Årsredovisning 2025

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25.
Fair value hierarchy, continued
Level 1
Level 2
Level 3
Total
- 
- 
1,313 
1,313 
155,316 
3,414 
5 
158,735 
9,269 
7,546 
1,655 
18,470 
- 
3,685 
- 
3,685 
- 
3,030 
- 
3,030 
21,585 
912 
- 
22,497 
- 
- 
9,387 
9,387 
186,170 
18,587 
12,360 
217,117 
- 
4,096 
- 
4,096 
- 
4,298 
- 
4,298 
- 
8,394 
- 
8,394 
Methods for establishing fair value
Loans to credit institutions ....................................................................................................
Derivatives used for hedge accounting .................................................................................
31.12.2024
Level 1: Fair value established from quoted market prices
The
fair
value
of
asset
and
liabilities
is
the
amount
at
which
the
asset
and
liability
could
be
exchanged
in
a
current
transaction
between
willing
parties,
i.e.
not
during
a
forced
sale
or
liquidation.
The
existence
of
published
price
quotations
in
an
active
market
is
the
best
evidence
of
fair
value
and
when
they
exist
they
are
used
by
the
Group
to
measure
assets
and
liabilities.
If
quoted
prices
for
an
asset
fail
to
represent
actual
and
regularly
occurring
transactions
in
active
market
transactions
or
if
quoted
prices
are
not
available
at
all,
fair
value
is
established by using an appropriate valuation technique.
Assets at fair value .............................................................................................................
There was no transfer between Level 1 and Level 2 during the year (2024: Transfers from Level 1 to Level 2 ISK 2,767 million).
Level
2
instruments
include
unlisted
shares,
unlisted
funds
with
underlying
bonds
and
equity
holdings
(share
certificates),
unlisted
and
less
liquid listed bonds and all OTC derivatives.
Derivatives ...........................................................................................................................
Level 2: Fair value established using valuation techniques with observable market information
The
best
evidence
of
the
fair
value
of
an
asset
and
liability
at
initial
recognition
is
the
transaction
price,
unless
the
fair
value
can
be
evidenced
by
comparison
with
other
observable
current
market
transactions,
or
is
based
on
a
valuation
technique
whose
variables
include
only data from observable markets.
In
most
cases
the
valuation
is
based
on
theoretical
financial
models,
such
as
the
Black
Scholes
model
or
variations
thereof.
These
techniques also include forward pricing and swap models using present value calculations.
In
some
cases,
the
carrying
value
of
an
asset
in
Note
24
is
used
as
an
approximation
for
the
fair
value
of
the
asset.
This
is
straight
forward
for
cash
and
cash
equivalents
but
is
also
used
for
short
term
investments
and
borrowings
to
highly
rated
counterparties,
such
as
credit
institutions, on contracts that feature interest close to or equal to market rates and expose the Group to little or no credit risk.
For
assets
and
liabilities,
for
which
the
market
is
not
active,
the
Group
applies
valuation
techniques
to
attain
a
fair
value
using
as
much
market
information
as
available.
Valuation
techniques
include
using
recent
market
transactions
between
knowledgeable
and
willing
parties,
if
available,
reference
to
current
fair
value
of
another
instrument
that
is
substantially
the
same,
discounted
cash
flow
analysis,
option
pricing
models or other commonly accepted valuation techniques used by market participants to price the instrument.
For
assets
and
liabilities
for
which
quoted
prices
on
active
markets
are
not
available,
the
fair
value
is
derived
using
various
valuation
techniques.
This
applies
in
particular
to
OTC
derivatives
such
as
options,
swaps,
futures
and
unlisted
equities
but
also
some
other
assets
and liabilities.
For
listed
and
liquid
stocks
and
bonds,
certain
financial
derivatives
and
other
market
traded
securities,
the
fair
value
is
derived
directly
from
quoted
market
prices.
These
instruments
are
disclosed
under
Financial
instruments
and
Financial
liabilities
at
fair
value
in
the
Statement
of
Financial Position.
Fair value of assets and liabilities
Investment property ..............................................................................................................
Bonds and debt instruments .................................................................................................
Liabilities at fair value ........................................................................................................
Derivatives ...........................................................................................................................
Shares and equity instruments with variable income ............................................................
Derivatives used for hedge accounting .................................................................................
Liabilities at fair value
Assets at fair value
Securities used for economic hedging ..................................................................................
40

===== SIDA 41 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25.
Fair value hierarchy, continued
Level 3: Fair value established using valuation techniques with significant unobservable market information
Movements in Level 3 assets measured at fair value
Loans
Bonds
Shares
Total
9,387 
1,313 
5 
1,655 
12,360 
5,277 
92 
- 
(218)
5,151 
191 
45 
- 
2,570 
2,806 
(7,550)
- 
(2)
(3)
(7,555)
7,305 
1,450 
3 
4,004 
12,762 
9,493 
- 
27 
3,595 
13,115 
(339)
51 
(20)
468 
160 
233 
1,262 
- 
26 
1,521 
- 
- 
(2)
(2,434)
(2,436)
9,387 
1,313 
5 
1,655 
12,360 
Line items where effects of Level 3 assets are recognized in the Income Statement
Loans
Bonds
Shares
Total
- 
122 
- 
- 
122 
- 
(30)
- 
(218)
(248)
4,848 
- 
- 
- 
4,848 
4,848 
92 
- 
(218)
4,722 
- 
65 
- 
- 
65 
- 
(14)
(20)
468 
434 
(339)
- 
- 
- 
(339)
(339)
51 
(20)
468 
160 
Additions ............................................................................................................
2024
Balance at the end of the year ........................................................................
Net financial income ..........................................................................................
Disposals ...........................................................................................................
Net interest income ............................................................................................
2025
Financial assets
In
some
cases
there
is
little
or
no
market
data
to
rely
on
for
fair
value
calculations.
The
most
common
valuation
technique
is
present
value
calculations.
Such
calculations
involve
the
estimation
of
future
cash
flow
and
the
assessment
of
appropriate
discount
rate.
The
discount
rate
should
both
reflect
current
market
rates
and
the
uncertainty
in
the
future
cash
flow.
In
such
cases
internal
models
and
methods
are
used
to
calculate
the
fair
value.
The
models
may
be
statistical
in
nature,
based
on
internal
or
external
history
of
assets
with
similar
characteristics
and/or
based
on
internal
knowledge
and
experience.
For
example,
the
credit
margin
on
most
loans
to
customers
which,
is
added
to
the
current
and
suitable
interest
rate
to
arrive
at
an
appropriate
discount
rate,
is
estimated
using
credit
rating
and
loss
parameters
in case of default that have been derived from internal models.
Equity
instruments
that
do
not
have
a
quoted
market
price
are
evaluated
using
methods
and
guidelines
from
pertinent
international
organizations.
In
most
cases
intrinsic
value
is
the
basis
for
the
assessment
but
other
factors,
such
as
cash
flow
analysis,
can
also
modify
the results.
Effects recognized in the Income Statement .................................................
Additions ............................................................................................................
Net fair value changes .......................................................................................
Other operating income .....................................................................................
Investment
property
Balance at the beginning of the year ..................................................................
Balance at the beginning of the year ..................................................................
Net fair value changes .......................................................................................
Effects recognized in the Income Statement .................................................
Disposals ...........................................................................................................
Balance at the end of the year ........................................................................
Investment
property
Other operating income .....................................................................................
2024
Net interest income ............................................................................................
Financial assets
Net financial income ..........................................................................................
2025
The
Group
applies
management
valuation
for
determining
fair
value
of
investment
properties.
Management
valuation
is
either
based
on
recent
transactions
and
offers
for
similar
assets
or
present
value
calculations
which
involve
estimation
of
future
cash
flow
and
the
assessment of appropriate discount rate.
41

===== SIDA 42 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25.
Fair value hierarchy, continued
Carrying values and fair values of financial assets and financial liabilities not carried at fair value
Carrying
Fair
Unrealized
Financial assets not carried at fair value
value
value
(loss) gain
150,111 
150,111 
- 
22,567 
22,567 
- 
1,327,606 
1,329,204 
1,598 
17,031 
17,031 
- 
1,517,315 
1,518,913 
1,598 
Financial liabilities not carried at fair value
12,003 
12,003 
- 
921,182 
921,182 
- 
494,823 
501,211 
(6,388)
43,518 
50,461 
(6,943)
11,792 
11,792 
- 
1,483,318 
1,496,649 
(13,331)
Financial assets not carried at fair value
124,094 
124,094 
- 
25,690 
25,690 
- 
1,228,745 
1,222,223 
(6,522)
8,476 
8,476 
- 
1,387,005 
1,380,483 
(6,522)
Financial liabilities not carried at fair value
6,618 
6,618 
- 
857,443 
857,443 
- 
433,178 
429,199 
3,979 
44,538 
48,226 
(3,688)
10,631 
10,631 
- 
1,352,408 
1,352,117 
291 
Derivatives
Notional
value
Assets
Liabilities
95,591 
430 
419 
268,565 
3,210 
1,718 
33,616 
167 
204 
1,882 
70 
5 
18,025 
4,747 
783 
417,680 
8,624 
3,129 
60,780 
180 
1,286 
235,504 
3,030 
4,297 
43,027 
235 
791 
3,243 
87 
2 
20,789 
2,596 
2,018 
- 
587 
- 
363,343 
6,715 
8,394 
Deposits ..................................................................................................................................................
Derivatives .............................................................................................................................................
Fair value hedge of interest rate swap .....................................................................................................
Derivatives .............................................................................................................................................
Share swap agreements ..........................................................................................................................
Interest rate and exchange rate agreements ...........................................................................................
Loans to credit institutions .......................................................................................................................
Fair value hedge of interest rate swap .....................................................................................................
Other financial liabilities ...........................................................................................................................
Other financial assets ..............................................................................................................................
Interest rate and exchange rate agreements ...........................................................................................
Share swap agreements ..........................................................................................................................
31.12.2024
Forward exchange rate agreements ........................................................................................................
31.12.2025
Forward exchange rate agreements ........................................................................................................
Options - purchased agreements, unlisted ..............................................................................................
Bond swap agreements ...........................................................................................................................
Other financial assets ..............................................................................................................................
Cash and balances with Central Bank .....................................................................................................
Loans to customers .................................................................................................................................
Subordinated liabilities ............................................................................................................................
Cash and balances with Central Bank .....................................................................................................
31.12.2025
Loans to credit institutions .......................................................................................................................
Financial liabilities not carried at fair value .........................................................................................
Bond swap agreements ...........................................................................................................................
Fair value
31.12.2024
Borrowings ..............................................................................................................................................
Subordinated liabilities ............................................................................................................................
Financial liabilities not carried at fair value .........................................................................................
Financial assets not carried at fair value .............................................................................................
Other financial liabilities ...........................................................................................................................
Due to credit institutions and Central Bank ..............................................................................................
Due to credit institutions and Central Bank ..............................................................................................
Loans
to
customers
largely
bear
variable
interest
rates.
Those
loans,
including
corporate
loans,
are
presented
at
book
value
as
they
generally
have
a
short
duration
and
very
limited
interest
rate
risk.
Loans
with
fixed
interest
rates,
mainly
retail
mortgages,
are
estimated
by
using
the
discount
cash
flow
method
with
the
interest
rates
offered
on
new
loans,
taking
into
account
loan
to
value.
Defaulted
loans
are
presented
at
book
value
as
no
future
cash
flow
is
expected
on
them.
Instead
they
are
written
down
according
to
their
estimated
potential
recovery value.
Financial assets not carried at fair value .............................................................................................
Borrowings ..............................................................................................................................................
Loans to customers .................................................................................................................................
Deposits ..................................................................................................................................................
42

===== SIDA 43 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25.
Fair value hierarchy, continued
Fair value hedge of interest rate swap
Gain (loss)
Notional 
on FV
1.1.-31.12.2025
Value
Assets
Liabilities
changes
- 
- 
- 
693 
73,640 
- 
1,395 
1,387 
44,184 
1,815 
- 
(248)
2,509 
53 
- 
30 
44,184 
656 
- 
(447)
15,680 
178 
- 
422 
44,184 
508 
- 
(229)
44,184 
- 
323 
(423)
3,210 
1,718 
1,185 
- 
- 
- 
213 
- 
- 
- 
157 
13,899 
- 
94 
441 
43,168 
- 
988 
1,621 
71,947 
- 
2,953 
1,955 
43,168 
1,977 
- 
(25)
2,780 
27 
- 
26 
43,168 
1,026 
- 
1,090 
17,374 
- 
263 
(611)
3,030 
4,298 
4,867 
Hedged borrowings and subordinated liabilities
Gain (loss)
Book
on FV
value
Assets
Liabilities
changes
- 
- 
- 
(648)
72,265 
1,038 
- 
(1,391)
44,731 
209 
- 
196 
46,252 
- 
154 
247 
2,893 
- 
53 
(31)
44,916 
- 
622 
427 
15,635 
218 
- 
(434)
43,835 
423 
- 
436 
270,527 
1,888 
829 
(1,198)
- 
- 
- 
(205)
3,150 
- 
- 
(615)
68,775 
2,395 
- 
(1,948)
42,597 
646 
- 
(1,619)
- 
- 
- 
(469)
45,384 
- 
397 
24 
2,989 
- 
27 
(27)
44,272 
- 
1,039 
(1,087)
16,854 
705 
- 
696 
224,021 
3,746 
1,463 
(5,250)
Fair value
- 
Interest rates swaps - USD .............................................................
EUR 300 million - issued 2021 - 4 years ...............................................................................
Interest rates swaps - EUR .............................................................
Interest rates swaps - EUR .............................................................
6-12 mth
3-6 mth
Interest rates swaps - EUR .............................................................
Interest rates swaps - EUR .............................................................
1-5 years
Interest rates swaps - EUR .............................................................
The
effectiveness
of
each
hedge
is
measured
regularly
with
linear
regression.
The
relationship
between
fair
value
changes
of
an
interest
rate swap on the one hand and a borrowing on the other hand is examined.
1-5 years
1.1.-31.12.2024
Interest rates swaps - USD .............................................................
EUR 500 million - issued 2021 - 5 years ...............................................................................
1-5 years
Interest rates swaps - EUR .............................................................
EUR 300 million - issued 2024 - 4 years ...............................................................................
EUR 300 million - issued 2025 - 5 years ...............................................................................
fair value
Accumulated 
EUR 300 million - issued 2025 - 6 years ...............................................................................
EUR 300 million - issued 2023 - 3 years ...............................................................................
1.1.-31.12.2025
Interest rates swaps - USD .............................................................
The
Group
applies
fair
value
hedge
accounting
only
with
respect
to
interest
rate
swaps
in
EUR
and
USD,
whereby
the
Group
pays
floating
rate
interest
and
receives
fixed
rate
interest,
with
identical
cash
flows
to
the
borrowings
and
subordinated
liabilities.
The
interest
rate
swaps
are
hedging
the
exposure
of
changes
in
the
fair
value
of
certain
fixed-rate
EUR
and
USD
bonds,
see
Notes
33
and
34,
arising
from
changes in EURIBOR and SOFR benchmark interest rates. 
Interest rates swaps - EUR .............................................................
6-12 mth
6-12 mth
over 5 years
- 
1-5 years
Interest rates swaps - EUR .............................................................
Interest rates swaps - USD .............................................................
Maturity
1.1.-31.12.2024
1-5 years
- 
1-5 years
1-5 years
EUR 300 million - issued 2021 - 4 years ...............................................................................
EUR 300 million - issued 2022 - 2 years ...............................................................................
Hedged borrowings and subordinated liabilities ..............................................................
During
2025
the
slope
for
the
regression
line
was
in
all
cases
within
the
range
of
0.95-1.24
and
the
regression
coefficient
was
at
least
0.94.
During
2024,
the
slope
of
the
regression
line
was
in
all
cases
within
the
range
of
0.93-1.05
and
the
regression
coefficient
was
at
least
0.97.
In all cases the effectiveness is within limits in 2025 and 2024.
Interest rates swaps - EUR .............................................................
EUR 300 million - issued 2023 - 3 years ...............................................................................
USD 21 million - issued 2024 - 3 years .................................................................................
USD 125 million - issued 2024 - Perpetual ...........................................................................
EUR 300 million - issued 2024 - 4 years ...............................................................................
1-5 years
1-5 years
Interest rates swaps - EUR .............................................................
Interest rates swaps - EUR .............................................................
Hedged borrowings and subordinated liabilities ..............................................................
USD 125 million - issued 2024 - Perpetual ...........................................................................
USD 21 million - issued 2024 - 3 years .................................................................................
date
EUR 300 million - issued 2020 - 4 years ...............................................................................
EUR 500 million - issued 2021 - 5 years ...............................................................................
USD 100 million - issued 2020 - Perpetual ...........................................................................
Interest rates swaps - EUR .............................................................
Interest rates swaps - USD .............................................................
43

===== SIDA 44 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
26.
Offsetting financial assets and financial liabilities
 
 
Assets
Assets after
Total assets
Gross assets
Nettings
recognized
consideration
enforceable
recognized
before
with gross
on Balance
Financial 
Collateral
of netting
netting arr-
on Balance
31.12.2025
nettings
liabilities
Sheet, net
liabilities
received
potential
angements
Sheet, net
Reverse repurchase agreements ..............
17,035 
(10,789)
6,246 
10,789 
- 
17,035 
- 
6,246 
Derivatives ................................................
3,739 
- 
3,739 
(1,486)
(5,602)
(3,349)
4,885 
8,624 
Total assets .............................................
20,774 
(10,789)
9,985 
9,303 
(5,602)
13,686 
4,885 
14,870 
31.12.2024
Reverse repurchase agreements ..............
16,469 
(10,383)
6,086 
(5,543)
- 
543 
- 
6,086 
Derivatives ................................................
4,523 
- 
4,523 
(2,015)
(2,504)
4 
2,192 
6,715 
Total assets .............................................
20,992 
(10,383)
10,609 
(7,558)
(2,504)
547 
2,192 
12,801 
Liabilities
Liabilities not
Total
Gross
 
