Service sector

Financial sector

Iceland’s financial services sector has grown considerably in recent years, catalysed by deregulation in the 1990s and, in particular, the privatisation of two commercial banks, which was completed in 2003. International acquisitions and internal growth have swollen the banks’ combined balance sheets, and the commercial banks have subsidiaries and branch offices in the UK, the US, Scandinavia, continental Europe and elsewhere. Financial legislation is transposed from EU law. Major companies have adopted the International Financial Reporting Standards (IFRS) and Basel II.

There are currently five commercial banks in Iceland, all privately held. The three largest – Glitnir, Kaupthing Bank and Landsbanki – provide all conventional banking and securities services. Total assets of the largest commercial bank groups amounted to EUR 124.5 billion (11,354 b.kr) at the end of 2007.

At the end of 2007, there were 20 savings banks in Iceland. One commercial bank, Icebank, serves as a banking institution for most of them. Total assets of the savings banks and Icebank amounted to EUR 7 billion (642.7 b.kr.) at the end of 2007.

In recent years, Glitnir, Kaupthing Bank and Landsbanki have expanded their operations abroad by acquiring subsidiaries in commercial banking and security brokerage. At the end of 2007, almost half of the total assets of the largest commercial banking groups were accounted for by foreign subsidiaries, most of them located in Northern Europe, and in 2007 about 58% of their overall income was generated abroad. The three largest commercial banks are rated by international rating agencies.

Thirteen other credit institutions currently operate in Iceland: five investment banks, three payment card companies, two investment funds, and three leasing companies, as well as the Housing Financing Fund (HFF), a state-owned mortgage credit fund.

Thirteen insurance companies are authorised to operate in Iceland, with total assets of around EUR 1.7 billion (154.8 b.kr.) at year-end 2007. Sjóvá, VÍS and TM are by far the largest. Life insurance companies represent only about 9% of total assets of insurance companies.

Other service industries

Tourism has been one of Iceland’s fastest-growing industries in recent years. The number of visitors from abroad is estimated at 480 thousand for the year 2007, compared to 310 thousand in 2000. Foreign exchange revenues generated by tourism in 2007 amounted to approximately EUR 640 million (56 b.kr.), or 12.4% of export revenues.

The technological sector of the services industry has also been diversifying rapidly. Iceland’s software industry has extensive expertise and long practical experience in the design of software for sophisticated food and fish processing equipment. Icelandic software developers are also actively engaged in multimedia and Internet applications, e-commerce, real-time communications, online games, medical software, and general office and database systems. In 2006, exports of software products amounted to EUR 72 million (6.3 b.kr), an increase of more than 175% since 2000.