratings

Sovereign credit ratings play an important role in the global financial markets. Ratings agencies assign borrowers a credit rating that significantly influences the lending terms offered to them.   The credit ratings reflect the assessment of borrowers’ ability to honour their commitments in full and on time. It gives an indication of the probability that a borrower will default on payments. Iceland´s sovereign rating sets the benchmark for the creditworthiness of other Icelandic borrowers in global credit markets and is therefore highly important to them.

Assignment of credit ratings

Sovereign credit ratings are assigned based on various criteria, including the following: 

• The sovereign’s ability to service foreign-denominated debt
• The country’s GDP growth potential
• Monetary policy
• Political risk
• Government finances and government guarantees
• Structure of the economy and revenues
• Debt position of State-owned corporations
• Public sector debt position
• Private sector debt position

These factors are all evaluated before the credit rating is assigned. In the financial markets, ratings from credit rating agencies are placed in two main categories: investment-grade and speculative-grade. The rating agencies assign comparable alphabetical scores, as can be seen in Table 1.  The alphabetic rating is generally accompanied by an outlook statement indicating the prospects for changes in the credit rating. The outlook can be negative, stable, or positive. Credit ratings agencies publish news and detailed grounds for their assessments on a regular basis.

Experts from the ratings agencies visit Iceland annually and meet with representatives from the Government, the Central Bank and the private sector. Following those meetings, the sovereign credit rating is affirmed or amended, depending on the assessment of the respective credit rating agency.

Developments in Iceland’s sovereign credit ratings