Liabilities
after
subject to
liabilities
liabilities
Nettings
recognized
consideration
enforceable
recognized
before
with gross
on Balance
Financial 
Collateral
of netting
netting arr-
on balance
31.12.2025
nettings
assets
Sheet, net
assets
pledged
potential
angements
sheet, net
Repurchase agreements ...........................
16,579 
(10,789)
5,790 
10,789 
- 
16,579 
- 
5,790 
Derivatives ................................................
2,555 
- 
2,555 
(1,486)
(1,752)
(683)
574 
3,129 
Total liabilities .........................................
19,134 
(10,789)
8,345 
9,303 
(1,752)
15,896 
574 
8,919 
31.12.2024
Repurchase agreements ...........................
15,926 
(10,383)
5,543 
(5,543)
- 
- 
- 
5,543 
Derivatives ................................................
7,131 
- 
7,131 
(2,015)
(4,327)
789 
1,263 
8,394 
Total liabilities .........................................
23,057 
(10,383)
12,674 
(7,558)
(4,327)
789 
1,263 
13,937 
27.
Investments in associates
31.12.2025
31.12.2024
814 
789 
(19)
- 
(8)
- 
(27)
25 
760 
814 
The Group's interest in its principal associates
-
33.4% 
31.8% 
31.8% 
23.0% 
23.0% 
35.3% 
35.3% 
19.7% 
- 
SER eignarhaldsfélag ehf., Borgartún 19, Reykjavík, Iceland ....................................................................................
Due
to
the
financial
difficulties
experienced
by
Matorka
ehf.
following
the
seismic
activity
in
Grindavík
and
subsequent
composition
agreements, Arion Bank obtained a share in the company at the end of March.
Reverse
repurchase
agreements
and
repurchase
agreements
are
recognized
within
the
line
items
Financial
instruments
and
Due
to
credit
institutions and Central Bank respectively.
In June Arion Bank sold its entire shareholding in Bílafrágangur ehf. with minor effects on the Income Statement.
Assets not 
subject to
Financial liabilities subject to enforceable master netting arrangements and similar arrangements
Carrying amount at the beginning of the year .............................................................................................................
Reiknistofa bankanna hf., Dalvegur 30, Reykjavík, Iceland ........................................................................................
Decreased share capital ............................................................................................................................................
Dividend received ......................................................................................................................................................
Liabilities subject to netting 
arrangements
Share of (loss) profit of associates .............................................................................................................................
Bílafrágangur ehf., Lágmúli 5, Reykjavík, Iceland ......................................................................................................
Netting potential not 
recognized in the 
Balance Sheet
Assets subject to netting 
arrangements
Netting potential not 
recognized in the 
Balance Sheet
Financial assets subject to enforceable master netting arrangements and similar arrangements
Investment in associates .........................................................................................................................................
Matorka ehf., Eyrartröd 12, Grindavik, Iceland ...........................................................................................................
Háblær ehf., Sudurlandsbraut 18, Reykjavík, Iceland .................................................................................................
44

===== SIDA 45 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
28.
Intangible assets
Policies applied to the Group's intangible assets
Customer
relationship
Infra-  
and related
2025
Goodwill
structure  
Software
Total
730 
2,383 
427 
4,148 
7,688 
- 
- 
- 
852 
852 
- 
- 
(60)
(947)
(1,007)
730 
2,383 
367 
4,053 
7,533 
2024
730 
2,383 
487 
4,451 
8,051 
- 
- 
- 
622 
622 
- 
- 
(60)
(925)
(985)
730 
2,383 
427 
4,148 
7,688 
Impairment testing
Discount and growth rates
Discount
Growth
Discount
Growth
rates
rates
rates
rates
14.3% 
3.5-10%
14.3% 
3.5-15%
13.9% 
3.6% 
14.3% 
4.0% 
Customer relationship
Acquired
Additions ............................................................................................................
Useful lives .....................................................................................
Straight-line basis 
over 3-10 years
Additions ............................................................................................................
Goodwill
related
to
the
insurance
operation
is
recognized
among
assets
in
the
operating
segment
Corporate
&
Investment
Banking
and
Retail Banking and goodwill related to the subsidiary Leiguskjól is recognized in the operating segment Other subsidiaries, see Note 5.
Balance at the end of the year ........................................................................
2024
2025
Acquired
Balance at the end of the year ........................................................................
Internally generated or acquired  .....................................................
agreements
Finite 6-15 years 
and undefined
Acquired and internally 
generated
Balance at the beginning of the year ..................................................................
The
model
used,
to
determine
the
recoverable
amount,
is
most
sensitive
to
changes
in
the
forecast
earnings
available
to
shareholders
over
a
five-year
period,
the
cost
of
equity
and
to
changes
in
the
growth
rate.
As
a
result
of
this
analysis
no
impairment
was
recognized
in
2025
(2024: nil).
Acquired
software
and
internally
developed
software
is
capitalized
on
the
basis
of
the
cost
of
acquiring
and
bringing
the
software
into
service.
Expenditure
on
internally
developed
software
is
recognized
as
an
asset
when
the
Group
is
able
to
demonstrate
its
intention
and
ability
to
complete
the
development
and
use
the
software
in
a
manner
that
will
generate
future
economic
benefits,
and
when
it
can
reliably
measure
the
costs
to
complete
the
development.
The
capitalized
costs
of
internally
developed
software
include
external
expenses
directly
attributable
to
developing
the
software
and
salary
and
salary
related
expenses
of
implementation
of
core
systems.
Capitalized
costs
of
software
are
amortized
over
its
useful
life.
Computer
software
licenses
and
internally
developed
software
recognized
as
intangible
assets
are amortized over their useful life, which is estimated to be 3-10 years.
Asset Management operation ...............................................................................................
Insurance operation ..............................................................................................................
The
methodology
for
impairment
testing
on
the
Infrastructure
and
Customer
relationship,
which
is
part
of
intangible
assets,
is
based
on
discounted cash flow model which uses inputs that consider features of the business and the environment.
Customer
relationships
and
related
agreements
are
connected
to
business
relationships
and
agreements
which
the
Bank
acquired
in
subsidiaries.
The
asset
is
based
on
the
assumption
that
business
relationships
and
agreements
generate
regular
payments
and
earnings
to
the
relevant
business
segments.
The
lifetime
of
these
agreements
is
based
on
the
experience
of
the
Group
and
the
industry.
As
a
result,
these agreements are assessed as having an identified useful lifetime.
Amortization .......................................................................................................
Software
Goodwill
and infrastructure
and related agreements
Straight-line basis over 
6-15 years and
impairment test
Amortization .......................................................................................................
Intangible
assets
comprise
the
following
categories:
Goodwill,
which
arises
on
business
combinations;
Infrastructure,
Customer
relationships
and
related
agreements
which
are
identified
during
the
acquisition
of
subsidiaries
and
related
to
the
activities
of
the
businesses being acquired; and Software, which is acquired (i.e. software licenses) and cost of implementation.
Infrastructure,
which
is
capitalized
as
an
intangible
asset,
is
related
to
the
asset
management
operation
and
the
insurance
operation.
The
business
activity
is
based
on
years
of
developing
expertise
and
systems,
during
which
a
valuable
platform
has
been
created
for
future
growth. An impairment test is performed annually.
Amortization method .......................................................................
Finite 3-10 years
Impairment test
Undefined
 
Balance at the beginning of the year ..................................................................
45

===== SIDA 46 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
29.
Tax assets and tax liabilities
Assets
Liabilities
Assets
Liabilities
- 
10,738 
- 
9,887 
2 
2,245 
2 
1,173 
2 
12,983 
2 
11,060 
Deferred tax assets and tax liabilities are attributable to the following:
1 
(769)
1 
(1,180)
- 
(1,030)
313 
- 
33 
(266)
33 
(249)
2 
(214)
6 
(376)
- 
- 
281 
- 
36 
(2,279)
634 
(1,805)
(34)
34 
(632)
632 
2 
(2,245)
2 
(1,173)
Recognized
Recognized
Changes in deferred tax assets and tax liabilities
through
in income
At 1 Jan.
equity 
statement
At 31 Dec.
(1,179)
- 
411 
(768)
313 
- 
(1,343)
(1,030)
(216)
- 
(17)
(233)
(370)
- 
158 
(212)
281 
- 
(281)
- 
(1,171)
- 
(1,072)
(2,243)
(1,227)
- 
48 
(1,179)
(361)
- 
674 
313 
(268)
- 
52 
(216)
(205)
- 
(165)
(370)
158 
- 
123 
281 
(1,903)
- 
732 
(1,171)
30.
Assets and disposal groups held for sale
31.12.2025
31.12.2024
98 
111 
98 
111 
Deferred foreign exchange differences .................................................................................
Tax loss carry forward ..........................................................................................................
Other assets and liabilities ....................................................................................................
Deferred
tax
assets
are
recognized
for
unused
tax
losses
to
the
extent
that
it
is
probable
that
taxable
profit
will
be
available
against
which
the
losses
can
be
utilized.
Significant
management
judgement
is
required
to
determine
the
amount
of
deferred
tax
assets
that
can
be
recognized, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.
Financial assets ....................................................................................................................
Change in deferred tax assets and tax liabilities ..............................................................
Change in deferred tax assets and tax liabilities ..............................................................
Investment property and property and equipment .................................................................
Tax assets and tax liabilities ..............................................................................................
Financial assets ....................................................................................................................
Other assets and liabilities ....................................................................................................
Deferred tax .........................................................................................................................
Investment property and property and equipment .................................................................
2024 .....................................................................................................................................
Real estates and other assets classified as assets held for sale are generally the result of foreclosures on companies and individuals. 
Deferred foreign exchange differences .................................................................................
Tax loss carry forward ..........................................................................................................
Other assets and liabilities ....................................................................................................
Current tax ...........................................................................................................................
31.12.2025
Assets and disposal groups held for sale ..............................................................................................................
Real estate and other assets .....................................................................................................................................
Financial assets ....................................................................................................................
31.12.2024
Tax loss carry forward ..........................................................................................................
2025
Deferred tax assets and tax liabilities ...............................................................................
Set-off of deferred tax assets together with tax liabilities of the same taxable entities ...........
Deferred tax related to foreign exchange gain ......................................................................
Investment property and property and equipment .................................................................
46

===== SIDA 47 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
31.
Other assets
31.12.2025
31.12.2024
3,354 
3,403 
745 
808 
3,465 
2,552 
9,174 
2,342 
5,779 
4,901 
22,517 
14,006 
Property and equipment
Real
Equip-
Total 
Total 
estate
ment
2025
2024
2,727 
3,687 
6,414 
6,533 
- 
463 
463 
325 
- 
(42)
(42)
(27)
- 
(23)
(23)
(179)
2,727 
4,085 
6,812 
6,652 
(1,190)
(1,821)
(3,011)
(2,861)
(74)
(409)
(483)
(555)
- 
23 
23 
6 
- 
13 
13 
161 
(1,264)
(2,194)
(3,458)
(3,249)
1,463 
1,891 
3,354 
3,403 
31.12.2025
31.12.2024
Right-of-use asset
808 
872 
72 
36 
26 
39 
(161)
(139)
745 
808 
Right-of-use asset is due to real estates for own use.
Depreciation .........................................................................................................................
Sundry assets ............................................................................................................................................................
Other assets .............................................................................................................................................................
Unsettled securities trading ........................................................................................................................................
Disposals ..............................................................................................................................
Write-offs ..............................................................................................................................
Additions ..............................................................................................................................
Right-of-use asset ......................................................................................................................................................
Gross carrying amount at the beginning of the year ..............................................................
Accumulated depreciation at the beginning of the year .........................................................
Gross carrying amount at the end of the year ..................................................................
Accounts receivable ...................................................................................................................................................
Write-offs ..............................................................................................................................
Property and equipment .............................................................................................................................................
Indexation ..................................................................................................................................................................
New lease agreements ..............................................................................................................................................
Balance at the beginning of the year ..........................................................................................................................
Depreciation ...............................................................................................................................................................
Accumulated depreciation at the end of the year .............................................................
The
official
real
estate
value
(Registers
Iceland)
amounted
to
ISK
4,495
million
at
the
end
of
the
year
(31.12.2024:
ISK
4,399
million)
and
the insurance value amounts to ISK 8,743 million (31.12.2024: ISK 8.318 million).
Disposals ..............................................................................................................................
Property and equipment .....................................................................................................
Right-of-use asset ....................................................................................................................................................
47

===== SIDA 48 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
32.
Other liabilities
31.12.2025
31.12.2024
1,496 
1,402 
3,041 
2,550 
22,435 
21,478 
6,560 
7,329 
2,107 
1,925 
5,508 
6,136 
1,466 
1,475 
682 
511 
867 
975 
6,574 
6,169 
50,736 
49,950 
Insurance contract liabilities
3,739 
3,851 
17,866 
16,819 
830 
808 
22,435 
21,478 
Lease liability
975 
1,074 
74 
37 
32 
47 
50 
53 
(264)
(236)
867 
975 
Liabilities for incurred claims ......................................................................................................................................
Balance at the beginning of the year ..........................................................................................................................
Indexation ..................................................................................................................................................................
Interest expense ........................................................................................................................................................
Accrued expenses .....................................................................................................................................................
Lease liability .............................................................................................................................................................
Sundry liabilities .........................................................................................................................................................
Other liabilities .........................................................................................................................................................
Insurance contract liabilities ...................................................................................................................................
Risk adjustment .........................................................................................................................................................
Lease payments ........................................................................................................................................................
Lease liability ...........................................................................................................................................................
Unsettled securities trading ........................................................................................................................................
Impairment of off-balance items .................................................................................................................................
Insurance contract liabilities .......................................................................................................................................
Prepaid income ..........................................................................................................................................................
Bank levy ...................................................................................................................................................................
Accounts payable ......................................................................................................................................................
Withholding tax ..........................................................................................................................................................
New and extended lease agreements ........................................................................................................................
Liabilities for remaining coverage ...............................................................................................................................
48

===== SIDA 49 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
33.
Borrowings
First
Maturity 
31.12.2025
31.12.2024
Currency, original nominal value
issued
Maturity
type 
Terms of interest
ARION CBI 25, ISK 37,940 million ............
2017
4/2025
At maturity 
- 
34,805 
ARION CBI 26 ISK 17,080 million .............
2019
10/2026
At maturity 
20,094 
21,775 
ARION CB EUR 500 million * ....................
2021
10/2026
At maturity 
72,265 
68,775 
ARION CB 27, ISK 53,100 million .............
2022
10/2027
At maturity 
26,083 
25,652 
ARION CBI 28, ISK 27,420 million ............
2024
9/2028
At maturity
23,286 
12,887 
ARION CBI 29, ISK 27,200 million ............
2014
12/2029
At maturity 
41,370 
39,939 
ARION CBI 30, ISK 31,920 million ............
2023
11/2030
At maturity 
33,421 
31,896 
ARION CBI 31, ISK 9,060 million ..............
2025
8/2031
Amortizing 
8,299 
- 
ARION CBI 48, ISK 11,680 million ............
2018
1/2048
Amortizing 
12,732 
12,663 
237,550 
248,392 
EUR 300 million Green * ...........................
2021
7/2025
At maturity
- 
42,597 
NOK 550 million ........................................
2022
8/2025
At maturity 
- 
6,783 
SEK 230 million .........................................
2022
8/2025
At maturity 
- 
2,906 
NOK 200 million ........................................
2023
3/2025
At maturity
- 
2,451 
ARION 26 1222 Green, ISK 5,760 million ..
2021
12/2026
At maturity 
5,417 
5,411 
SEK 300 million .........................................
2023
3/2026
At maturity
4,091 
3,775 
EUR 300 million* .......................................
2023
5/2026
At maturity
46,252 
45,384 
NOK 250 million ........................................
2017
4/2027
At maturity
3,182 
3,129 
USD 21 million* .........................................
2024
12/2027
At maturity
2,893 
2,989 
SEK 500 million Green ..............................
2024
10/2027
At maturity
6,840 
6,324 
NOK  500 million Green ............................
2024
10/2027
At maturity
6,288 
6,185 
NOK  600 million Green ............................
2025
12/2027
At maturity
7,479 
- 
SEK 900 million Green ..............................
2025
12/2027
At maturity
12,248 
- 
ARION 28 1512, ISK 16,920 million ..........
2023
12/2028
At maturity
18,271 
12,580 
EUR 300 million * ......................................
2024
11/2028
At maturity
44,916 
44,272 
SEK 250 million .........................................
2025
1/2028
At maturity
3,418 
- 
USD 27 million ..........................................
2025
7/2028
At maturity
3,015 
- 
NOK 350 million ........................................
2025
1/2028
At maturity
4,397 
- 
EUR 300 million * ......................................
2025
5/2030
At maturity
44,731 
- 
EUR 300 million * ......................................
2025
9/2031
At maturity
43,835 
- 
257,273 
184,786 
494,823 
433,178 
Floating NIBOR 3M +1.20% ..........
Fixed 7.25% ..................................
Floating STIBOR 3M +3.00% ........
Floating NIBOR 3M +1.11% ..........
*
The
Group
applies
fair
value
hedge
accounting
to
these
bond
issuances
and
uses
certain
foreign
currency
denominated
interest
rate
swaps
as
hedging
instruments,
see
Note
25.
The
interest
rate
swaps
are
hedging
the
Group’s
exposure
to
fair
value
changes
of
these
fixed-rate
bonds
in
EUR
and
USD
arising
from
changes in interest rates. 
Borrowings ...............................................................................................................................................................
Fixed 5.00%  .................................
Fixed 3.625% ................................
Floating STIBOR 3M +1.20% ........
Fixed 4.625% ................................
Fixed 0.375%  ...............................
Fixed 3.50% ..................................
Statutory covered bonds .........................................................................................................................................
The
book
value
of
listed
bonds
was
ISK
495
billion
at
the
end
of
the
year
(31.12.2024:
ISK
433
billion).
The
market
value
of
those
bonds
was
ISK
501
billion
(31.12.2024:
ISK
429
billion).
The
Group
repurchased
own
debts
amounting
to
ISK
11
billion
during
the
year
with
a
net
gain of ISK 33 million recognized in the Income Statement (2024: ISK 182 million loss).
Floating STIBOR 3M +2.35% ........
Floating STIBOR 3M +1.13% ........
Fixed CPI linked 4.35% .................
Fixed 4.70% ..................................
Fixed CPI linked 2.75% .................
Fixed CPI linked 4.25% .................
Fixed CPI linked 3.50% .................
Fixed CPI linked 3.65% .................
Fixed CPI linked 2.50% .................
Fixed 6.25% ..................................
Fixed 3.40%  .................................
Floating NIBOR 3M +2.55% ..........
Floating STIBOR 3M +1.20% ........
Fixed EUR 0.05% .........................
Fixed CPI linked 3.00% .................
Fixed CPI linked 2.00% .................
Floating NIBOR 3M +2.35% ..........
Fixed 5.50% ..................................
Floating NIBOR 3M +1.17% ..........
Senior unsecured bonds .........................................................................................................................................
49

