...+ Although we believe that the Icelandic banking market has stabilized, we might not see a further improvement in the competitive and funding landscape over the next few years. We have therefore revised our banking industry risk trend in Iceland to stable from positive. + In our view, the role of pension funds in lending continues to distort Icelandic banks' competitive environment in terms of business generation and margins. + While new external funding is gradually diversifying resources for the banks, we expect the domestic wholesale funding market to remain small and concentrated compared to that of international peers. + Overall, economic risks in Iceland remain stable as the economy continues to grow and signs of overheating are receding. + However, credit risk may increase, due to banks' relatively sizable exposure to the real estate and tourism sectors and to consumer price index-linked mortgage loans, combined with fierce domestic competition from bank and non-bank institutions....
