Condensed Consolidated
Financial
Statements 2025
Arion Bank Consolidated Financial Statements 2025
page
3
4
13
16
17
18
19
21
22
99
100
Contents
Consolidated Income Statement ...........................................................................................................................................................
Consolidated Statement of Cash Flows ................................................................................................................................................
Arion Bank highlights ............................................................................................................................................................................
Endorsement and statement by the Board of Directors and the CEO ...................................................................................................
Consolidated Statement of Financial Position .......................................................................................................................................
Consolidated Statement of Comprehensive Income .............................................................................................................................
Consolidated Statement of Changes in Equity ......................................................................................................................................
Independent Auditor's report ...............................................................................................................................................................
Notes to the Consolidated Financial Statements ..................................................................................................................................
5-year overview ....................................................................................................................................................................................
Appendices (unaudited) ........................................................................................................................................................................
2
Arion Bank
Highlights 31 December 2025
FY 2025 14.9%
Return on
Equity*
FY 2025 42.3%
Total cost-to-
core income
18.4%
CET1 ratio
    





    





    





Return on equity* (%)
Net interest margin (%)
Total cost-to-Core income ratio (%)
CET1 ratio (%)
    





LCR ratio (%)
    





Total assets (ISK bn)










Long term: A3
Covered bond: Aa1
Outlook: Stable












Loans to customers by sector
*Return on equity attributable to shareholders of Arion Bank
Unaudited
Arion Bank Consolidated Financial Statements 2025
About Arion Bank
-
Operations during the year
2025
Return on equity attributable to
shareholders of Arion Bank
14.9%
Core operating income / REA 7.4%
Insurance revenue growth (YoY) 5.5%
Combined ratio 89.8%
Total cost-to-core income ratio 42.3%
308 bps
50%
Endorsement and statement
by the Board of Directors and the CEO
The Consolidated Financial Statements of Arion Bank for the year ended 31 December 2025 include the Consolidated Financial Statements of
Arion Bank ("the Bank") and its subsidiaries, together referred to as "the Group".
Income Statement
Arion Bank and its subsidiaries provide comprehensive financial services to the people of Iceland. Arion Bank’s role is to help those who want to
achieve success in Iceland and the Arctic through smart and reliable financial solutions which enhance financial health and create sustainable
value. Arion Bank places great importance on developing long-term relationships with its clients and is a market leader as a provider of cutting-
edge and modern banking services.
Arion Bank provides services to individuals, corporates and investors in three business segments: Retail Banking, Corporate & Investment
Banking, and Markets. The service offering is further augmented by the subsidiaries Stefnir and Vördur. Stefnir is one of the largest fund
management companies in Iceland, and Vördur is the fastest growing insurance company in Iceland, providing non-life and life insurance. The
Bank also offers pension services and manages several pensions funds. Arion’s service offering is therefore highly diverse.
The diverse service offering creates a broad revenue base, and the loan portfolio is well diversified between retail and corporate customers. The
high percentage of mortgages and the healthy distribution of loans across different sectors contribute towards risk management.
The Group is a market leader in terms of digital solutions and innovation, and the majority of the Group’s services can be obtained using the
Arion app. The broad spectrum of digital services makes banking more convenient for customers and also makes the business more cost
efficient. The Bank is a leading service provider and advisor to corporate customers and investors and has been a key figure in invigorating the
Icelandic stock market.
Arion Bank has adopted a clear policy on sustainable operations and environmental and climate issues. A wide range of green financial