===== SIDA 50 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
34.
Subordinated liabilities
First call 
31.12.2025
31.12.2024
Currency, original nominal value
Issued
Maturity
date
Terms of interest
ARION T2I 30 ISK 4,800 million ................
2019
1/2030
4 Jan '25
- 
6,607 
ARION T2 30 ISK 880 million ....................
2019
1/2030
4 Jan '25
- 
905 
EUR 5 million ............................................
2019
1/2026
6 Mar '26
753 
735 
ARION T2I ISK 33 9,860 million ................
2022
12/2033
15 Dec '28
11,613 
11,195 
ARION T2 33 ISK 2,240 million .................
2022
12/2033
15 Dec '28
2,249 
2,249 
SEK 225 million .........................................
2024
11/2034
20 Nov '29
3,078 
2,843 
ARION T2I 36 ISK 10,040 million ..............
2025
12/2036
2 Dec '31
10,190 
- 
27,883 
24,534 
ARION AT1 USD 100 million * ..................
2020
Perpetual
26 Aug '25
- 
3,150 
ARION AT1 USD 125 million * ..................
2024
Perpetual
24 Mar '30
15,635 
16,854 
15,635 
20,004 
43,518 
44,538 
35.
Liabilities arising from financial activities
Net
cash
Interest
Foreign
Effect
At period
2025
At 1 Jan.
flows
expenses
exchange
from hedge
end
153,965 
(24,357)
9,594 
- 
- 
139,202 
25,652 
(1,458)
1,889 
- 
- 
26,083 
68,775 
(1,555)
1,958 
1,648 
1,439 
72,265 
166,795 
53,098 
9,843 
4,552 
(703)
233,585 
5,411 
(285)
291 
- 
- 
5,417 
12,580 
4,237 
1,454 
- 
- 
18,271 
17,802 
2,556 
1,445 
- 
- 
21,803 
3,153 
(1,116)
212 
- 
- 
2,249 
3,579 
(174)
171 
255 
- 
3,831 
20,004 
(4,832)
1,684 
(1,683)
462 
15,635 
477,716 
26,114 
28,541 
4,772 
1,198 
538,341 
2024
132,391 
10,580 
10,994 
- 
- 
153,965 
31,344 
(7,455)
1,763 
- 
- 
25,652 
69,337 
(4,660)
3,125 
2,971 
(1,998)
68,775 
167,106 
(15,407)
10,295 
7,864 
(3,063)
166,795 
11,510 
(6,905)
806 
- 
- 
5,411 
8,772 
2,877 
931 
- 
- 
12,580 
16,997 
(795)
1,600 
- 
- 
17,802 
3,157 
(267)
264 
- 
- 
3,154 
7,908 
(5,099)
430 
339 
- 
3,578 
13,217 
5,265 
1,749 
(421)
194 
20,004 
461,739 
(21,866)
31,957 
10,753 
(4,867)
477,716 
Tier 2 subordinated liabilities ..................................................................................................................................
Covered bonds in FX.......................................................................
Covered bonds in ISK - CPI linked...................................................
Subordinated bond T2 FX................................................................
Fixed 8.125% ................................
Liabilities arising from financial activities....................................
Subordinated bond AT1 FX..............................................................
Senior unsecured bonds in FX.........................................................
Senior unsecured bonds in ISK........................................................
Subordinated liabilities ............................................................................................................................................
Fixed 9.25%  .................................
Covered bonds in ISK......................................................................
Non-cash changes
Additional Tier 1 subordinated liabilities  ...............................................................................................................
*
The
Group
applies
fair
value
hedge
accounting
to
these
bond
issuances
and
uses
certain
foreign
currency
denominated
interest
rate
swaps
as
hedging
instruments, see Note 25. 
Fixed CPI linked 3.875% ...............
Fixed CPI linked 4.95%  ................
Senior unsecured bonds in ISK - CPI linked.....................................
Covered bonds in FX.......................................................................
Covered bonds in ISK......................................................................
Subordinated bond T2 ISK...............................................................
Subordinated bond T2 in ISK - CPI linked........................................
Additional
Tier
1
and
Tier
2
subordinated
liabilities
are
eligible
as
regulatory
capital
under
the
Icelandic
Financial
Undertakings
Act
No.
161/2002.
Fixed CPI linked 5.00% .................
Senior unsecured bonds in ISK - CPI linked.....................................
Subordinated bond T2 in ISK - CPI linked........................................
Subordinated bond T2 ISK...............................................................
Senior unsecured bonds in ISK........................................................
Senior unsecured bonds in FX.........................................................
Liabilities arising from financial activities....................................
Subordinated bond AT1 FX..............................................................
Subordinated bond T2 FX................................................................
Fixed 6.25% ..................................
Fixed 3.24%  .................................
Fixed 6.75% ..................................
Floating 3 mth STIBOR +2.65% ....
Covered bonds in ISK - CPI linked...................................................
50

===== SIDA 51 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
36.
Pledged assets
31.12.2025
31.12.2024
Pledged assets against liabilities
359,645 
398,505 
5,049 
7,452 
364,694 
405,957 
(85,549)
(105,265)
15,727 
15,429 
294,872 
316,121 
37.
Equity
Share capital and share premium
Share 
Own
Share 
2025
Share 
Own
Share 
2024
capital
shares
premium
total
capital
shares
premium
total
Balance at the beginning of the year .........
1,513 
(101)
4,273 
5,686 
1,460 
(14)
9,188 
10,634 
Issued new share capital ...........................
- 
- 
- 
- 
53 
- 
6,187 
6,240 
Share capital reduction .............................
(93)
93 
- 
- 
- 
- 
- 
- 
Purchase of treasury shares .....................
- 
(36)
(5,218)
(5,254)
- 
(90)
(12,362)
(12,452)
- 
6 
715 
721 
- 
2 
280 
282 
- 
1 
229 
230 
- 
1 
165 
166 
Warrants excercised .................................
- 
- 
- 
- 
- 
- 
816 
816 
Balance at the end of the year ................
1,420 
(36)
- 
1,383 
1,513 
(101)
4,273 
5,686 
Own shares / issued share capital .............
2.59% 
6.65% 
Share option vested ...................................
Incentive scheme .......................................
According
to
the
Bank's
Articles
of
Association,
total
share
capital
amounts
to
ISK
1,420
million,
with
par
value
of
ISK
1
per
share.
The
holders
of
ordinary
shares
are
entitled
to
receive
dividends
as
approved
by
the
Annual
General
Meeting
(AGM)
and
are
entitled
to
one
vote
per share at shareholders' meetings.
In
accordance
with
the
Bank's
dividend
policy
Arion
Bank
has
in
place
a
regular
buyback
program.
In
April
2025
the
FSA
granted
the
Bank
authorization
to
buy
back
own
shares
in
Iceland
and
Sweden
amounting
up
to
a
total
of
19.9
shares
and
SDRs
or
up
to
ISK
3.0
billion.
There
are
no
ongoing
programs
at
the
end
of
December
2025.
In
2024
the
FSA
authorized
the
Bank
to
initiate
share
buy-back
programs
in
Iceland and Sweden amounting up to a total of 113.6 million shares or up to ISK 15.5 billion.
The
AGM
of
Arion
Bank,
held
on
12
March
2025,
approved
to
reduce
the
Bank’s
share
capital
by
ISK
93,423,078
nominal
value,
by
cancelling
the
Bank’s
own
shares.
The
reduction
was
carried
out
on
7
April
2025.
In
2024
the
nominal
value
of
Arion
Bank's
share
capital
was increased by ISK 53,198,719 in order to cover the exercising of issued warrants.
Assets against repoed issued bonds ..........................................................................................................................
Assets, pledged as collateral against borrowings .......................................................................................................
The
Group
has
issued
covered
bonds
amounting
to
ISK
61
billion
that
can
be
used
for
repo
borrowings
at
the
Central
Bank
of
Iceland,
the
European
Central
Bank
or
sold
if
market
conditions
are
favorable
(31.12.2024:
ISK
78
billion).
Pledged
assets
against
those
covered
bonds
are ISK 70 billion (31.12.2024: ISK 90 billion).
The
Group
has
pledged
assets
against
due
to
credit
institutions
and
borrowings,
both
issued
covered
bonds
and
other
issued
bonds
and
loan
agreements
undir
Icelandic
law.
Pledged
loans
comprised
mortgage
loans
to
individuals.
The
book
value
of
those
liabilities
were
ISK
238 billion at period end (31.12.2024: ISK 248 billion).
Pledged assets against liabilities on balance ........................................................................................................
Pledged assets against liabilities ...........................................................................................................................
Thereof pledged assets against issued covered bonds held by the Bank ...................................................................
Assets pledged as a collateral against loans from banks and other financial liabilities ...............................................
The
Group
has
pledged
bonds
against
short
term
lending
from
the
Central
Bank
of
Iceland
and
against
short
positions,
related
to
swap
agreements,
to
hedge
market
risk
of
those
assets
to
ensure
the
clearing
of
the
Icelandic
payment
system.
Moreover,
it
has
pledged
cash
in
foreign banks and financial institutions, mainly as collateral for trades under ISDA agreements to hedge market risk.
51

===== SIDA 52 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
37.
Equity, continued
Share options
Number
Exercise
of shares
Exercise
price
(in ths.)
year
(ISK)
2,488 
2026
95.50 
2,306 
2026
153.75 
1,463 
2026
153.75 
751 
2026
155.75 
1,040 
2026
174.56 
583 
2026
140.56 
157 
2026
143.36 
164 
2026
155.93 
2,330 
2028-2030
Indeterminate
11,281 
Weighted
Weighted
Number
average
Number
average
of shares
contract
of shares
contract
(in ths.)
rate
(in ths.)
rate
17,116 
135.1 
24,435 
136.3 
1,203 
172.0 
1,953 
153.6 
(4,523)
130.1 
(6,766)
148.2 
(4,844)
124.2 
(2,506)
96.7 
8,952 
139.1 
17,116 
135.1 
2,330 
Indeterminate
- 
- 
11,281 
17,116 
Warrants
Movements in share options during the year.
Outstanding at the beginning of the year ..............................................................................
All outstanding share options, if exercised, represent approximately 0.8% of the total issued shares.
Issued in 2023 (ISK 900,000) - employees of Arion Bank ........................................................................
Issued in 2024 (ISK 1,500,000) - employees of Arion Bank .....................................................................
Issued in 2025 - incentive scheme - employees of Group .......................................................................
Share options granted - incentive scheme ............................................................................
No share options are exercisable at year end. Next exercise periods are in February and May 2026.
The
warrants
reserve
represents
the
consideration
received
for
outstanding
warrants.
Arion
Bank
issued
54
million
warrants
on
9
March
2021.
The
purchase
price
of
the
warrants
amounted
to
ISK
15.6
per
warrant,
resulting
in
a
total
sale
price
of
ISK
842.4
million.
The
warrant
issuing
represented
approximately
3%
of
the
Bank's
total
share
capital
and
the
Bank
was
obliged
to
issue
new
shares
when
the
warrants
were
exercised.
Approximately
48.5%
of
the
total
issue
was
sold
to
around
150
employees
of
the
Group
and
51.5%
to
professional
investors.
The
exercise
period
ran
from
Q4
2023
to
Q3
2024.
Arion
Bank
received
notification
of
the
exercising
of
warrants
relating
to
a
total
of
51,087,696
new
shares,
amounting
to
ISK
6
billion,
during
the
final
exercise
period
which
concluded
on
24
August
2024.
There
were
no outstanding warrants at the end of the year 2025.
To
meet
the
Bank's
obligations
on
the
basis
of
the
share
option
plan,
the
Bank
will
issue
new
share
capital
or
deliver
treasury
shares.
Arion
Bank has no legal or constructive obligation to repurchase or settle the options in cash.
Outstanding share options pursuant to Icelandic income tax act ...................................
Outstanding share options at the end of the year ............................................................
Share options granted ..........................................................................................................
Share options forfeited .........................................................................................................
31.12.2024
Issued in 2023 (ISK 1,500,000) - employees of subsidiaries ...................................................................
Issued in 2023 (ISK 1,500,000) - employees of Arion Bank .....................................................................
In
accordance
with
the
current
incentive
scheme
for
Arion
Bank
hf.
and
Vördur,
a
limited
group
of
employees
can
receive
payments
of
up
to
25%
of
the
employees
fixed
salaries,
of
which
40%
or
80%
can
be
in
the
form
of
share
options
in
the
Bank.
The
share
options
are
settled
4-
5 years after granting. See Note 13 for further disclosures on the incentive scheme.
Share options exercised, WAVG share price ISK 169.5 at exercise date (2024: 154.3) ........
Issued in 2021 (ISK 600,000) - employees of Arion Bank ........................................................................
Issued in 2025 (ISK 1,500,000) - employees of Arion Bank .....................................................................
Arion
Bank
has
in
place
a
share
option
plan
for
all
employees
of
the
Bank,
Vördur
and
Stefnir,
approved
at
the
Banks
AGM,
under
which
employees
may
be
granted
options
to
purchase
ordinary
shares.
The
annual
maximum
purchase
price
for
each
employee
is
ISK
1.5
million,
in
line
with
Article
10
of
the
Income
Tax
Act
no.
90/2003,
at
an
exercise
price
determined
by
the
Bank’s
average
share
price
10
days
prior
to
issue
date.
The
employee
must
remain
continuously
employed
with
Arion
Bank
until
the
expiring
date.
The
options
carry
neither
rights
to
dividends nor voting rights and are valued using the Black-Scholes pricing model.
Issued in 2025 (ISK 1,500,000) - employees of subsidiaries ...................................................................
Issued in 2024 (ISK 1,500,000) - employees of subsidiaries ...................................................................
31.12.2025
The following share option contracts are in existence at year end.
52

===== SIDA 53 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Other information
38.
Shareholders of Arion Bank
31.12.2025
31.12.2024
 
 
9.56% 
9.06% 
9.55% 
9.17% 
9.24% 
8.79% 
5.22% 
5.31% 
5.07% 
5.29% 
4.07% 
3.60% 
3.97% 
3.59% 
2.97% 
3.15% 
2.92% 
3.02% 
2.61% 
2.25% 
2.59% 
2.43% 
2.59% 
6.65% 
2.06% 
1.51% 
1.81% 
1.63% 
1.73% 
2.08% 
1.44% 
1.52% 
1.05% 
0.94% 
0.91% 
1.01% 
30.66% 
29.00% 
100.0% 
100.0% 
Number
Number
of shares
of shares
- 
12,000 
- 
12,000 
- 
49,933 
- 
32,000 
12,136 
3,181,575 
24,273 
3,133,450 
627,353 
3,328,222 
189,171 
3,138,856 
39.
Legal matters
Contingent liabilities
Legal proceedings regarding damages
Íslandsbanki hf. ..........................................................................................................................................................
Landsbréf hf. ..............................................................................................................................................................
Almenni lífeyrissjódur .................................................................................................................................................
Stefnir funds ..............................................................................................................................................................
Brú lífeyrissjódur ........................................................................................................................................................
Stodir hf.  ...................................................................................................................................................................
Frjálsi lífeyrissjódurinn ...............................................................................................................................................
Vanguard ...................................................................................................................................................................
Gildi lífeyrissjódur ......................................................................................................................................................
Alternate directors of the Board ............................................................................................
Options
Festa lífeyrissjódur .....................................................................................................................................................
Stapi lífeyrissjódur .....................................................................................................................................................
Lífeyrissjódur verzlunarmanna ...................................................................................................................................
31.12.2024
* Key management personnel are defined in Note 43.
Hvalur hf. ...................................................................................................................................................................
Lífeyrissjódur starfsmanna ríkisins .............................................................................................................................
31.12.2025
Birta lífeyrissjódur ......................................................................................................................................................
The
Group
has
formal
controls
and
policies
in
place
for
managing
legal
claims.
Once
professional
advice
has
been
obtained
and
the
likelihood
and
amount
of
loss
reasonably
estimated,
the
Group
makes
adjustments,
if
appropriate,
to
account
for
any
adverse
effects
the
claims
may
have
on
its
financial
standing.
Should
the
Group
conclude
that
it
is
to
the
detriment
of
the
Group's
case
to
disclose
such
potential
amounts,
relating
to
the
legal
claims
raised,
it
elects
not
to
do
so.
At
the
end
of
the
period,
the
Group
had
several
unresolved
legal
claims.
Arion banki hf. ............................................................................................................................................................
Benedikt Gíslason, CEO .......................................................................................................
Íslandssjódir ...............................................................................................................................................................
Other shareholders with less than 1% shareholding ...................................................................................................
Key management personnel* ...............................................................................................
At
the
end
of
the
year
the
Group's
employees
held
a
shareholding
of
1.36%
in
Arion
Bank
(31.12.2024:
1.15%).
The
Board
of
Directors
and
key management personnel shareholding is as follows: 
Steinunn K. Thórdardóttir, Director .......................................................................................
Lífsverk lífeyrissjódur .................................................................................................................................................
Options
In
a
lawsuit
brought
in
June
2013,
Kortaþjónustan
hf.
claimed
damages
from
Arion
Bank
hf.,
Íslandsbanki
hf.,
Landsbankinn
hf.,
Borgun
hf.
and
Valitor
hf.
in
the
amount
of
ISK
1.2
billion
plus
interest.
The
lawsuit
is
a
result
of
damage
which
Kortaþjónustan
hf.
contended
the
five
parties
had
caused
the
company
due
to
violations
of
the
Competition
Act.
In
June
2017,
the
Supreme
Court
dismissed
the
case
on
procedural
grounds.
Since
then,
Kortaþjónustan
hf.
and
subsequently
its
largest
shareholder
EC-Clear
have
tried
to
initiate
five
lawsuits
against
the
same
defendants
which
have
all
been
dismissed,
the
last
one
in
March
2021.
In
September
2021,
EC-Clear
once
again
brought
an
action
concerning
the
same
dispute,
claiming
damages
in
the
amount
of
ISK
922
million
plus
interest,
against
the
same
defendants.
In
September
2022,
the
District
Court
dismissed
the
claims.
EC-Clear
appealed
the
dismissal
but
with
a
ruling
in
January
2023
the
Court
of
Appeal
rejected
the
District
Court’s
ruling
and
ruled
that
the
case
should
be
heard
on
its
merits
by
the
District
Court.
Should
the
defendants
be found liable for damages, they would be jointly responsible. Therefore, the Bank has not made any provision. 
53

