...Volatile credit charges, which are higher than at Nordic peers. Outlook: Stable Our stable outlook on Arion Bank balances our view of the bank's sustained capital generation and progress in reducing its equity position. We believe that the bank will materially reduce its capital over the next two-to-three years as it recalibrates its capital base, but that it is unlikely to reduce its risk-adjusted capital (RAC) ratio below 15%. We could lower the rating if capital reduced beyond our expectations (that is, a RAC ratio below 15%). This could also be the case if we saw signs of a material deterioration of asset quality as a result of more aggressive underwriting or economic headwinds in Iceland. Such a development could result in us no longer viewing the combined capital and risk assessment as a relative strength for the rating. We consider a positive rating action unlikely, as we expect the bank's regional and sector concentration to remain unchanged, while its funding and liquidity profile...