services, such as green car loans, deposits, corporate loans and mortgages, is available to its customers. Arion Bank has in addition published
a sustainable financing framework which addresses the Bank’s funding and lending activities.
Arion Bank is a financially robust bank which aspires to operate profitably in harmony with society and the environment. The Bank is committed
to paying competitive dividends and is listed on Nasdaq Iceland and Nasdaq Stockholm.
Net earnings attributable to the shareholders of Arion Bank amounted to ISK 30.6 billion for the year, with a return on equity of 14.9% and
earnings per share ISK 22.05, compared with ISK 26.1 billion, 13.2% and ISK 18.31 respectively in 2024. Core income, defined as net interest
income, net commission income and insurance service results (excluding opex), increased by 12.3%, compared with the previous year. Net
interest income increased by 13.5%, compared with the previous year, and the net interest margin was 3.2%, compared with 3.1% in 2024. Net
commission income increased by 11.6% between years, an increase across the major categories. The operation of Vördur contributed
standalone net results of ISK 2.0 billion in 2025, compared with ISK 3.7 billion in 2024. Insurance revenues continued to grow, increasing by
5.5% between years, while claims increased by 5.0%. Net financial income amounted to ISK 1.1 billion, impacted by challenging capital markets,
especially in equities during the first half of the year. Other operating income amounted to ISK 5.5bn, mainly due to the fair value change and
profit from sale of the investment property Arnarland. Operating expenses, including operating expenses of the insurance operation, increased
by 2.5% compared with the previous year, with fluctuations in underlying items. Inflation measured 3.7% between years. The cost-to-income
ratio was 36.0%, compared with 42.6% in 2024, while the total cost-to-core income ratio was 42.3%, compared with 47.2% in 2024. Impairments
were calculated at 24bps for the year. The effective income tax rate was 27.7%.
Arion Bank's medium-term financial targets
Exceed 13%
Exceed 7.2%
In excess of market growth (5.7% in 9M 2025 YoY)
Below 95%
Below 45%
Pay-out ratio of approximately 50% of net earnings attributable to shareholders through either
dividends or buyback of the Bank's shares or a combination of both
150-250 bps management buffer (~16.8 - 17.8%)
Balance Sheet
CET1 ratio above regulatory
capital requirements
Arion Bank's medium-term financial targets compared with the operational results for the year
Dividend pay-out ratio
Arion Bank's balance sheet grew by 8.5% from year-end 2024. Loans to customers increased by 8.0%, mainly loans to corporates which
increased by 16.6%. Deposits increased by 7.4%, primarily individuals and SMEs with low LCR outflow weight. Shareholders’ equity amounted
to ISK 217,327 million at the end of the year. The Group's capital ratio, as calculated under the Financial Undertakings Act No. 161/2002, was
22.5% and the CET1 ratio was 18.4% assuming around ISK 15.3 billion dividend payment and ISK 5 billion buyback of own shares approved by
the Board in 2025 and the Financial Supervisory Authority of the Central Bank of Iceland (FSA) in January 2026. These ratios comfortably
exceed the requirements made by the FSA and Icelandic law. The liquidity position was strong at year-end and well above the regulatory
minimum.
4
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Merger discussion between Arion Bank and Kvika
Economic outlook
Outlook for the Group
Employees
Arion Bank and Vördur have in place an incentive scheme which came into effect in 2021 for employees of Arion Bank and Vördur. The scheme
is in compliance with the FSA’s rules on remuneration policies for financial institutions. The scheme is divided into two parts. Firstly, employees
can receive up to 10% of their fixed salary in the form of a cash payment. Secondly, a limited group can receive up to 25% of their fixed salary
as payment, partly in the form of shares or share options in the Bank. The key metric used to determine whether remuneration will be paid for
the relevant year, in part or in full, is whether the Bank’s return on equity in the relevant year is higher than the weighted ROE of the Bank’s main
competitors. Stefnir has a separate incentive scheme where other criteria are used as a basis. Since 2021 Arion Bank has had in place a share
option plan for all employees of the Bank, and the subsidiaries Vördur and Stefnir, which is considered important for aligning the interests of
employees with the long-term interests of the Bank. The share option plan was initially for five years and employees are entitled to buy shares
for up to ISK 1,500,000 each year. The purchase price is determined by the Bank’s average share price 10 days before the share option
agreement is signed. Further disclosure on the incentive scheme and the share option plan can be found in Note 13.
The Group had 901 full-time equivalent positions at the end of the year, compared with 858 at the end of 2024.
On 4 July 2025, the Board of Directors of Arion Bank reiterated its interest from 27 May to the Board of Kvika banki hf. to enter into merger
