Banks in Iceland | Iceland Banking System & Novel Approaches

Banks in Iceland – Their novel approaches

The banking sector of Iceland has been widely studied throughout the last decades. Unlike the rest of the world, after the last financial crisis of 2008, Icelandic banks were not bailed out by the state or any other public entity. In that time, banks were 10 times the GDP of Iceland and 20 times the state budget. They were just too big to be bailed out. 97% of the banking sector collapsed in a matter of three days. However, since then, new banks emerged with novel regulations emerged, giving Iceland a privileged spot alongside those countries whose banks exist to serve its population and not the other way round. Swapp Agency will be able to guide you throughout the process of getting in touch with local banks for any inquiry you may have.

Current Iceland Banks and their novel approaches

Arion Bank: It’s the third-largest bank of Iceland and focuses on commercial banking. It operates in the Greater Reykjavík area as well as in the largest urban areas of the country. The Bank has 21 branches all over the country and over 100,000 customers. Arion Bank seeks to offer diverse financial services.

The core targets for 2020 of Arion Bank regarding sustainable banking are:

  • Evaluate the Bank’s loan portfolio according to green criteria and set targets in this regard.
  • Ask their main suppliers about the environmental and climate impact of their activities.
  • measure the carbon footprint of the loan portfolio
  • They have established this year that they will no longer buy vehicles which do not run on 100% renewable energy, by 2023.

Íslandsbanki: It’s the second largest bank of Iceland and also operates mainly in the Greater Reykjavík area. Íslandsbanki prides itself of being ranked first among banks in the Icelandic Customer Satisfaction Index for six out of seven years. Its focus is clearly commercial.

Íslandsbanki defines its business with a broad stakeholder approach. Based on UN SDGs, the bank has chosen to give particular support to four of them: Quality Education; Gender Equality; Industry, innovation, and Infrastructure; and Climate Action. In terms of business structure, the bank has also defined how it will manage its portfolio.

  • Responsible Lending: When taking lending decisions, the Bank shall consider sustainability and ESG criteria. The Bank is committed to supporting customers in their efforts to adopt more sustainable practices. In particular, the Bank intends to participate actively in financing transportation energy transformation.
  • Responsible Purchasing: As a large purchaser of goods and services, Íslandsbanki is in a position to act as a positive force in society. When looking for providers, ESG factors are taken into account in the screening.
  • Responsible Investments: Íslandsbanki applies negative screening techniques to avoid lending money to any agent who might go against SDGs.
  • Íslandsbanki supports good causes in the local community through direct grants. The Bank makes a particular attempt to support causes that are clearly linked to the SDGs it has chosen to promote.

Landsbankinn: It is the largest bank in Iceland has 37 branches around the country. In 2018, Landsbankinn had a 37,8% market share in the retail market and 34% in the corporate banking market. While its focus is commercial, it has an important financial branch.

The Bank’s strategy emphasises providing exemplary service, developing electronic service solutions for the benefit of customers, increasing the efficiency of support functions, modernising technology and ensuring the economy in the balance sheet. Special emphasis is placed on promoting a performance-oriented culture in the Bank.

The corporate governance strategy of the bank is aligned with ethics more than environmental or social impact. In their own words:

“Landsbankinn’s code of ethics is the basic tenet of good business practices and morality of the Bank’s employees. The code applies to relations between employees and customers, between co-workers, regulators, shareholders, competitors and other stakeholders. It is one of the cornerstones of Landsbankinn’s strategy and a guideline for ethical behaviour in questionable circumstances.”

Get in touch with Icelandic professionals

To have an extensive consultancy relating ESG models and sustainability in banking, contact Swapp Agency. We are a leading group of experts in diverse fields. Our professional team will be happy to assist you throughout the process of getting to know procedures, mechanisms and models in the implementation of ESG criteria. Regardless of the industry or sector, we are prepared to solve all your inquiries.