OVERVIEW The compositions of failed Icelandic banks' wind-down estates have been agreed, significantly reducing uncertainties relating to the eventual lifting of capital controls, in our view. That said, we observe ongoing house price growth, which could lead to widening imbalances. All in all, we now see a positive economic risk trend for banks in Iceland, given the more resilient economy and likely lower risk from potential large swings in the exchange rate. We are therefore revising our outlooks on Arion Bank and Islandsbanki to positive from stable, maintaining our positive outlook on Landsbankinn, and affirming our 'BBB-/A-3' ratings on all three banks. The positive outlooks indicate that we could raise the ratings if the banks' credit profiles strengthen in the