negotiations. The aim of the merger is to combine the companies’ strengths and to create a robust financial institution which offers
comprehensive services for its customers. The Board of Directors of Kvika agreed to the request, and both parties signed a letter of intent.
According to the letter of intent Kvika shareholders receive in exchange for their shares new shares in Arion Bank representing 26% of the
merged entity, a total of 485,237,822 shares, representing a share price of ISK 19.17 per share in Kvika and a share price of ISK 174.5 per
share in Arion Bank. The merger of the two banks is subject to both regulatory approval and the approval of shareholders’ meetings of both
entities. The first steps involve due diligence reviews and preliminary discussions with the Icelandic Competition Authority, which began late last
year, where the aims of the merger and benefits resulting from it, both for customers and the Icelandic financial market, will be presented. The
parties hope that the preliminary discussions, the finalization of contracts, and the due diligence review will be completed in the next few months.
Assuming that the preliminary discussions with the Icelandic Competition Authority are successful, merger negotiations will commence and the
merger will be formally announced to the regulators and will be submitted for approval at shareholders’ meetings of both companies. For further
information, see press releases from 4 and 21 July 2025.
In recent years, Arion has followed a strategy designed to drive leadership in our markets, the success of our customers and society as a whole.
This vision builds on long-term client relationships, diverse products and services and strong teamwork which form the basis for a seamless
customer experience and sustainable value creation. The Group’s performance over the past few years, which has continued in 2025, indicates
that we are on the right track. The proposed merger with Kvika Bank is a natural progression of this strategy and has strong potential to further
enhance the operational performance and the service to our clients.
The external operating environment continues to evolve. As before, Arion benefits from its diverse revenue streams and sound infrastructure,
while also retaining the flexibility to respond to the shifting environment. The operating environment for 2025 has continued to be impacted by
inflation, elevated interest rates, and international political uncertainty. Arion Bank remains in a strong position to manage the evolving external
operating environment.
After two years of modest expansion, household consumption regained its role as a key driver of economic activity. A 6.9% increase in payment
card turnover in the fourth quarter indicates continued momentum, reflecting households’ strong financial position, considerable resilience, and
substantial increases in real income. Thus, rising unemployment and a cooling labour market have not yet weighed on household spending.
Although it is too early to draw definitive conclusions, signs point to a structural shift in the adjustment mechanism of the economy, with a
greater share of adjustment now occurring through the labour market rather than via a weaker currency, higher inflation, and reduced purchasing
power. Such a shift, however, implies a higher level of unemployment than otherwise. Unemployment is projected to continue rising in the
coming months, as labour demand has weakened sharply and business sentiment, particularly among export oriented firms, has deteriorated.
The year 2025 proved particularly turbulent, as rising protectionism in global trade brought widespread uncertainty and significant volatility in
international markets. Although the impact on the Icelandic economy was ultimately less severe than feared, conditions became increasingly
challenging as the year progressed. Even so, the economy demonstrated resilience, with GDP growth of 1.5% in the first nine months of the
year according to Statistics Iceland’s preliminary estimates. Growth was driven primarily by household consumption, which increased by 3.6%
year on year, and investment, which expanded by 10.1%. Despite a record-breaking summer season for tourism, export growth was outpaced by
an 11.4% rise in imports. The surge in imports was largely attributable to significant inflows of computer equipment for data center operations,
together with a marked rise in foreign travel by Icelandic consumers, both reaching unprecedented levels.
During the autumn the economy faced a series of challenges. Flight capacity to Iceland sharply declined, international guidance on total
allowable catches (TAC) of pelagic species was significantly reduced, a major electrical equipment failure halted aluminium production locally,
and households’ borrowing terms and financial conditions tightened following a Supreme Court ruling. This led to a rise in unemployment and a
further slowdown in housing market activity, which had already shown signs of cooling earlier in the year. Even as the economic slowdown