===== SIDA 54 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
39.
Legal matters, continued
Consumer Association’s class-action lawsuit
Other legal proceedings
40.
Events after the reporting period
 
 
 
 
In
response
to
the
letter,
Arion
Bank
undertook
a
review
of
its
contractual
terms
and
processes
for
interest
rate
decisions,
concluding
that
no
changes
were
required
and
that
the
Association’s
arguments
were
unfounded.
A
response
was
sent
to
the
Consumer
Association
in
September
2020.
According
to
information
published
on
the
Consumer
Association’s
website,
all
three
banks
rejected
the
Association’s
arguments. 
No
event
has
arisen
after
the
reporting
period
and
up
to
the
approval
of
these
Consolidated
Financial
Statements
that
require
additional
disclosures.
Since
2008
Arion
Bank
has
formally
been
a
party
to
proceedings
in
Luxembourg,
commenced
against
the
Luxembourg
company
R
Capital
S.á
r.l.
and
its
beneficial
owner,
Mr.
Umberto
Ronsisvalle,
for
the
collection
of
EUR
6
million
plus
interest.
During
this
time,
Kaupthing
ehf.
has
been
the
beneficial
owner
of
the
claim,
with
Arion
Bank’s
involvement
limited
to
being
the
formal
party
to
the
proceedings
while
enjoying
indemnity
from
Kaupthing.
The
reason
for
the
setup
is
a
decision
by
the
Icelandic
Financial
Supervisory
Authority
in
2009
during
the
division
of
Kaupthing
into
the
“new”
and
“old”
bank.
In
2019,
a
counterclaim
was
made
against
Arion
Bank
in
the
proceedings,
for
the
net
sum
of
EUR
24
million
plus
interest,
with
the
Bank
continuing
to
enjoy
full
indemnity
from
Kaupthing.
In
September
2021,
Kaupthing
and
Arion
Bank
agreed
that
all
rights
and
liabilities
in
the
Luxembourg
proceedings
would
be
transferred
to
Arion
Bank.
The
Bank
is
still
held
harmless for any liabilities associated with the claims and has therefore not made any provision. 
It
should
be
noted
that
the
terms
of
Arion
Bank
mortgages
which
contain
provisions
on
variable
interest
rates
differ
from
those
which
were
the
subject
of
the
Supreme
Court
judgment
in
the
case
against
Íslandsbanki
and
Landsbankinn.
The
terms
of
Arion
Bank
mortgages
in
respect
of
varying
the
interest
rates
are
exhaustively
listed,
unlike
the
terms
of
the
Íslandsbanki
and
Landsbankinn
mortgages,
and
each
reference
or
term
is
further
defined
by
a
brief
explanation.
The
terms
of
the
Bank’s
non-indexed
loans
are
similar
to
those
addressed
in
the
Bank’s
Supreme
Court
ruling,
except
that
they
also
refer
to
interest
rates
set
by
the
Central
Bank.
Therefore,
the
impact
of
the
judgements
in
Íslandsbanki’s
and
Landsbanki’s
case
on
Arion
Bank’s
loans
bearing
non-indexed
rates
cannot
be
asserted
with
full
certainty.
Moreover,
in
the
Bank’s
assessment,
the
argument
the
Supreme
Court
uses
in
Íslandsbanki’s
and
Landsbanki’s
cases,
regarding
reference
to
the
Central
Bank’s
policy
rate,
is
also
applicable
to
the
terms
of
Arion
Bank
mortgages
bearing
non-indexed
rates.
If
the
Íslandsbanki
and
Landsbanki verdict is applied to Arion Bank’s non-indexed loans, the loss is estimated to be less than ISK 500 million pre-tax. 
The Bank has not made any provision in respect of impending court cases. 
The Bank is also party to a case concerning a non-indexed loan, waiting to be heard by the District Court of Reykjavik. Cases regarding non-
indexed
loans
were
also
filed
against
Landsbankinn
and
Íslandsbanki.
Supreme
Court
judgements
in
cases
for
both
banks
were
delivered
in
2025.
The
Supreme
Court
found
that
the
disputed
contractual
clause
permitting
changes
to
interest
rates
was
partially
invalid.
The
only
part
of
the
terms
that
was
considered
valid
was
a
reference
to
the
Central
Bank’s
policy
rate.
Íslandsbanki
and
Landsbankinn
were,
however, acquitted of the borrower’s financial claim. 
In
May
2021,
the
Consumer
Association
published
an
article
on
its
website
calling
for
participants
in
a
class
action
lawsuit.
The
intention
was
to
commence
court
proceedings
against
the
Icelandic
banks
to
provide
a
legal
precedent
for
loans
with
variable
rates.
Arion
Bank
received
requests
for
information
from
a
legal
firm
representing
approximately
1,200
individuals.
A
case
was
filed
against
the
Bank
concerning
an
indexed
loan
and
with
a
judgement
of
the
Supreme
Court
on
10
December
2025
the
Bank
was
acquitted.
The
Supreme
Court thereby upheld the judgments of the District Court and the Court of Appeal in the case. 
The
Consumer
Association
of
Iceland
sent
a
letter
to
Arion
Bank,
Íslandsbanki
and
Landsbankinn
in
April
2020
urging
the
banks
to
review
their
contractual
terms
on
variable
rate
mortgages
to
individuals.
The
letter
called
for
revised
terms
and
compensation
to
borrowers
who,
according
to
the
Association,
had
suffered
damage.
The
Association’s
argument
is
that
the
standard
contractual
terms
lack
proper
legal
grounds,
as
the
parameters
for
interest
rate
decisions
lack
transparency
and
predictability,
thus
causing
a
contractual
imbalance
to
the
detriment of the consumer. 
54

===== SIDA 55 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Off balance sheet information
41.
Commitments
31.12.2025
31.12.2024
25,450 
21,804 
90,187 
74,270 
85,329 
67,658 
200,966 
163,732 
42.
Assets under management, supervision and custody
31.12.2025
31.12.2024
1,563,569 
1,417,450 
425,248 
215,251 
1,107,656 
1,699,260 
Related party
43.
Related party
31.12.2025
31.12.2024
31.12.2025
31.12.2024
3,940 
229 
1,072 
340 
4 
3 
- 
- 
3,944 
232 
1,072 
340 
(995)
(1,385)
(10)
(157)
- 
- 
(24)
(28)
(995)
(1,385)
(33)
(186)
197 
19 
78 
39 
(45)
(49)
(2)
(6)
21 
14 
- 
- 
- 
- 
(45)
(74)
11 
11 
- 
- 
(45)
(2)
(1,412)
(1,361)
139 
(7)
(1,380)
(1,402)
Assets under management .........................................................................................................................................
Unused overdrafts ......................................................................................................................................................
Financial guarantees ..................................................................................................................................................
Assets under supervision ...........................................................................................................................................
Shareholders
with
significant
influence
are
shareholders
that
have
the
power
to
participate
in
the
finanical
and
operating
decisions
of
Arion
Bank
but
do
not
control
those
policies.
At
the
end
of
the
year
no
shareholder
was
defined
as
related
party
with
an
influence
over
the
Group
(31.12.2024: none).
The
key
management
personnel
includes
the
Board
of
Directors,
the
Executive
Committee
of
Arion
Bank
and
heads
of
other
internal
control
functions,
as
well
as
their
close
family
members
and
legal
entities
controlled
by
them.
The
Executive
Committee
consists
of
the
CEO,
Managing
Directors
of
Retail
banking,
CIB,
Markets,
Finance,
Risk,
IT
and
Operations
&
culture.
For
compensation,
pension
and
other transactions with the Board of Directors and the Executive Committee, see Notes 13 and 38.
Financial guarantees, unused credit facilities and undrawn loan commitments .................................................
Key management
For information on the Group's associated companies, see Note 27.
Arion
Bank
defines
related
party
as
shareholders
with
significant
influence
over
the
Group,
the
key
management
personnel
and
the
Group's
associated companies.
Undrawn loan commitments .......................................................................................................................................
Assets under custody .................................................................................................................................................
Assets
under
supervision
refer
to
the
total
market
value
of
financial
assets
in
non-proprietary
funds
that
the
Group
administers
on
behalf
of
its customers.
Net expenses ......................................................................................................................
Interest income .....................................................................................................................
Interest expenses .................................................................................................................
Other income ........................................................................................................................
Other expenses ....................................................................................................................
Commission income .............................................................................................................
Commission expenses ..........................................................................................................
Financial guarantees, unused credit facilities and undrawn loan commitments
Total liabilities ....................................................................................................................
Total assets .........................................................................................................................
Deposits ...............................................................................................................................
Other liabilities ......................................................................................................................
Other assets .........................................................................................................................
Loans ...................................................................................................................................
companies
personnel
The
Group,
acting
as
custodian,
is
responsible
for
safeguarding
a
firm's
or
individual's
financial
assets,
hold
in
safekeeping
securities
such
as
stocks,
bonds
and
securities
funds,
arrange
the
settlement
of
trades
and
movements
of
securities,
process
corporate
actions
such
as
income on bonds and dividends on shares; and pricing on securities.
Associated
Transactions
with
related
parties
have
been
conducted
on
an
arm's
length
basis.
There
have
been
no
further
guarantees
provided
or
received for related party receivables or payables.
Assets under management represent the total market value of the financial assets which the Group manages on behalf of its customers.
55

===== SIDA 56 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Risk management disclosures
Further
information
on
risk
management
and
capital
adequacy
is
provided
in
the
Annual
Financial
Statements
for
2025,
in
the
Pillar
3
Risk
Disclosures
for
2025
and
in
the
quarterly
Additional
Pillar
3
Risk
Disclosures.
These
documents
are
available
on
the
Bank's
website,
www.arionbank.com.
Notes to the Consolidated Financial Statements
The
Board
of
Directors
is
ultimately
responsible
for
the
Bank's
risk
management
framework
and
for
ensuring
that
satisfactory
risk
policies
and
governance
are
in
place.
Each
subsidiary
is
responsible
for
its
own
risk
management
framework
but
adheres
to
the
Bank's
ownership
policies
which
outline
the
Group's
internal
control
policy,
risk
appetite
and
reporting
mechanisms.
The
Board
sets
the
risk
appetite
for
the
Bank,
and
in
some
cases
the
Group,
which
is
translated
into
exposure
limits
and
targets
monitored
by
the
Bank's
Risk
Management
division.
The
Chief
Executive
Officer
(CEO)
is
responsible
for
sustaining
an
effective
risk
management
framework,
processes
and
controls
as
well
as maintaining a high level of risk awareness among employees, making risk everyone's business.
The
Bank
operates
several
committees
to
manage
risk.
The
Board
Risk
Committee
(BRIC)
is
responsible
for
supervising
the
Bank's
risk
management
framework,
risk
appetite
and
the
internal
capital
and
liquidity
adequacy
assessment
processes
(ICAAP/ILAAP).
The
Board
Credit
Committee
(BCC)
approves
certain
proposals
for
credit
origination,
debt
cancellation,
underwriting
and
investments,
while
the
Board
of
Directors
is
the
supreme
authority
for
cases
which
entail
deviations
from
risk
appetite
or
strategy.
On
the
management
level
the
CEO
has
established
six
primary
risk
committees.
The
Asset
and
Liability
Committee
(ALCO)
is
responsible
for
managing
asset-liability
mismatches,
liquidity
and
funding
risk,
market
risk,
capital
adequacy,
and
decides
on
underwriting
and
investment
exposures.
The
Operational
Risk
Committee
(ORCO)
is
responsible
for
managing
operational
risk,
which
includes
information
security,
financial
crime,
regulatory
compliance
and
data
management.
The
Arion
Credit
Committee
(ACC)
administers
the
Bank's
credit
rules
and
decides
on
the
origination
of
credit
while
the
Arion
Composition
and
Debt
Cancellation
Committee
(ADC)
is
the
principal
authority
for
debt
cancellation,
debt
restructuring
and
composition
agreements.
ACC
and
ADC
operate
within
limits
set
by
the
BCC.
The
Sustainability
Committee
ensures
that
the
Bank's
strategy
and
decision-making
are
aligned
with
the
Bank's
commitments
in
relation
to
the
environmental,
social
and
governance
(ESG)
agenda.
The
committee
oversees
the
Bank's
Green
Financing
Framework.
Finally,
the
Executive
Risk
Committee
(ERCO),
chaired
by
the
CRO,
oversees
the
implementation
of
risk
policies,
ensures
that
the
Bank's
limit
framework
adheres
to
the
risk
appetite,
reviews
the
Bank's
ICAAP,
ILAAP
and
stress
testing,
and
approves
economic
scenarios,
credit
models
and
specific
provisions
under IFRS9. The Executive Committee is concerned with business and strategic risk.
The
Bank's
Internal
Audit
conducts
independent
reviews
of
the
Bank's
and
several
subsidiaries'
operations,
risk
management
framework,
processes
and
measurements.
Internal
Audit
discusses
its
results
with
management
and
reports
its
findings
and
recommendations
to
the
Board Audit Committee (BAC) and to the Board of Directors.
The
Bank’s
Risk
Management
division
is
headed
by
the
Chief
Risk
Officer.
It
is
independent
and
centralized
and
reports
directly
to
the
CEO.
Risk
Management
is
divided
into
four
units.
Balance
Sheet
Risk
and
Models
is
responsible
for
the
quantification
of
risk
on
a
portfolio
level,
including
risk
modelling
and
reporting;
Operational
and
Sustainability
Risk
facilitates
and
monitors
the
management
of
risk
and
controls
in
the
first
line
and
supports
the
Bank's
quantification
and
management
of
sustainability
risk;
and
Credit
Risk
supports
the
Bank's
credit
transaction
process,
participates
in
credit
decisions
and
monitors
credit
quality.
The
Security
Team
monitors
the
effectiveness
of
the
Bank’s defences against risks associated with IT security, physical security and external cyber fraud.
Arion
Bank
is
a
small
bank
in
international
context
but
classified
as
systemically
important
in
Iceland.
The
Group
operates
in
a
small
economy
which
is
subject
to
sectoral
concentration,
fluctuations
in
capital
flows,
and
exchange
rate
volatility.
Among
the
Group’s
most
significant
risks
are
credit
risk,
concentration
risk,
liquidity
risk,
interest
rate
risk,
cyber
risk,
third
party
risk,
business
risk
and
reputational
risk.
These
risk
factors
are
to
the
largest
extent
encountered
within
the
parent
company.
Through
the
Bank's
subsidiaries,
the
Group
bears
risk arising from insurance activities and fund management. 
Risk
management
is
a
core
activity
within
the
Group
as
it
faces
various
risks
arising
from
its
day
to
day
operations.
The
key
to
effective
risk
management
is
a
process
of
on-going
identification
of
significant
risks,
quantification
of
risk
exposures,
actions
to
limit
risk
and
regular
monitoring.
This
process,
and
the
ability
to
evaluate,
manage
and
correctly
price
the
risk
encountered
is
critical
to
the
Group's
continuing
profitability, and ensures that risk exposures remain within acceptable levels.
The
Bank's
Compliance
function
is
headed
by
the
Compliance
Officer.
It
is
independent
and
centralized
and
the
Compliance
Officer
reports
directly
to
the
CEO.
The
Compliance
function
manages
the
Bank's
conduct
and
compliance
risk,
including
risk
relating
to
data
protection and financial crime.
56

===== SIDA 57 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk
Exposure to credit risk
The
value
of
collateral
is
based
on
estimated
market
value.
The
valuation
of
real
estate
is
based
on
market
price,
valuation
model,
or
the
opinion
of
internal
or
external
specialists.
The
valuation
of
fishing
vessels
takes
into
account
related
fishing
quotas.
The
quality
of
collateral is evaluated in the lending process with regards to specialization, location, age and condition and possibilities for reuse.
Collateral
value
is
monitored
and
action
is
taken
to
remedy
insufficient
collateral
coverage
where
the
underlying
agreement
provides
for
such
remedies.
Collateral
value
is
reviewed
to
ensure
the
adequacy
of
the
allowance
for
impairment
losses.
Collateral
values
shown
are
capped by the related book value amount.
- Other collateral: Fixed and current assets including vehicles, equipment, inventory and trade receivables
- Vessels: Ships with assigned fishing quota and other vessels
Credit
risk
is
managed
and
controlled
by
setting
limits
on
the
amount
of
risk
the
Group
is
willing
to
accept
for
individual
counterparties,
group
of
connected
clients,
industries,
geographies
and
loan
types,
and
by
monitoring
exposures
in
relation
to
such
limits.
The
Group
seeks
to
limit
its
total
credit
risk
through
diversification
of
the
loan
portfolio
across
sectors
and
by
limiting
large
exposures
to
groups
of
connected clients.
Credit
risk
arises
when
the
Group
commits
its
funds,
resulting
in
capital
or
earnings
being
dependent
on
counterparty,
issuer
or
borrower
performance.
Loans
to
customers
are
the
largest
source
of
credit
risk.
Credit
risk
is
also
inherent
in
other
types
of
assets,
such
as
loans
to
credit institutions, bonds, derivatives and off-balance sheet items such as commitments and guarantees.
Managing
and
analyzing
the
Group's
loan
portfolio
is
of
utmost
importance.
Great
emphasis
is
placed
on
the
quality
of
the
credit
portfolio,
by
maintaining
a
strict
credit
process,
by
critically
inspecting
loan
applications,
by
actively
monitoring
the
credit
portfolio
and
by
identifying
and reacting to possible problem loans at an early stage as well as by restructuring impaired credits.
The
Group
grants
credit
based
on
well-informed
lending
decisions
and
seeks
to
build
business
relationships
with
customers
that
have
good repayment capacity and are backed by strong collateral. The risk level of each credit is considered in the pricing.
The
following
table
shows
the
maximum
exposure
to
credit
risk
for
the
components
of
the
Statement
of
Financial
Position
before
the
effect
of
mitigation
due
to
collateral
agreements
or
other
credit
enhancements.
The
table
also
shows
related
collateral
and
credit
enhancements.
The
amount
and
type
of
collateral
required
depends
on
an
assessment
of
the
credit
risk
of
the
counterparty
and
the
exposure
type.
The
main types of collateral obtained are as follows:
- Real estate: Residential property, commercial real estate and land
- Cash and securities: Cash, treasury notes and bills, asset backed bonds, listed equity, and funds that consist of eligible securities
Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual obligations.
57

