Banks in Iceland – Their novel approaches

The Icelandic banking sector has been extensively analysed in recent decades. Unlike in the rest of the world, Icelandic banks were not bailed out by the state or any other public institution after the last financial crisis in 2008. At the time, the banks were 10 times the size of Iceland's GDP and 20 times the size of the national budget. They were simply too big to be rescued. 97% of the banking sector collapsed within three days. Since then, however, new banks have emerged with new regulations that give Iceland a privileged place alongside countries whose banks are there for the people and not the other way round. The Swapp agency can help you get in touch with local banks if you have an enquiry.

Current Iceland Banks and their novel approaches

Arion Bank: It is the third largest bank in Iceland and specialises in commercial banking. It operates in the greater Reykjavík area as well as in the country's largest urban areas. The bank has 21 branches throughout the country and over 100,000 customers. Arion Bank endeavours to offer a wide range of financial services.

Arion Bank's core targets for 2020 in relation to 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: Íslandsbanki is the second largest bank in Iceland and also operates mainly in the greater Reykjavík area. Íslandsbanki is proud to have ranked first among banks in the Icelandic Customer Satisfaction Index for six out of seven years. Its focus is clearly on the commercial sector.

Íslandsbanki defines its business with a comprehensive stakeholder approach. Based on the United Nations SDGs, the bank has decided to support four of these goals in particular: Quality Education, Gender Equality, Industry, Innovation and Infrastructure and Climate Action. In terms of business structure, the Bank has also determined 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 and has 37 branches throughout the country. In 2018, Landsbankinn had a market share of 37.8% in retail banking and 34% in corporate banking. Although its focus is on commercial banking, it has an important financial division.

The Bank’s strategy focuses on providing exemplary service, developing electronic service solutions for the benefit of customers, increasing the efficiency of support functions, modernising technology and ensuring the profitability of the balance sheet. Particular emphasis is placed on promoting a performance-orientated culture within the bank.

The bank's corporate governance strategy is focussed more on ethics than on environmental or social impact. In their own words:

“Landsbankinn’s Code of Ethics is the basis for the good business practises and morals of the Bank’s employees. The Code applies to relations between employees and customers, between employees, supervisory authorities, shareholders, competitors and other interest groups. It is one of the cornerstones of Landsbankinn’s strategy and a guideline for ethical behaviour in questionable situations”

Get in touch with Icelandic professionals

If you would like comprehensive advice on ESG models and sustainability in banking, contact the Swapp agency . We are a leading group of experts in various fields. Our professional team will be happy to help you familiarise yourself with procedures, mechanisms and models for implementing ESG criteria. Regardless of the industry or sector, we are ready to answer all your questions.