The ratings on the Republic of Iceland reflect significant and sustained improvements in the resilience and structure of the Icelandic banking sector, as well as the positive perspective for public finances, which should lead to a rapid decline in general government debt levels. The financial sector in Iceland has recovered from the imbalances created by the pre-2001 lending boom. Improved regulation and supervision, as well as the expansion of operations within the Scandinavian region and beyond, leave the sector much more resilient and less sensitive to developments in the Icelandic economy, as well as providing easier access to funds. The recent entry of the commercial banks into the Icelandic mortgage market provides the private financial sector with additional domestic stability