===== SIDA 58 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Maximum
Cash and
Real
Other
Total 
31.12.2025
exposure 
securities
estate
Vessels
collateral
collateral
150,111 
- 
- 
- 
- 
- 
22,567 
- 
- 
- 
- 
- 
1,327,606 
15,816 
982,047 
65,647 
111,401 
1,174,911 
640,394 
161 
589,706 
28 
14,604 
604,499 
576,828 
134 
576,297 
- 
- 
576,431 
63,566 
27 
13,409 
28 
14,604 
28,068 
687,212 
15,655 
392,341 
65,619 
96,797 
570,412 
126,000 
2,168 
118,383 
11 
294 
120,856 
108,071 
222 
98,010 
6 
2,886 
101,124 
107,416 
1,294 
26,435 
58,230 
13,314 
99,273 
87,036 
1,554 
36,263 
1,063 
25,114 
63,994 
46,775 
34 
44,842 
- 
206 
45,082 
58,606 
9,528 
18,072 
4,069 
20,174 
51,843 
69,908 
532 
32,288 
- 
18,288 
51,108 
17,925 
40 
1,223 
2,208 
9,038 
12,509 
40,458 
275 
1,606 
- 
6,810 
8,691 
11,354 
8 
2,678 
11 
104 
2,801 
13,663 
- 
12,541 
21 
569 
13,131 
17,031 
- 
- 
- 
- 
- 
25,450 
1,348 
4,989 
274 
6,597 
13,208 
175,516 
- 
- 
- 
- 
- 
138,302 
- 
- 
- 
- 
- 
136,868 
- 
- 
- 
- 
- 
1,434 
- 
- 
- 
- 
- 
1,856,583 
17,164 
987,036 
65,921 
117,998 
1,188,119 
31.12.2024
124,094 
- 
- 
- 
- 
- 
25,690 
- 
- 
- 
- 
- 
1,228,745 
12,589 
931,451 
63,466 
117,745 
1,125,251 
639,404 
526 
584,014 
23 
20,342 
604,905 
570,842 
404 
569,959 
- 
- 
570,363 
68,562 
122 
14,055 
23 
20,342 
34,542 
589,341 
12,063 
347,437 
63,443 
97,403 
520,346 
117,929 
1,610 
113,229 
- 
1,582 
116,421 
84,419 
198 
74,662 
17 
4,104 
78,981 
87,696 
1,124 
17,612 
60,155 
6,838 
85,729 
74,814 
899 
28,035 
1,235 
31,004 
61,173 
47,755 
14 
42,570 
- 
4,173 
46,757 
52,600 
7,435 
16,455 
- 
16,220 
40,110 
61,481 
750 
38,534 
- 
17,607 
56,891 
10,249 
4 
1,189 
2,031 
6,636 
9,860 
30,633 
16 
1,437 
- 
8,534 
9,987 
9,509 
13 
2,224 
5 
187 
2,429 
12,256 
- 
11,490 
- 
518 
12,008 
8,476 
- 
- 
- 
- 
- 
21,804 
2,335 
4,212 
280 
4,688 
11,515 
141,928 
- 
- 
- 
- 
- 
126,898 
- 
- 
- 
- 
- 
125,923 
- 
- 
- 
- 
- 
975 
- 
- 
- 
- 
- 
1,677,635 
14,924 
935,663 
63,746 
122,433 
1,136,766 
Financial guarantees ...................................................................
Undrawn loan commitments and unused overdrafts  ...................
Fair value through OCI ................................................................
Bonds issued by financial institutions and corporates ..............
Government bonds ..................................................................
Balance at the end of the year ..................................................
Collateral
Loans to credit institutions at amortized cost ...............................
Loans to customers at amortized cost .........................................
Industry, energy and manufacturing .................................................
Undrawn loan commitments and unused overdrafts  ...................
Individuals ................................................................................
Corporates ...............................................................................
Real estate activities ........................................................................
Financial and insurance activities ....................................................
Commerce and services ...................................................................
Accommodation and food service activities .....................................
Cash and balances with Central Bank .........................................
Fishing industry ................................................................................
Other assets with credit risk .........................................................
Transportation ..................................................................................
Information and communication technology .....................................
Public sector .....................................................................................
Agriculture and forestry ....................................................................
Financial guarantees ...................................................................
Construction .....................................................................................
Mortgages ........................................................................................
Transportation ..................................................................................
Construction .....................................................................................
Information and communication technology .....................................
Public sector .....................................................................................
Industry, energy and manufacturing .................................................
Commerce and services ...................................................................
Corporates ...............................................................................
Individuals ................................................................................
Accommodation and food service activities .....................................
Financial and insurance activities ....................................................
Cash and balances with Central Bank .........................................
Real estate activities ........................................................................
Loans to customers at amortized cost .........................................
Other ................................................................................................
Fishing industry ................................................................................
Loans to credit institutions at amortized cost ...............................
Fair value through OCI ................................................................
Balance at the end of the year ..................................................
Bonds issued by financial institutions and corporates ..............
Government bonds ..................................................................
Other ................................................................................................
Mortgages ........................................................................................
Agriculture and forestry ....................................................................
Other assets with credit risk .........................................................
Maximum
exposure
to
credit
risk
and
collateral
held
against
different
types
of
financial
instruments
subject
to
the
impairment
requirements
of IFRS 9
58

===== SIDA 59 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
LTV ratio for residential mortgage lending
31.12.2025
31.12.2024
31.12.2025
31.12.2024
223,975 
233,652 
2,832 
2,647 
107,698 
113,874 
2,110 
1,531 
102,661 
96,331 
1,587 
1,185 
88,631 
75,063 
1,427 
1,269 
51,163 
48,341 
708 
344 
1,669 
2,075 
114 
135 
1,497 
2,172 
261 
319 
198 
17 
5 
- 
577,492 
571,525 
9,044 
7,430 
31.12.2025
31.12.2024
31.12.2025
31.12.2024
516,063 
514,309 
7,925 
6,484 
45,445 
42,063 
743 
589 
12,363 
11,461 
230 
165 
2,521 
2,694 
77 
63 
385 
434 
41 
27 
517 
560 
23 
102 
198 
4 
5 
- 
577,492 
571,525 
9,044 
7,430 
Collateral for financial assets in stage 3
Collateral repossessed
At
the
end
of
the
year,
the
gross
carrying
amount
of
assets
in
stage
3
was
ISK
32,661
million
(31.12.2024:
ISK
28,568
million)
with
ISK
28,860 million in collateral (31.12.2024: ISK 25,586 million), thereof ISK 24,474 million in real estate (31.12.2024: ISK 24,587 million).
The
following
table
describes
the
loan
to
value
(LTV)
and
impairment
status
of
the
Group's
residential
mortgage
portfolio.
LTV
is
calculated
as
the
ratio
of
the
total
exposure
of
individual
borrowers
to
the
value
of
the
pledged
real
estate
without
adjusting
for
possible
costs
of
obtaining
and
selling
the
collateral.
An
exposure
to
a
particular
borrower
appears
in
a
single
row
in
the
table
(whole-loan
approach).
The
residential
real
estate
valuation
model
used
gives
an
estimate
of
current
value
on
a
monthly
basis.
This
model
is
used
when the market transaction value becomes older than 2 years.
70-80% .............................................................................................................................
The
Group
took
possession
of
assets
due
to
foreclosures.
The
total
value
of
real
estate
the
Group
took
possession
of
during
the
year
and
still
holds
at
the
end
of
the
year
is
ISK
66
million
(31.12.2024:
ISK
79
million).
Assets
aquired
due
to
foreclosure
are
held
for
sale,
see
Note 30.
Gross carrying amount ...................................................................................................
80-90% .............................................................................................................................
More than 100% ................................................................................................................
Less than 50% ..................................................................................................................
50-60% .............................................................................................................................
Thereof in Stage 3
Less than 55% ..................................................................................................................
The
following
table
gives
an
alternative
representation
of
the
loan
to
value
profile
of
the
mortgage
portfolio.
Here,
each
exposure
is
split
into
pieces
and
each
piece
is
placed
into
the
appropriate
LTV
bucket.
A
single
exposure
can
therefore
be
spread
between
several
rows
in
the table (loan-splitting approach).
55-70% .............................................................................................................................
70-80% .............................................................................................................................
90-100% ...........................................................................................................................
60-70% .............................................................................................................................
Thereof in Stage 3
Not classified ....................................................................................................................
Not classified ....................................................................................................................
80-90% .............................................................................................................................
90-100% ...........................................................................................................................
More than 100% ................................................................................................................
Gross carrying amount ...................................................................................................
59

===== SIDA 60 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Large exposures
Credit quality
The
Group
uses
internal
credit
ratings
and
external
credit
ratings,
if
available,
to
monitor
credit
risk.
The
Group's
internal
credit
rating
system
rates
customers
through
application
of
statistical
models
based
on
a
variety
of
information
that
has
been
determined
to
be
predictive
of
default.
This
includes
demographic,
behavioral,
financial
and
economic
data,
coupled
with
qualitative
expert
judgment
for
large
corporate
exposures.
Six
exposure
type
models
rate
individuals'
exposures
–
mortgages,
consumer
loans,
auto
loans,
guarantees,
loans
to
individuals
for
work
purposes,
and
other
loans.
The
models
are
validated
annually
and
recalibrated
and
updated
with
current
data
with
the
aim
of
maintaining
their
predictive
power.
Year-on-year
changes
in
risk
classification
of
loans
may
in
part
be
due
to
model
refinement.
External
ratings
are
primarily
used
for
marketable
securities
and
loans
to
credit
institutions.
For
further
information
on
the
rating scales used, see Note 59.
The
following
tables
show
financial
instruments
subject
to
the
impairment
requirements
of
IFRS
9
broken
down
by
rating
scale,
where
risk
class
5,
DD
,
represents
exposures
in
default
.
Assets
carried
at
fair
value
through
profit
and
loss
are
not
subject
to
the
impairment
requirements
of
IFRS
9.
The
tables
below
sum
up
the
gross
carrying
amount
of
assets
by
rating
class
and
impairment
stage.
The
gross
carrying
amount
net
of
loss
allowance
is
the
book
value
of
the
underlying
assets.
For
off-balance
sheet
exposures,
the
nominal
amount
is
shown. FVOCI stands for fair value through other comprehensive income.
Exposures
that
are
'Unrated'
are
typically
due
to
newly
formed
entities,
entities
for
which
the
Bank's
rating
models
are
not
applicable
or
no
external rating is available.
The Group had no large exposure at the end of the year (31.12.2024: no large exposure).
A
large
exposure
is
defined
as
an
exposure
to
a
group
of
financially
related
borrowers
which
is
equal
to
or
exceeds
10%
of
the
Group's
Tier
1
capital
according
to
the
Financial
Undertakings
Act
No.
161/2002.
The
legal
maximum
for
individual
large
exposures
is
25%
of
Tier
1 capital, net of eligible credit risk mitigation. 
60

===== SIDA 61 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Credit quality profile for financial instruments subject to IFRS 9 impairment requirements
31.12.2025
Loans to customers
Stage 1
Stage 2
Stage 3
POCI
Total 
441,647 
256 
- 
117 
442,020 
413,457 
1,827 
- 
124 
415,408 
289,610 
6,889 
- 
63 
296,562 
105,819 
46,753 
- 
23 
152,595 
- 
- 
32,255 
406 
32,661 
439 
- 
- 
- 
439 
1,250,972 
55,725 
32,255 
733 
1,339,685 
(2,833)
(1,551)
(7,508)
(187)
(12,079)
1,248,139 
54,174 
24,747 
546 
1,327,606 
Loans to customers - Individuals
345,978 
256 
- 
117 
346,351 
216,374 
518 
- 
124 
217,016 
46,562 
4,108 
- 
63 
50,733 
8,883 
8,932 
- 
23 
17,838 
- 
- 
10,892 
120 
11,012 
5 
- 
- 
- 
5 
617,802 
13,814 
10,892 
447 
642,955 
(611)
(332)
(1,617)
(1)
(2,561)
617,191 
13,482 
9,275 
446 
640,394 
Loans to customers - Corporates and public sector entities
95,669 
- 
- 
- 
95,669 
197,083 
1,309 
- 
- 
198,392 
243,048 
2,781 
- 
- 
245,829 
96,936 
37,821 
- 
- 
134,757 
- 
- 
21,363 
286 
21,649 
434 
- 
- 
- 
434 
633,170 
41,911 
21,363 
286 
696,730 
(2,222)
(1,219)
(5,891)
(186)
(9,518)
630,948 
40,692 
15,472 
100 
687,212 
Loan commitments, guarantees and unused credit facilities
114,147 
46 
- 
- 
114,193 
76,291 
4,758 
1,116 
- 
82,165 
4,608 
- 
- 
- 
4,608 
195,046 
4,804 
1,116 
- 
200,966 
(342)
(266)
(73)
- 
(681)
194,704 
4,538 
1,043 
- 
200,285 
Risk class 5 - (DD) ...................................................................................
Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................
Risk class 2 - (Grades BB+ to BB-) ................................................................
Unrated ..........................................................................................................
Risk class 1 - (Grades BBB+ to BBB-)  .....................................................
Risk class 2 - (Grades BB+ to BB-) ..........................................................
Risk class 0 - (Grades AAA to A-) ............................................................
Gross carrying amount ................................................................................
Risk class 1 - (Grades BBB+ to BBB-)  ...........................................................
Risk class 0 - (Grades AAA to A-) ............................................................
Loss allowance .........................................................................................
Risk class 3 to 4 - (Grades B+ to CCC-) .........................................................
Risk class 0 - (Grades AAA to A-) ..................................................................
Risk class 5 - (DD) ...................................................................................
Risk class 1 - (Grades BBB+ to BBB-)  .....................................................
Unrated ..........................................................................................................
Risk class 0 to 1 (Grades AAA to BBB-) .........................................................
Risk class 2 to 4 (Grades BB+ to CCC-)  ........................................................
Gross carrying amount ..........................................................................
Loss allowance ...............................................................................................
Risk class 2 - (Grades BB+ to BB-) ..........................................................
Book value ..............................................................................................
Book value ..............................................................................................
Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................
Nominal less loss allowance .......................................................................
Nominal .........................................................................................................
Risk class 5 - (DD) .........................................................................................
Unrated ....................................................................................................
Loss allowance ...............................................................................................
Book value ....................................................................................................
Gross carrying amount ..........................................................................
Loss allowance .........................................................................................
Unrated ....................................................................................................
61

===== SIDA 62 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
31.12.2024
Loans to customers
Stage 1
Stage 2
Stage 3
POCI
Total 
436,790 
93 
- 
52 
436,935 
323,053 
1,783 
- 
155 
324,991 
250,011 
26,076 
- 
32 
276,119 
108,985 
62,430 
- 
24 
171,439 
- 
- 
28,388 
180 
28,568 
45 
- 
- 
- 
45 
1,118,884 
90,382 
28,388 
443 
1,238,097 
(2,282)
(1,746)
(5,323)
(1)
(9,352)
1,116,602 
88,636 
23,065 
442 
1,228,745 
Loans to customers - Individuals
337,617 
93 
- 
52 
337,762 
215,576 
215 
- 
155 
215,946 
41,708 
17,943 
- 
32 
59,683 
9,477 
9,305 
- 
24 
18,806 
- 
- 
9,514 
180 
9,694 
7 
- 
- 
- 
7 
604,385 
27,556 
9,514 
443 
641,898 
(545)
(410)
(1,538)
(1)
(2,494)
603,840 
27,146 
7,976 
442 
639,404 
Loans to customers - Corporates and public sector entities
99,173 
- 
- 
- 
99,173 
107,477 
1,568 
- 
- 
109,045 
208,303 
8,133 
- 
- 
216,436 
99,508 
53,125 
- 
- 
152,633 
- 
- 
18,874 
- 
18,874 
230 
- 
- 
- 
230 
514,691 
62,826 
18,874 
- 
596,391 
(1,737)
(1,336)
(3,785)
- 
(6,858)
512,954 
61,490 
15,089 
- 
589,533 
Loan commitments, guarantees and unused credit facilities
82,245 
5 
- 
- 
82,250 
71,991 
5,370 
544 
- 
77,905 
3,577 
- 
- 
- 
3,577 
157,813 
5,375 
544 
- 
163,732 
(399)
(112)
- 
- 
(511)
157,414 
5,263 
544 
- 
163,221 
Unrated ....................................................................................................
Book value ....................................................................................................
Risk class 2 - (Grades BB+ to BB-) ..........................................................
Risk class 1 - (Grades BBB+ to BBB-)  ...........................................................
Nominal less loss allowance .......................................................................
Loss allowance ...............................................................................................
Gross carrying amount ..........................................................................
Risk class 2 - (Grades BB+ to BB-) ................................................................
Risk class 3 to 4 - (Grades B+ to CCC-) .........................................................
Risk class 0 - (Grades AAA to A-) ..................................................................
Risk class 1 - (Grades BBB+ to BBB-)  .....................................................
Risk class 5 - (DD) .........................................................................................
Unrated ....................................................................................................
Loss allowance ...............................................................................................
Risk class 0 - (Grades AAA to A-) ............................................................
Risk class 0 - (Grades AAA to A-) ............................................................
Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................
Risk class 5 - (DD) ...................................................................................
Risk class 5 - (DD) ...................................................................................
Book value ..............................................................................................
Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................
Book value ..............................................................................................
Unrated ..........................................................................................................
Gross carrying amount ................................................................................
Nominal .........................................................................................................
Risk class 0 to 1 - (Grades AAA to BBB-) .......................................................
Risk class 2 to 4 - (Grades BB+ to CCC-)  ......................................................
Unrated ..........................................................................................................
Loss allowance .........................................................................................
Gross carrying amount ..........................................................................
Risk class 1 - (Grades BBB+ to BBB-)  .....................................................
Risk class 2 - (Grades BB+ to BB-) ..........................................................
Loss allowance .........................................................................................
62

===== SIDA 63 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Gross 
Gross 
Gross 
 
