The strong economic growth in Iceland continues, with improving economic resilience and falling private sector leverage, only partly offset by concerns of increasing economic imbalances. As such, our view of the Icelandic banking sector has improved, as has our expectation for Iceland-based Arion Bank's risk-adjusted capital position given significant reductions in equity positions. We anticipate that the bank's likely upcoming IPO, which could be delayed by the elections this fall, will be neutral for the ratings. As a result, we are raising the long-term ratings on Arion Bank to 'BBB+' from 'BBB', and affirming the 'A-2' short-term rating. The stable outlook reflects our expectation that the Icelandic economy will remain stable, and that Arion Bank will maintain very strong capital
