Moody's Investors Service on Thursday changed the outlook for Iceland's Baa3 local and foreign currency government bond ratings to negative from stable.
The rating action was taken in view of the recent Supreme Court ruling on the illegality of foreign-exchange-linked loans and government's continuing difficulties in achieving a resolution to its "Icesave" dispute with the U.K. and Dutch governments.
The rating agency said the Supreme Court ruling has the potential to cause substantial bank losses on foreign currency-denominated loans to domestic borrowers and may therefore require additional government support to the banking system. Moreover, a failure to resolve the "Icesave" dispute could lead the Nordic countries and the IMF to withhold future disbursements to the Icelandic government.
"These two sources of macroeconomic uncertainty are indicative of the generally asymmetric risks facing Iceland and explains the rationale for the negative outlook on its ratings," Moody's said.
Moody's also changed the outlook on Iceland's country ceiling for foreign-currency bonds of Baa2 from stable to negative. The outlook on the foreign-currency deposit ceiling of Baa3 has also been changed to negative from stable.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.