Carrying
Loss
Carrying
Loss
Carrying
Loss
Book
31.12.2025
amount
allowance
amount
allowance
amount
allowance
value
310,987 
(7)
- 
- 
- 
- 
310,980 
617,802 
(611)
14,141 
(332)
11,012 
(1,618)
640,394 
556,668 
(201)
11,780 
(123)
9,044 
(340)
576,828 
61,134 
(410)
2,361 
(209)
1,968 
(1,278)
63,566 
633,170 
(2,222)
41,911 
(1,219)
21,649 
(6,077)
687,212 
117,560 
(237)
5,623 
(68)
3,919 
(797)
126,000 
93,971 
(475)
9,159 
(279)
7,639 
(1,944)
108,071 
105,252 
(197)
1,086 
(31)
1,934 
(628)
107,416 
79,503 
(331)
5,911 
(212)
2,685 
(520)
87,036 
35,122 
(133)
10,897 
(274)
1,653 
(490)
46,775 
55,466 
(288)
3,433 
(138)
191 
(58)
58,606 
69,437 
(168)
390 
(46)
582 
(287)
69,908 
14,596 
(49)
3,440 
(69)
22 
(15)
17,925 
38,092 
(274)
1,255 
(75)
2,792 
(1,332)
40,458 
11,299 
(32)
53 
(7)
41 
- 
11,354 
12,872 
(38)
664 
(20)
191 
(6)
13,663 
(2,840)
56,052 
(1,551)
32,661 
(7,695)
1,638,586 
31.12.2024
276,685 
(3)
- 
- 
- 
- 
276,682 
604,385 
(545)
27,819 
(410)
9,694 
(1,539)
639,404 
540,494 
(162)
23,600 
(229)
7,431 
(292)
570,842 
63,891 
(383)
4,219 
(181)
2,263 
(1,247)
68,562 
514,499 
(1,737)
62,826 
(1,336)
18,874 
(3,785)
589,341 
107,012 
(239)
8,418 
(62)
3,667 
(867)
117,929 
70,037 
(342)
7,317 
(93)
8,588 
(1,088)
84,419 
79,542 
(66)
6,992 
(135)
2,427 
(1,064)
87,696 
66,003 
(279)
7,923 
(160)
1,694 
(367)
74,814 
34,515 
(107)
12,408 
(417)
1,544 
(188)
47,755 
41,791 
(272)
11,235 
(155)
1 
- 
52,600 
60,593 
(101)
631 
(48)
517 
(111)
61,481 
6,119 
(13)
4,207 
(79)
23 
(8)
10,249 
28,960 
(259)
1,981 
(147)
162 
(64)
30,633 
9,145 
(27)
344 
(4)
51 
- 
9,509 
10,782 
(32)
1,370 
(36)
200 
(28)
12,256 
(2,285)
90,645 
(1,746)
28,568 
(5,324)
1,505,427 
   Construction ..........................................................
   Fishing industry .....................................................
   Accommodation and food service activities ...........
Balance at the end of the year ................................
   Public Sector .........................................................
   Agriculture and forestry .........................................
   Commerce and services ........................................
Loans to corporates and public sector entities ..........
   Information and communication technology ...........
1,561,959 
   Industry, energy and manufacturing ......................
   Commerce and services ........................................
Loans to corporates and public sector entities ..........
Sector split, gross carrying value and loss allowance for financial instruments subject to IFRS 9 impairment requirements
   Construction ..........................................................
   Fishing industry .....................................................
Stage 2
   Other .....................................................................
   Real estate activities .............................................
   Mortgages .............................................................
Stage 1
Stage 3
Loans to individuals ..................................................
Loans to credit instit., securities & cash ....................
   Public Sector .........................................................
   Transportation .......................................................
1,395,569 
   Industry, energy and manufacturing ......................
Loans to credit instit., securities & cash ....................
Loans to individuals ..................................................
   Mortgages .............................................................
   Other .....................................................................
Balance at the end of the year ................................
   Financial and insurance activities ..........................
   Real estate activities .............................................
   Information and communication technology ...........
   Transportation .......................................................
   Agriculture and forestry .........................................
   Accommodation and food service activities ...........
   Financial and insurance activities ..........................
63

===== SIDA 64 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Transfers of financial assets between impairment stages
Net remeasurement of loss allowance
New financial assets, originated or purchased
Derecognitions and maturities
Write-offs
31.12.2025
Impairment loss allowance *
Stage 1
Stage 2
Stage 3
POCI
Total 
(2,681)
(1,858)
(5,323)
(1)
(9,863)
(697)
561 
136 
- 
- 
193 
(350)
157 
- 
- 
63 
189 
(252)
- 
- 
644 
(341)
(3,373)
- 
(3,070)
(1,458)
(408)
(1,141)
(186)
(3,193)
731 
363 
1,527 
- 
2,621 
30 
27 
688 
- 
745 
(3,175)
(1,817)
(7,581)
(187)
(12,760)
(7)
- 
- 
- 
(7)
(3,182)
(1,817)
(7,581)
(187)
(12,767)
New financial assets, originated or purchased ................................................
** During the year the loss allowance balance for stage 3 loans was reduced by ISK 995 million due to unwinding of interest income.
Impairment loss allowances for assets only carrying 12-month ECL ...............
*** During the year an amount of ISK 547 million was written off but is still subject to enforcement activities subject to Icelandic law.
Net remeasurement of loss allowance ** ........................................................
Transfers to Stage 2 (lifetime ECL) ..........................................................
All transfers are presumed to occur before any corresponding remeasurement of the loss allowance.
Include purchases and originations and reflect the allowance related to assets newly recognized during the year.
Comprise
the
impact
of
changes
in
model
inputs
or
assumptions,
including
changes
in
forward-looking
macroeconomic
conditions,
partial
repayments
and
additional
draws
on
existing
facilities,
inflation,
changes
in
the
measurement
following
a
transfer
between
stages,
effects
of
foreign
exchange
rate
changes,
impairment
of
interest
income
due
to
impaired
debt
instruments
and
unwinding
of
the
time
value
discount due to the passage of time.
Balance at the beginning of the year ..............................................................
*
These
amounts
are
a
combination
of
all
impairments,
including
an
allowance
for
loan
commitments
and
guarantees
presented
as
a
liability
in
these
ConsolidatedFinancial
Statements.
The
amounts
represent
the
difference
between
the
loss
allowance
at
the
beginning
of
the
year
and
at
the
reporting
date,
ignoring other intra-period changes.
Derecognitions and maturities ........................................................................
The amount after net remeasurements of loss allowance written off during the year.
**** Loss allowance for all assets other than cash, bonds and loans to credit institutions.
Reflect
the
allowance
related
to
assets
derecognized
during
the
period
without
a
credit
loss
being
incurred,
including
those
assets
that
were derecognized following a modification of terms.
Transfers to Stage 3 (credit impaired financial assets) .............................
Write-offs *** ..................................................................................................
Impairment loss allowance **** ...................................................................
Total impairment loss allowance .................................................................
Transfers of financial assets:
The
table
below
reconciles
the
opening
and
closing
allowance
balance
for
loans
to
customers
and
debt
securities
at
amortized
cost
and
FVOCI  and  loan commitments, guarantees and unused credit facilities by impairment stages. The reconciliation includes:
Transfers to Stage 1 (12-month ECL)  ......................................................
64

===== SIDA 65 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Impairment loss allowance for loans to customers
Stage 1
Stage 2
Stage 3
POCI
Total 
(2,282)
(1,746)
(5,323)
(1)
(9,352)
(655)
519 
136 
- 
- 
138 
(295)
157 
- 
- 
61 
183 
(244)
- 
- 
532 
(203)
(3,308)
- 
(2,979)
(1,282)
(373)
(1,141)
(186)
(2,982)
625 
337 
1,527 
- 
2,489 
30 
27 
688 
- 
745 
(2,833)
(1,551)
(7,508)
(187)
(12,079)
 
Impairment loss allowance for loans to customers - Individuals
(545)
(410)
(1,538)
(1)
(2,494)
(283)
199 
84 
- 
- 
32 
(58)
26 
- 
- 
12 
54 
(66)
- 
- 
254 
(126)
(381)
- 
(253)
(189)
(82)
(124)
- 
(395)
78 
66 
151 
- 
295 
30 
25 
231 
- 
286 
(611)
(332)
(1,617)
(1)
(2,561)
Impairment loss allowance for loans to customers - Corporates
(1,737)
(1,336)
(3,785)
- 
(6,858)
(372)
320 
52 
- 
- 
106 
(237)
131 
- 
- 
49 
129 
(178)
- 
- 
278 
(77)
(2,927)
- 
(2,726)
(1,093)
(291)
(1,017)
(186)
(2,587)
547 
271 
1,376 
- 
2,194 
- 
2 
457 
- 
459 
(2,222)
(1,219)
(5,891)
(186)
(9,518)
Impairment loss allowance for loan commitments, guarantees and  unused credit facilities  
(399)
(112)
- 
- 
(511)
(42)
42 
- 
- 
- 
55 
(55)
- 
- 
- 
2 
6 
(8)
- 
- 
112 
(138)
(65)
- 
(91)
(176)
(35)
- 
- 
(211)
106 
26 
- 
- 
132 
(342)
(266)
(73)
- 
(681)
Transfers to Stage 2 (lifetime ECL) ..............................................
Net remeasurement of loss allowance ................................................
Total loss allowance for loan commit., guarantees, unused facilities .....
New financial commitments originated ......................................................
Total loss allowance for loans to corporates .................................
Transfers to Stage 3 (credit impaired financial assets) .................
New financial assets, originated or purchased ....................................
Derecognitions and maturities ............................................................
Transfers to lifetime ECL ....................................................................
Transfers to Stage 2 (lifetime ECL) ....................................................
Transfers to Stage 1 (12-month ECL)  ................................................
Transfers to Stage 3 (credit impaired financial assets) .......................
New financial assets, originated or purchased ..........................................
Net remeasurement of loss allowance ................................................
Write-offs ...........................................................................................
Transfers to Stage 2 (lifetime ECL) ..............................................
Transfers to Stage 1 (12-month ECL)  ..........................................
Total loss allowance for loans to individuals .................................
Balance at the beginning of the year ..................................................
Derecognitions and maturities ............................................................
New financial assets, originated or purchased ....................................
Write-offs .................................................................................................
Net remeasurement of loss allowance ......................................................
Net remeasurement of loss allowance ......................................................
Transfers to 12-month ECL  ...............................................................
Balance at the beginning of the year ........................................................
Transfers
Transfers to credit impaired ................................................................
Total loss allowance for loans to customers ........................................
Transfers to Stage 3 (credit impaired financial assets) .................
Transfers of financial assets
Derecognitions and maturities ..................................................................
Derecognitions and maturities ..................................................................
Transfers to Stage 1 (12-month ECL)  ..........................................
Balance at the beginning of the year ........................................................
Balance at the beginning of the year ..................................................
Write-offs ...........................................................................................
Transfers of financial assets
Transfers of financial assets:
65

===== SIDA 66 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
31.12.2024
Impairment loss allowance *
Stage 1
Stage 2
Stage 3
POCI
Total 
(2,584)
(2,216)
(4,022)
(92)
(8,914)
(744)
536 
208 
- 
- 
131 
(178)
47 
- 
- 
94 
140 
(234)
- 
- 
886 
(263)
(2,494)
- 
(1,871)
(1,108)
(658)
(649)
- 
(2,415)
524 
664 
845 
91 
2,124 
120 
117 
976 
- 
1,213 
(2,681)
(1,858)
(5,323)
(1)
(9,863)
(3)
- 
- 
- 
(3)
(2,684)
(1,858)
(5,323)
(1)
(9,866)
Impairment loss allowance for loans to customers
Stage 1
Stage 2
Stage 3
POCI
Total 
(2,348)
(2,091)
(4,020)
(92)
(8,551)
(666)
458 
208 
- 
- 
121 
(168)
47 
- 
- 
90 
138 
(228)
- 
- 
792 
(230)
(2,500)
- 
(1,938)
(829)
(606)
(649)
- 
(2,084)
438 
636 
843 
91 
2,008 
120 
117 
976 
- 
1,213 
(2,282)
(1,746)
(5,323)
(1)
(9,352)
 
Impairment loss allowance for loans to customers - Individuals
(559)
(532)
(1,381)
(1)
(2,473)
(290)
205 
85 
- 
- 
26 
(42)
16 
- 
- 
29 
65 
(94)
- 
- 
327 
(152)
(551)
- 
(376)
(173)
(92)
(136)
- 
(401)
77 
30 
289 
- 
396 
18 
108 
234 
- 
360 
(545)
(410)
(1,538)
(1)
(2,494)
Impairment loss allowances for assets only carrying 12-month ECL ...............
** During the year the loss allowance balance for stage 3 loans was reduced by ISK 961 million due to unwinding of interest income.
Net remeasurement of loss allowance ................................................
New financial assets, originated or purchased ..........................................
Total impairment loss allowance .................................................................
*
These
amounts
are
a
combination
of
all
impairments,
including
an
allowance
for
loan
commitments
and
guarantees
presented
as
a
liability
in
these
Consolidated
Financial
Statements.
The
amounts
represent
the
difference
between
the
loss
allowance
at
the
beginning
of
the
year
and
at
the
reporting
date,
ignoring
other
intra-
period changes.
*** During the year an amount of ISK 892 million was written off but is still subject to enforcement activities subject to Icelandic law.
New financial assets, originated or purchased ....................................
Transfers of financial assets:
Balance at the beginning of the year ........................................................
Net remeasurement of loss allowance ......................................................
Derecognitions and maturities ..................................................................
Transfers to Stage 1 (12-month ECL)  ................................................
Transfers to Stage 1 (12-month ECL)  ..........................................
Transfers of financial assets
Transfers to Stage 2 (lifetime ECL) ..............................................
Transfers to Stage 2 (lifetime ECL) ....................................................
Derecognitions and maturities ............................................................
Total loss allowance for loans to individuals .................................
Balance at the beginning of the year ..................................................
Total loss allowance for loans to customers ........................................
Write-offs ...........................................................................................
Transfers to Stage 3 (credit impaired financial assets) .................
Write-offs .................................................................................................
Transfers to Stage 2 (lifetime ECL) ..........................................................
Transfers to Stage 3 (credit impaired financial assets) .......................
Transfers of financial assets:
**** Loss allowance for all assets other than cash, bonds and loans to credit institutions.
Derecognitions and maturities ........................................................................
Impairment loss allowance **** ...................................................................
Write-offs *** ..................................................................................................
Transfers to Stage 1 (12-month ECL)  ......................................................
Balance at the beginning of the year ..............................................................
New financial assets, originated or purchased ................................................
Net remeasurement of loss allowance ** ........................................................
Transfers to Stage 3 (credit impaired financial assets) .............................
66

===== SIDA 67 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Stage 1
Stage 2
Stage 3
POCI
Total 
Impairment loss allowance for loans to customers - Corporates
(1,789)
(1,559)
(2,639)
(91)
(6,078)
(376)
253 
123 
- 
- 
95 
(126)
31 
- 
- 
61 
73 
(134)
- 
- 
465 
(78)
(1,949)
- 
(1,562)
(656)
(514)
(513)
- 
(1,683)
361 
606 
554 
91 
1,612 
102 
9 
742 
- 
853 
(1,737)
(1,336)
(3,785)
- 
(6,858)
Impairment loss allowance for loan commitments, guarantees and  unused credit facilities  
(236)
(125)
(2)
- 
(363)
(78)
78 
- 
- 
- 
10 
(10)
- 
- 
- 
4 
2 
(6)
- 
- 
94 
(33)
6 
- 
67 
(279)
(52)
- 
- 
(331)
86 
28 
2 
- 
116 
(399)
(112)
- 
- 
(511)
Macroeconomic forecast
2026
2027
2028
4.5%
3.9%
3.8%
0.9%
4.0%
5.0%
2.6%
2.9%
2.9%
1.6%
2.7%
2.4%
6.6%
5.8%
5.0%
2026
2027
2028
2026
2027
2028
3.0%
2.9%
3.5%
6.1%
5.1%
4.4%
6.2%
10.7%
7.2%
-2.9%
1.3%
3.9%
4.2%
3.5%
3.2%
-0.2%
1.7%
2.5%
3.1%
3.4%
2.7%
-0.8%
1.3%
1.9%
6.3%
5.4%
4.6%
7.0%
6.2%
5.4%
Sensitivity analysis
Regarding
macroeconomic
outlook,
see
Note
3,
Material
accounting
estimates
and
judgements.
The
Group
calculates
loss
for
three
different
scenarios,
optimistic,
neutral
and
pessimistic
and
the
loss
allowance
is
the
weighted
average
of
the
results.
As
a
sensitivity
analysis,
it
can
be
noted
that
the
loss
allowance
in
stage
1
and
2
for
each
of
these
scenarios
separately
is
ISK
2.2
billion,
ISK
4.0
billion
and
ISK
9.1
billion
for
the
optimistic,
base
case
and
pessimistic
scenarios,
respectively
(31.12.2024:
ISK
1.8
billion,
ISK
3.3
billion
and
ISK
7.9 billion, respectively).
Unemployment rate .....................................................................
New financial assets, originated or purchased ....................................
Housing prices, year-on-year change ..........................................
GDP growth .........................................................................................................................................
Key interest rate ..........................................................................
Base case
Transfers
Transfers to credit impaired ................................................................
Total loss allowance for loan commit., guarantees, unused facilities ............
Optimistic
Pessimistic
Net remeasurement of loss allowance ......................................................
Unemployment rate .............................................................................................................................
Housing prices, year-on-year change ...................................................................................................
Transfers to Stage 2 (lifetime ECL) ..............................................
New financial commitments originated ......................................................
Transfers to Stage 3 (credit impaired financial assets) .................
Key interest rate ..................................................................................................................................
Private consumption, growth ........................................................
GDP growth .................................................................................
Private consumption, growth ................................................................................................................
Derecognitions and maturities ..................................................................
Transfers to Stage 1 (12-month ECL)  ..........................................
Transfers of financial assets
Balance at the beginning of the year ..................................................
Transfers to 12-month ECL  ...............................................................
Balance at the beginning of the year ........................................................
Net remeasurement of loss allowance ................................................
Derecognitions and maturities ............................................................
Transfers to lifetime ECL ....................................................................
Write-offs ...........................................................................................
Total loss allowance for loans to corporates .................................
The
calculation
of
expected
credit
losses
under
IFRS
9
uses
forward-looking
information
in
the
form
of
scenarios
where
the
development
of
macro-economic
variables
is
predicted.
The
expected
credit
loss
is
a
probability-weighted
average
of
the
estimated
forecasts
over
three
scenarios:
base
case
60%,
pessimistic
25%
and
optimistic
15%
(31.12.2024:
base
case
60%,
pessimistic
30%
and
optimistic
10%).
The
macroeconomic
forecast
and
scenario
probability
weights
is
done
by
the
Bank’s
Chief
Economist
and
approved
by
the
Bank’s
Executive
Risk Committee. The following table shows values used for IFRS 9 impairment calculations.
67

===== SIDA 68 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44.
Credit risk, continued
Forbearance
Gross
Gross
Gross
Gross
carrying
Loss
carrying
Loss
carrying
Loss
carrying
Loss
31.12.2025
amount
allowance
carrying 
allowance
carrying 
allowance
carrying 
allowance
Individuals ..............................................
5,566 
(15)
3,350 
(53)
5,963 
(678)
14,879 
(746)
Companies .............................................
4,322 
(31)
16,552 
(302)
11,420 
(3,351)
32,294 
(3,684)
Total ......................................................
9,888 
(46)
19,902 
(355)
17,383 
(4,029)
47,173 
(4,430)
31.12.2024
Individuals ..............................................
4,315 
(13)
2,570 
(26)
4,483 
(465)
11,368 
(504)
Companies .............................................
2,063 
(10)
15,221 
(403)
11,559 
(2,239)
28,843 
(2,652)
Total ......................................................
6,378 
(23)
17,791 
(429)
16,042 
(2,704)
40,211 
(3,156)
The
Group
grants
forbearance
measures
to
facilities
where
the
customer
is
facing
temporary
difficulties
and
needs
measures
which
would
not
generally
be
available
to
customers.
These
forbearance
measures
include
refinancing
and
renegotiations
of
loan
terms,
including
loan
extensions
and
adjustment
of
the
payment
schedule.
After
forbearance
measures
have
been
granted,
the
facility
is
classified
as
forborne
for a period of at least 24 months. The forborne classification is not removed until the customer has demonstrated repayment capacity.
Stage 1
Stage 3
Stage 2
Total
68

===== SIDA 69 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk
Interest rate risk
Interest rate risk
31.12.2025
Up to 3
3-12
1-5
5-10
Over 10
Assets
months
months
years
years
years
Total
150,111 
- 
- 
- 
- 
150,111 
22,567 
- 
- 
- 
- 
22,567 
914,513 
158,023 
242,825 
5,328 
8,515 
1,329,204 
56,829 
56,544 
45,016 
7,406 
5,190 
170,985 
451 
41 
328 
627 
285 
1,732 
139,972 
131,248 
110,295 
44,184 
- 
425,699 
1,284,443 
345,856 
398,464 
57,545 
13,990 
2,100,298 
Liabilities
12,003 
- 
- 
- 
- 
12,003 
912,492 
8,690 
- 
- 
- 
921,182 
329,767 
83,102 
9,138 
- 
- 
422,007 
31,840 
159,158 
243,888 
53,241 
13,084 
501,211 
3,535 
- 
34,327 
868 
11,731 
50,461 
1,289,637 
250,950 
287,353 
54,109 
24,815 
1,906,864 
(5,194)
94,906 
111,111 
3,436 
(10,825)
193,434 
Bonds and debt instruments ........................................................
Bonds and debt instruments used for hedging .............................
Derivatives ..................................................................................
Net interest gap  ........................................................................
Deposits ......................................................................................
Subordinated liabilities .................................................................
Assets ........................................................................................
Derivatives ..................................................................................
Liabilities ....................................................................................
Borrowings  ..................................................................................
Due to credit institutions and Central Bank ..................................
The
interest
rate
fixing
profile
for
non-indexed
assets
and
liabilities
is
largely
matched
and
the
duration
of
fixing
has
generally
shortened
as
the
bulk
of
fixed
rate
mortgages
have
been
reset
in
2024
to
2025
with
the
majority
of
customers
refinancing
to
indexed
loans
as
they
offer
lower
monthly
payments.
The
fixing
duration
of
indexed
liabilities
is
however
greater
than
that
of
indexed
assets,
as
covered
bonds
are
fixed rate while indexed loans are predominantly floating rate.
Market
risk
allowance
is
set
by
the
Board
in
the
Bank's
risk
appetite
and
limit
frameworks
are
in
place
for
each
trading
desk.
The
Asset
and
Liability
Committee
(ALCO)
is
responsible
for
managing
the
Bank's
overall
market
risk.
Risk
Management
is
responsible
for
measuring and monitoring market risk exposure, and reporting the exposure, usage and limit breaches.
Market
risk
is
the
current
or
prospective
risk
that
changes
in
financial
market
prices
and
rates
adversely
affect
the
Group's
earnings
and
equity due to changes to the value and cash flows of its assets and liabilities.
Loans to credit institutions ...........................................................
The
Group's
interest
rate
risk
for
foreign
currencies
is
limited
as
foreign
denominated
assets
predominantly
have
short
fixing
periods
and
the
Group
generally
applies
fair
value
hedging
for
its
foreign
denominated
fixed
rate
borrowings.
For
domestic
rates,
longer
fixing
periods
are more common.
The
following
table
shows
the
Group's
interest-bearing
assets
and
liabilities
by
interest
fixing
periods.
The
figures
for
loans
to
customers
and
borrowings
are
shown
on
a
fair
value
basis,
see
Note
25,
and
are
therefore
different
from
the
amounts
shown
in
these
Consolidated
Financial
Statements.
Defaulted
loans
are
presented
at
book
value,
which
is
based
on
the
value
of
the
underlying
collateral,
and
are
therefore assumed to be independent of interest adjustment periods and placed in the 'Up to 3 months' category.
Balances with Central Bank .........................................................
Market
risk
arises
from
imbalances
in
the
Group's
statement
of
financial
position
as
well
as
in
market
making
activities
and
position
taking
in bonds, equities, currencies, derivatives and other commitments which are marked to market.
Interest
rate
risk
arises
from
the
possibility
that
changes
in
market
rates
adversely
affect
net
interest
income
and
fair
value
of
interest-
bearing
instruments
on
the
Group's
statement
of
financial
position.
The
Group's
operations
are
subject
to
interest
rate
risk
due
to
mismatches
in
the
fixing
of
interest
rates
between
assets
and
liabilities,
resulting
in
a
repricing
risk
for
the
Group.
The
Group
also
faces
interest
basis
risk
between
interest-bearing
assets
and
interest-bearing
liabilities
due
to
different
types
of
floating-rate
indices
in
different
currencies.
The Group manages and limits market risk exposure in accordance with its risk appetite and strategic goals for net profit.
The
Group
tracks
market
risk
closely
and
separates
its
exposures
for
the
trading
book
and
the
banking
book.
Market
risk
in
the
trading
book
arises
from
market
making
activities
and
non-strategic
derivatives
positions
arising
from
the
Group's
operations
of
meeting
customers'
investment
and
risk
management
needs.
Market
risk
in
the
banking
book
arises
from
various
mismatches
in
assets
and
liabilities in e.g. currencies, maturities and interest rates. Market risk in the trading book and in the banking book is managed separately.
Loans to customers .....................................................................
69

===== SIDA 70 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk, continued
31.12.2024
Up to 3
3-12
1-5
5-10
Over 10
Assets
months
months
years
years
years
Total
124,094 
- 
- 
- 
- 
124,094 
25,690 
- 
- 
- 
- 
25,690 
867,139 
148,051 
194,711 
2,521 
9,801 
1,222,223 
102,606 
22,938 
14,916 
13,551 
4,724 
158,735 
- 
1 
1,014 
979 
670 
2,664 
105,825 
77,146 
181,495 
- 
- 
364,466 
1,225,354 
248,136 
392,136 
17,051 
15,195 
1,897,872 
Liabilities
6,618 
- 
- 
- 
- 
6,618 
844,816 
12,627 
- 
- 
- 
857,443 
229,251 
130,700 
4,820 
- 
- 
364,771 
27,898 
76,473 
279,837 
32,282 
12,709 
429,199 
10,985 
3,363 
15,047 
18,831 
- 
48,226 
1,119,568 
223,163 
299,704 
51,113 
12,709 
1,706,257 
105,786 
24,973 
92,432 
(34,062)
2,486 
191,615 
NPV change in the banking book
-100 bps
+100 bps
-100 bps
+100 bps
(1,781)
1,728 
(1,724)
1,652 
638 
(610)
(2,181)
2,146 
45 
(35)
(229)
197 
NPV change in the trading book
215 
(194)
137 
(125)
339 
(317)
247 
(234)
(37)
37 
(33)
33 
Foreign currencies ............................................................................................................
Foreign currencies ............................................................................................................
Loans to credit institutions ...........................................................
Balances with Central Bank .........................................................
Due to credit institutions and Central Bank ..................................
ISK, CPI index-linked ........................................................................................................
Derivatives ..................................................................................
ISK, CPI index-linked ........................................................................................................
Deposits ......................................................................................
Net interest gap  ........................................................................
Sensitivity analysis of interest rate risk
31.12.2024
Subordinated liabilities .................................................................
Borrowings  ..................................................................................
Bonds and debt instruments used for hedging .............................
Bonds and debt instruments ........................................................
Loans to customers .....................................................................
Derivatives ..................................................................................
Liabilities ....................................................................................
ISK, Non index-linked ........................................................................................................
Assets ........................................................................................
The
following
table
shows
the
sensitivity
of
the
Group's
net
present
value
(NPV)
of
interest-bearing
assets
and
liabilities,
due
to
changes
in
interest
rates
by
currencies.
The
variation
is
calculated
on
the
basis
of
simultaneous
parallel
shifts
upwards
or
downwards
of
yield
curves.
The
choice
of
shifts
is
not
an
estimate
of
risk
likelihood.
Behavioral
maturities
are
taken
into
account
in
the
NPV
calculations,
including
prepayment likelihood and expected behavior of non-maturing deposits. The Bank's behavioral models were last updated in Q4 2025.
ISK, Non index-linked ........................................................................................................
31.12.2025
70

===== SIDA 71 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk, continued
Indexation risk
31.12.2025
Up to 1
1 to 5
Over 5
Assets, CPI index-linked
year
years
years
Total
24,567 
119,753 
376,058 
520,378 
6,335 
8,772 
5,137 
20,244 
30,902 
128,525 
381,195 
540,622 
Liabilities, CPI index-linked
118,029 
12,687 
4,371 
135,087 
20,522 
118,169 
18,782 
157,473 
- 
- 
21,803 
21,803 
- 
- 
1,243 
1,243 
4,241 
- 
- 
4,241 
142,792 
130,856 
46,199 
319,847 
(107,649)
(2,331)
334,996 
225,016 
(4,241)
- 
- 
(4,241)
(111,890)
(2,331)
334,996 
220,775 
(114,555)
(10,683)
329,939 
204,697 
31.12.2024
Assets, CPI index-linked
14,792 
107,828 
357,789 
480,409 
6,702 
7,304 
10,564 
24,570 
21,494 
115,132 
368,353 
504,979 
Liabilities, CPI index-linked
114,696 
13,998 
4,196 
132,890 
35,207 
88,891 
42,447 
166,545 
6,607 
- 
11,195 
17,802 
- 
- 
1,122 
1,122 
105 
54 
- 
159 
156,615 
102,943 
58,960 
318,518 
(135,016)
12,243 
309,393 
186,620 
(105)
(54)
- 
(159)
(135,121)
12,189 
309,393 
186,461 
(135,223)
4,885 
298,830 
168,491 
Net on-balance sheet position ...........................................................................................
Financial instruments ........................................................................................................
CPI balance for prudential consolidation, excluding insurance operations * .............
Borrowings ........................................................................................................................
Assets, CPI index-linked .................................................................................................
Other .................................................................................................................................
Loans to customers ...........................................................................................................
Book value and maturity profile of indexed assets and liabilities
Financial instruments ........................................................................................................
Deposits ............................................................................................................................
* Consolidated situation as per EU Regulation No 575/2013 (CRR) 
CPI balance for prudential consolidation, excluding insurance operations * .............
Liabilities, CPI indexed linked ........................................................................................
Off-balance sheet position ................................................................................................
Deposits ............................................................................................................................
CPI balance ......................................................................................................................
Subordinated liabilities ......................................................................................................
Loans to customers ...........................................................................................................
Net on-balance sheet position ...........................................................................................
Borrowings ........................................................................................................................
CPI balance ......................................................................................................................
A
significant
part
of
the
Group's
statement
of
financial
position
is
linked
to
the
Icelandic
Consumer
Price
Index
(CPI).
For
index-linked
instruments,
principal
and
interest
payments
are
adjusted
proportionally
to
the
CPI.
The
Group
is
exposed
to
indexation
risk
as
indexed
assets exceed indexed liabilities. Financial instruments held for liquidity or market making purposes are assumed to be on demand.
Subordinated liabilities ......................................................................................................
Assets, CPI index-linked .................................................................................................
Off-balance sheet position ................................................................................................
Liabilities, CPI index-linked ............................................................................................
Other .................................................................................................................................
Net off-balance sheet position ...........................................................................................
Net off-balance sheet position ...........................................................................................
71

===== SIDA 72 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk, continued
Currency risk
Breakdown of assets and liabilities by currency
31.12.2025
Financial assets
ISK
EUR
USD
GBP
DKK
NOK
Other
Total
149,766 
167 
56 
52 
- 
21 
49 
150,111 
Loans to credit institutions ......................
643 
7,912 
9,351 
1,722 
1,313 
278 
1,348 
22,567 
Loans to customers ................................
1,066,903 
181,591 
42,317 
2,250 
31,848 
2,729 
1,418 
1,329,056 
Financial instruments .............................
123,312 
51,321 
4,205 
242 
78 
19,952 
16,706 
215,816 
Other financial assets .............................
15,611 
324 
990 
103 
2 
1 
- 
17,031 
Financial assets ...................................
1,356,235 
241,315 
56,919 
4,369 
33,241 
22,981 
19,521 
1,734,581 
Financial liabilities
Due to credit inst. and Central Bank .......
6,075 
3,556 
1,560 
770 
- 
- 
42 
12,003 
Deposits .................................................
829,869 
37,421 
40,081 
5,024 
5,106 
2,640 
1,041 
921,182 
Financial liabilities at fair value ...............
1,289 
1,720 
18 
17 
7 
63 
15 
3,129 
Other financial liabilities ..........................
6,277 
3,023 
1,781 
181 
245 
66 
219 
11,792 
Borrowings .............................................
188,973 
251,999 
5,908 
- 
- 
21,347 
26,596 
494,823 
Subordinated liabilities ...........................
24,052 
753 
15,635 
- 
- 
- 
3,078 
43,518 
Financial liabilities ...............................
1,056,535 
298,472 
64,983 
5,992 
5,358 
24,116 
30,991 
1,486,447 
Net on-balance sheet position ................
299,700 
(57,157)
(8,064)
(1,623)
27,883 
(1,135)
(11,470)
Net off-balance sheet position ................
(52,267)
58,964 
7,865 
1,881 
(28,441)
1,101 
10,897 
Net position * ........................................
247,433 
1,807 
(199)
258 
(558)
(34)
(573)
Non-financial assets
Investment property ...............................
7,305 
- 
- 
- 
- 
- 
- 
7,305 
Investments in associates ......................
760 
- 
- 
- 
- 
- 
- 
760 
Intangible assets ....................................
7,533 
- 
- 
- 
- 
- 
- 
7,533 
Tax assets .............................................
2 
- 
- 
- 
- 
- 
- 
2 
Assets and disposal groups
held for sale ........................................
98 
- 
- 
- 
- 
- 
- 
98 
Other non financial assets ......................
4,981 
311 
63 
104 
- 
27 
- 
5,486 
Non-financial assets ............................
20,679 
311 
63 
104 
- 
27 
- 
21,184 
Non-financial liabilities and equity
Tax liabilities ..........................................
12,894 
- 
- 
89 
- 
- 
- 
12,983 
Other non-financial liabilities ...................
38,827 
103 
12 
- 
- 
- 
2 
38,944 
Shareholders' equity ...............................
217,327 
- 
- 
- 
- 
- 
- 
217,327 
Non-controlling interest ..........................
64 
- 
- 
- 
- 
- 
- 
64 
Non-financial liabilities and equity ......
269,112 
103 
12 
89 
- 
- 
2 
269,318 
Management reporting
of currency risk ** .............................
(1,000)
2,015 
(148)
273 
(558)
(7)
(575)
 
Cash and balances with CB ....................
Currency
risk
is
the
risk
of
loss
due
to
adverse
movements
in
foreign
exchange
rates.
The
Group
is
exposed
to
currency
risk
through
a
currency mismatch between assets and liabilities. Net exposures per currency are monitored centrally in the Bank.
**
Management
monitors
currency
risk
with
more
assets
and
liabilities
underlying
as
it
is
considered
to
be
a
more
accurate
measurement
of
the
Group's
currency
exposure. The net position, as seen by management, is the position used for managing the currency imbalance.
* The net position of the currency risk is presented in accordance with IFRS.
72

===== SIDA 73 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk, continued
31.12.2024
Financial assets
ISK
EUR
USD
GBP
DKK
NOK
Other
Total
123,395 
355 
189 
62 
- 
20 
73 
124,094 
Loans to credit institutions ......................
170 
9,022 
12,501 
567 
718 
419 
2,293 
25,690 
Loans to customers ................................
1,011,398 
130,718 
57,871 
1,569 
25,031 
1,993 
1,478 
1,230,058 
Financial instruments .............................
124,920 
43,854 
11,698 
212 
120 
12,854 
12,759 
206,417 
Other financial assets .............................
6,470 
318 
1,671 
4 
1 
11 
1 
8,476 
Financial assets ...................................
1,266,353 
184,267 
83,930 
2,414 
25,870 
15,297 
16,604 
1,594,735 
Financial liabilities
Due to credit inst. and Central Bank .......
2,649 
3,388 
176 
333 
- 
- 
72 
6,618 
Deposits .................................................
763,140 
35,697 
47,448 
5,218 
3,383 
1,282 
1,275 
857,443 
Financial liabilities at fair value ...............
2,961 
4,006 
1,082 
10 
- 
219 
116 
8,394 
Other financial liabilities ..........................
6,760 
812 
1,865 
219 
468 
148 
359 
10,631 
Borrowings .............................................
197,607 
201,031 
2,989 
- 
- 
18,547 
13,004 
433,178 
Subordinated liabilities ...........................
20,957 
735 
20,004 
- 
- 
- 
2,842 
44,538 
Financial liabilities ...............................
994,074 
245,669 
73,564 
5,780 
3,851 
20,196 
17,668 
1,360,802 
Net on-balance sheet position ................
272,279 
(61,402)
10,366 
(3,366)
22,019 
(4,899)
(1,064)
Net off-balance sheet position ................
(40,216)
63,377 
(9,923)
3,266 
(22,090)
4,925 
661 
Net position * ........................................
232,063 
1,975 
443 
(100)
(71)
26 
(403)
Non-financial assets
Investment property ...............................
9,387 
- 
- 
- 
- 
- 
- 
9,387 
Investments in associates ......................
814 
- 
- 
- 
- 
- 
- 
814 
Intangible assets ....................................
7,688 
- 
- 
- 
- 
- 
- 
7,688 
Tax assets .............................................
2 
- 
- 
- 
- 
- 
- 
2 
Assets and disposal groups
held for sale ........................................
111 
- 
- 
- 
- 
- 
- 
111 
Other non financial assets ......................
5,004 
294 
100 
105 
1 
27 
- 
5,531 
Non-financial assets ............................
23,006 
294 
100 
105 
1 
27 
- 
23,533 
Non-financial liabilities and equity
Tax liabilities ..........................................
11,060 
- 
- 
- 
- 
- 
- 
11,060 
Other non-financial liabilities ...................
39,292 
21 
6 
- 
- 
- 
- 
39,319 
Shareholders' equity ...............................
206,582 
- 
- 
- 
- 
- 
- 
206,582 
Non-controlling interest ..........................
504 
- 
- 
- 
- 
- 
- 
504 
Non-financial liabilities and equity ......
257,438 
21 
6 
- 
- 
- 
- 
257,465 
Management reporting
of currency risk ** .............................
(2,369)
2,248 
537 
5 
(70)
53 
(403)
Cash and balances with CB ....................
** The management monitors currency risk with more assets and liabilities underlying as it is considered to be a more accurate measurement of the Group's 
currency exposure. The net position, as seen by the management, is the position used for managing the currency imbalance.
* The net position of the currency risk is presented in accordance with IFRS.
73

===== SIDA 74 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45.
Market risk, continued
Sensitivity analysis for currency risk
Currency
-10%
+10%
-10%
+10%
(202)
202 
(225)
225 
15 
(15)
(54)
54 
(27)
27 
(1)
1 
56 
(56)
7 
(7)
1 
(1)
(5)
5 
58 
(58)
40 
(40)
Equity risk
Sensitivity analysis for equity risk
Equity
-10%
+10%
-10%
+10%
(367)
367 
(374)
374 
(759)
759 
(740)
740 
(594)
594 
(286)
286 
Derivatives
Derivatives
are
a
part
of
the
Group's
customer
product
offering.
The
types
of
derivatives
currently
offered
are
forward
contracts,
swaps
and
options.
Eligible
underlying
market
factors
are
interest
rates,
foreign
exchange
rates,
equities
and
commodities.
Exposure
limits,
hedging
requirements
and
collateral
requirements
are
determined
in
accordance
with
the
Group's
risk
appetite
and
monitored
by
Risk
Management
on
a
daily
basis.
The
Group
also
uses
derivatives
to
hedge
market
risk
on
its
statement
of
financial
position.
Note
25
provides a breakdown of the Group's derivative positions by type.
The
table
below
indicates
the
currencies
to
which
the
Group
had
significant
exposure
at
the
end
of
the
period.
The
analysis
calculates
the
effect
of
a
reasonably
possible
movement
of
the
currency
rate
against
the
ISK,
with
all
other
variables
held
constant,
on
the
Consolidated
Income
Statement
(due
to
the
fair
value
of
currency
sensitive
non-trading
monetary
assets
and
liabilities).
A
negative
amount
in
the
table
reflects
a
potential
net
reduction
in
the
Consolidated
Income
Statement
or
equity,
while
a
positive
amount
reflects
a
net
potential
increase.
An
equivalent
decrease
in
each
of
the
below
currencies
against
the
ISK
would
have
resulted
in
an
equivalent
but
opposite
impact
(+10%
denotes a depreciation of the ISK). 
The
analysis
below
calculates
the
effect
of
a
reasonable
possible
movement
in
equity
prices
that
affect
the
Consolidated
Financial
Statements.
A
negative
amount
in
the
table
reflects
a
potential
net
reduction
in
the
Consolidated
Income
Statement
or
equity,
while
a
positive
amount
reflects
a
potential
net
increase.
Investments
in
associates
are
excluded.
The
result
of
value-at-risk
calculations
for
the
trading book are shown in the Group's Pillar 3 Risk Disclosures.
Banking book - unlisted .....................................................................................................
Trading book - listed ..........................................................................................................
NOK ..................................................................................................................................
Equity
risk
is
the
risk
that
the
fair
value
of
equities
decreases.
For
information
on
assets
seized
and
held
for
sale
and
equity
exposures,
see Notes 30 and 24 respectively.
DKK ..................................................................................................................................
Other .................................................................................................................................
31.12.2025
31.12.2025
GBP ..................................................................................................................................
31.12.2024
EUR ..................................................................................................................................
Banking book - listed .........................................................................................................
31.12.2024
USD ..................................................................................................................................
74

===== SIDA 75 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
46.
Liquidity and Funding risk
Maturity analysis of assets and liabilities
Contractual cash flow of assets and liabilities
31.12.2025
On
Up to 3
 3-12
 1-5
Over 5
With no
Book
Financial assets
demand
months
months
years
years
maturity
Total
value
Cash and balances with CB ...................
31,371 
85,137 
33,603 
- 
- 
- 
150,111 
150,111 
Loans to credit institutions ......................
20,222 
2,342 
3 
- 
- 
- 
22,567 
22,567 
Loans to customers ................................
6,193 
194,928 
206,108 
606,114 
1,213,624 
- 
2,226,967 
1,329,056 
Financial instruments .............................
11,733 
58,312 
42,035 
71,729 
7,049 
34,475 
225,333 
215,816 
Derivatives - assets leg .............................
- 
54,751 
38,482 
38,081 
- 
- 
131,314 
107,477 
Derivatives - liabilities leg ..........................
- 
(50,757)
(33,310)
(35,221)
- 
- 
(119,288)
(98,853)
Other financial instruments ........................
11,733 
54,318 
36,863 
68,869 
7,049 
34,475 
213,307 
207,192 
Other financial assets .............................
689 
12,358 
413 
3,232 
339 
- 
17,031 
17,031 
Financial assets ...................................
70,208 
353,077 
282,162 
681,075 
1,221,012 
34,475 
2,642,009 
1,734,581 
Financial liabilities
6,405 
5,602 
- 
- 
- 
- 
12,007 
12,003 
Deposits .................................................
615,915 
174,863 
115,497 
13,319 
5,441 
- 
925,035 
921,182 
Financial liabilities at fair value ...............
- 
1,960 
2,065 
(187)
(115)
- 
3,723 
3,129 
Derivatives - assets leg .............................
- 
(65,157)
(5,397)
(7,097)
(10,138)
- 
(87,789)
(78,261)
Derivatives - liabilities leg ..........................
- 
67,117 
7,462 
6,910 
10,023 
- 
91,512 
81,390 
Other financial liabilities ..........................
183 
9,545 
900 
1,164 
- 
- 
11,792 
11,792 
Borrowings .............................................
- 
6,366 
162,564 
315,285 
66,226 
- 
550,441 
494,823 
Subordinated liabilities ...........................
- 
1,071 
2,103 
25,566 
33,759 
- 
62,499 
43,518 
Financial liabilities ...............................
622,503 
199,407 
283,129 
355,147 
105,311 
- 
1,565,497 
1,486,447 
Net position for assets and liab. ..........
(552,295)
153,670 
(967)
325,928 
1,115,701 
34,475 
1,076,512 
248,134 
 
Off-balance sheet items
Financial guarantees ..............................
- 
2,344 
10,034 
3,865 
9,207 
- 
25,450 
25,450 
Unused overdraft ...................................
- 
90,187 
- 
- 
- 
- 
90,187 
90,187 
Undrawn loan commitments ...................
- 
38,891 
29,913 
16,525 
- 
- 
85,329 
85,329 
Off-balance sheet items .......................
- 
131,422 
39,947 
20,390 
9,207 
- 
200,966 
200,966 
Net contractual cash flow ....................
(552,295)
22,248 
(40,914)
305,538 
1,106,494 
34,475 
875,546 
47,168 
Liquidity
risk
is
one
of
the
Group's
most
significant
risk
factors
and
a
great
deal
of
emphasis
is
placed
on
managing
it.
The
Asset
and
Liability
Committee
(ALCO)
is
responsible
for
managing
liquidity
and
funding
risk
within
the
risk
appetite
set
by
the
Board
of
Directors.
The
Bank's
Treasury
manages
liquidity
positions
on
a
day-to-day
basis.
Risk
Management
measures,
monitors
and
reports
the
Bank's
liquidity
and funding risk on a daily basis.
A
primary
source
of
funding
for
the
Group
is
deposits
from
individuals,
businesses
and
financial
undertakings.
The
Group's
liquidity
risk
stems from the fact that the maturity of loans exceeds the maturity of deposits, of which 67% is on-demand.
Due to credit inst. and Central Bank .......
The
maturity
analysis
is
based
on
contractual
cash
flows.
The
amounts
are
not
discounted
and
include
future
interest
payments,
but
CPI-
linked
amounts
do
not
include
accrued
indexation
due
to
future
inflation.
The
total
amount
for
each
item
is
higher
than
the
corresponding
amount
on
the
Group's
statement
of
financial
position,
since
the
amounts
on
the
balance
sheet
are
either
at
amortized
cost
and
do
not
contain future interest payments, or at fair value where future cash flows have been discounted.
Liquidity
risk
is
the
risk
that
the
Group,
though
solvent,
either
does
not
have
sufficient
financial
resources
available
to
meet
its
liabilities
when
they
fall
due,
or
can
secure
them
only
at
excessive
cost.
Liquidity
risk
arises
from
the
inability
to
manage
unplanned
decreases
or
changes in funding sources.
Contractual
cash
flows
differ
in
many
ways
from
expected
cash
flows.
The
difference
is
most
significant
for
deposits
on
the
liability
side
and
bonds
on
the
asset
side.
Deposits
are
always
assumed
to
be
withdrawn
at
the
earliest
possible
date,
despite
the
fact
that
a
large
part
of
the
deposit
base
is
considered
to
be
stable
funding
where
behavioral
maturity
considerably
exceeds
contractual
maturity.
Furthermore,
although
contractual
cash
flows
are
presented
for
bonds
held
by
the
Bank,
a
large
portion
of
the
bonds
are
a
part
of
the
Bank's
liquidity
buffer
and
are
considered
to
be
highly
liquid
and
can
be
sold
or
pledged
to
the
Central
Bank
of
Iceland
and
thus
converted
into
cash
at
very short notice.
The
Group's
strategy
in
relation
to
liquidity
risk
is
to
actively
manage
its
liquidity
positions
and
risks
to
meet
payment
and
settlement
obligations
on
a
timely
basis
under
both
normal
and
stressed
conditions.
The
Group
seeks
to
maintain
a
stable
funding
profile
which
supports
its
business
strategy
and
liquidity
profile,
ensuring
that
the
Group
can
withstand
periods
of
market
turbulence,
without
reliance
on
volatile funding or external support.
75

===== SIDA 76 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
46.
Liquidity and Funding risk, continued
31.12.2024
On
Up to 3
 3-12
 1-5
Over 5
With no
Book
Financial assets
demand
months
months
years
years
maturity
Total
value
Cash and balances with CB ...................
25,480 
66,140 
32,474 
- 
- 
- 
124,094 
124,094 
Loans to credit institutions ......................
23,019 
2,659 
11 
- 
- 
- 
25,689 
25,690 
Loans to customers ................................
4,751 
179,293 
196,603 
528,859 
1,365,661 
- 
2,275,167 
1,230,058 
Financial instruments .............................
11,706 
103,642 
22,860 
19,680 
14,150 
38,304 
210,342 
206,417 
Derivatives - assets leg .............................
- 
33,378 
10,632 
46,199 
- 
- 
90,209 
74,009 
Derivatives - liabilities leg ..........................
- 
(31,243)
(9,205)
(41,502)
- 
- 
(81,950)
(67,294)
Other financial instruments ........................
11,706 
101,507 
21,433 
14,983 
14,150 
38,304 
202,083 
199,702 
Other financial assets .............................
548 
4,840 
1,013 
2,075 
- 
- 
8,476 
8,476 
Financial assets ...................................
65,504 
356,574 
252,961 
550,614 
1,379,811 
38,304 
2,643,768 
1,594,735 
Financial liabilities
4,117 
2,504 
- 
- 
- 
- 
6,621 
6,618 
Deposits .................................................
587,107 
135,946 
118,596 
14,674 
5,282 
- 
861,605 
857,443 
Financial liabilities at fair value ...............
- 
3,698 
5,277 
6,160 
- 
- 
15,135 
8,394 
Derivatives - assets leg .............................
- 
(47,474)
(21,313)
(12,852)
- 
- 
(81,639)
(72,889)
Derivatives - liabilities leg ..........................
- 
51,172 
26,590 
19,012 
- 
- 
96,774 
81,283 
Short position in bonds used for hedging ..
- 
- 
- 
- 
- 
- 
- 
- 
Other financial liabilities ..........................
99 
9,339 
292 
901 
- 
- 
10,631 
10,631 
Borrowings .............................................
- 
3,974 
102,645 
326,115 
45,775 
- 
478,509 
433,178 
Subordinated liabilities ...........................
- 
1,630 
4,788 
9,377 
45,352 
- 
61,147 
44,538 
Financial liabilities ...............................
591,323 
157,091 
231,598 
357,227 
96,409 
- 
1,433,648 
1,360,802 
Net position for assets and liab. ..........
(521,115)
195,986 
50,564 
323,848 
1,124,603 
34,475 
1,208,361 
233,933 
 
Off-balance sheet items
Financial guarantees ..............................
- 
1,921 
8,221 
3,847 
7,815 
- 
21,804 
21,804 
Unused overdraft ...................................
- 
74,270 
- 
- 
- 
- 
74,270 
74,270 
Undrawn loan commitments ...................
- 
36,788 
23,476 
7,394 
- 
- 
67,658 
67,658 
Off-balance sheet items .......................
- 
112,979 
31,697 
11,241 
7,815 
- 
163,732 
163,732 
Net contractual cash flow ....................
(525,819)
86,504 
(10,334)
182,146 
1,275,587 
38,304 
1,046,388 
70,201 
Net Stable Funding Ratio
31.12.2025
31.12.2024
1,319,265 
1,223,464 
1,115,682 
1,040,677 
118% 
118% 
Available stable funding  .........................................................................................................................................
Required stable funding  .........................................................................................................................................
The
NSFR
calculations
are
based
solely
on
figures
for
the
parent
company.
The
Bank's
subsidiaries
have
negligible
impact
on
the
funding
ratio. 
The
Net
Stable
Funding
Ratio
(NSFR)
measures
the
amount
of
available
stable
funding
(ASF)
with
the
Group
against
the
required
stable
funding
(RSF)
as
per
the
definition
of
the
Central
Bank
of
Iceland
rules
No.
750/2021.
In
general,
RSF
is
determined
by
applying
different
weights
to
different
asset
classes
depending
on
the
level
of
liquidity.
ASF
however
is
calculated
by
applying
weights
to
the
Group's
liabilities depending on maturity and stickiness. The NSFR in total shall exceed 100%.
Due to credit inst. and Central Bank .......
Net stable funding ratio  .......................................................................................................................................
76

===== SIDA 77 =====

Arion Bank Consolidated Financial Statements 2025
Amounts are in ISK millions
Notes to the Consolidated Financial Statements
46.
Liquidity and Funding risk, continued
Liquidity coverage ratio
Total all
31.12.2025
ISK
EUR
currencies
205,171 
47,836 
290,759 
11,898 
- 
11,898 
217,069 
47,836 
302,657 
146,016 
15,407 
185,886 
376 
- 
598 
9,395 
9,014 
15,375 
155,787 
24,421 
201,859 
- 
4,874 
18,089 
24,805 
2,917 
31,822 
24,805 
7,791 
49,911 
166%
288%
199%
31.12.2024
180,898
39,790
253,753
10,753 
- 
10,753 
191,651 
39,790 
264,506 
138,492 
14,537 
176,642
7,919 
- 
8,079
9,012 
10,009 
14,657
155,423
24,546
199,378
1 
6,935 
22,051
25,264 
2,588 
30,882
25,265 
9,523 
52,933 
147%
265%
181%
***
LCR
is
defined
as:
LCR
=
Weighted
liquid
assets
/
(weighted
cash
outflows
-
weighted
cash
inflows)
where
weighted
cash
inflows
are
capped
at
75%
of
weighted cash outflows.
Liquid assets level 1 *  .........................................................................................................................
Other cash inflows  ..............................................................................................................................
Cash outflows ....................................................................................................................................
Cash outflows ....................................................................................................................................
Liquidity coverage ratio (LCR)  *** ....................................................................................................
** Short-term deposits with other banks are defined as cash inflows in LCR calculations.
Other cash outflows  ............................................................................................................................
Borrowings  ..........................................................................................................................................
Other cash inflows  ..............................................................................................................................
Deposits  .............................................................................................................................................
Liquid assets level 2  ...........................................................................................................................
To
qualify
as
highly
liquid
assets
under
the
LCR
rules,
assets
must
be
non-pledged,
liquid
and
easily
priced
on
the
market,
traded
on
an
active market and not issued by the Group or related entities.
The
minimum
requirement
for
the
total
LCR
is
100%,
while
the
requirement
for
the
LCR
in
ISK
is
50%
and
80%
in
EUR.
There
is
no
minimum requirement for the aggregate position in all foreign currencies.
The following table shows the breakdown for the Group's LCR calculations.
*
Level
1
assets
include
the
Group's
cash
and
balances
with
the
Central
Bank,
domestic
bonds
eligible
as
collateral
at
the
Central
Bank
and
foreign
government
bonds which receive 100% weight.
Liquidity coverage ratio (LCR)  *** ....................................................................................................
Liquid assets level 2  ...........................................................................................................................
Short-term deposits with other banks **  ..............................................................................................
Liquid assets ......................................................................................................................................
Cash inflows .......................................................................................................................................
Liquid assets level 1 *  .........................................................................................................................
Other cash outflows  ............................................................................................................................
Borrowings  ..........................................................................................................................................
The
Liquidity
Coverage
Ratio
(LCR)
is
one
of
the
standards
introduced
in
the
Basel
III
Accord.
The
LCR
is
the
result
of
a
stress
test
that
is
designed
to
ensure
that
banks
have
the
necessary
assets
on
hand
to
withstand
short-term
liquidity
disruptions.
More
precisely,
LCR
represents
the
balance
between
highly
liquid
assets
and
the
expected
net
cash
outflow
of
the
Group
in
the
next
30
days
under
stressed
conditions.
Cash inflows .......................................................................................................................................
Short-term deposits with other banks **  ..............................................................................................
Deposits  .............................................................................................................................................
Liquid assets ......................................................................................................................................
77

===== SIDA 78 =====