became more evident, substantial wage increases continued to fuel domestic inflationary pressures. Inflation expectations likewise remained
elevated and well above the Central Bank’s target. Nevertheless, the Central Bank lowered interest rates in November, primarily in response to
turbulence in the mortgage market. Only two months later inflation rose to 5.2% in January, up from 4.6% at the beginning of 2025. Despite
visible signs of cooling economy, the uptick in inflation, although largely attributable to changes in excise taxes and other public-sector fees,
poses a significant challenge for the Monetary Policy Committee. As a result, interest rates were left unchanged in February, and further rate
cuts were set aside for the time being. Analysts still expect rate cuts to resume, but not until the second half of the year.
5
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Funding and liquidity
Capital adequacy and dividends
Ownership of Arion Bank
Risk management
In June, the Bank issued a new series of Tier 2 subordinated bonds. The total issue amounted to ISK 10.0 billion. The series matures in
December 2036 and can be called by the issuer in December 2031 and on every subsequent due interest date.
Arion Bank continued to issue covered bonds which are secured under the Covered Bond Act No. 11/2008. In 2025 the Bank issued covered
bonds amounting to ISK 18.5 billion, of which ISK 960 million were for own use.
Moody’s affirmed the Bank's A3 rating for senior unsecured debt and its A2 rating for long-term deposits with a stable outlook. In addition, the
Bank retained its Aa1 rating for covered bonds and its P-1 rating for short-term deposits. The rating reflected Moody’s expectations that the
Bank’s financial results would continue to be stable and that the proposed merger with Kvika will be orderly.
The proposed dividend for 2025, which will be subject to the approval of the Annual General Meeting on 11 March 2026, is equivalent to ISK
11.5 per share or around ISK 15.3 billion, net of own shares. In March 2025, Arion Bank paid a dividend of ISK 11.5 per share, approximately
ISK 16 billion. The Annual General Meeting 2025 authorized the Board to purchase up to 10% of the Bank’s issued share capital.
The main reason for the REA decrease is the introduction of CRR3 in Iceland in December 2025, resulting in an overall REA decrease of around
ISK 55 billion. REA for credit risk and operational risk decreased while changes to own funds requirements for market risk have been postponed
in the EEA and other effects are smaller. The CRR3-driven decrease was partly offset by customer lending growth of ISK 27.3 billion, which led
to an increase in REA. It should be noted that the Bank makes use of transitional arrangements in CRR3 so some of the initial capital relief will
be phased out over time.
The AGM of Arion Bank, held on 12 March 2025, approved the reduction of the Bank’s share capital by ISK 93,423,078 nominal value, through
cancelling the Bank’s own shares. The reduction was carried out on 7 April 2025. Thus, the share capital of Arion Bank was reduced from ISK
1,513 million to ISK 1,420 million in 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.
Following the introduction of CRR3, the Bank announced its intention to buy back up to ISK 5 billion of its own shares in Iceland and Sweden
and reduce its share capital.
The Bank's MREL requirements are 19.8% of REA excluding own funds used to meet the combined buffer requirement and 6.0% of TEM. The
Bank comfortably exceeded both at the end of 2025. An MREL subordination requirement of 13.5% will apply to the Bank from Q3 2027.
The main forum at which the Board reports information to the shareholders and propose decisions is at legally convened shareholders’
meetings. The Bank provides an effective and accessible arrangement for communications between shareholders and the Board of Directors
between those meetings. Any information sensitive to the market will be released through a MAR press release, unless legal conditions for
delaying public disclosure apply. Arion Bank also arranges quarterly meetings where the interim financial results are presented. The Bank has
also held its capital markets day, most recently in March 2024, where the management team discussed the Group’s performance and key focus
areas going forward.
Arion Bank's dividend policy states that the Bank aims to pay 50% of net earnings in dividends and that additional dividend or share buybacks
can be considered when the Bank's capital levels exceed the minimum regulatory requirements together with the Bank's management buffer. In
the medium term, the Bank aims to maintain capital adequacy ratios 150-250bps above total regulatory requirements. Arion Bank is currently
rated A3 with a stable outlook from Moody's Ratings.
The Group's capital adequacy ratio on 31 December 2025 was 22.5% and the CET1 ratio was 18.3%. The ratios account for a deduction due to
foreseeable dividend payments and share buybacks. This compares to a regulatory capital requirement of 19.6%, including the combined buffer
requirement. The Bank’s REA decreased by ISK 29.1 billion in the fourth quarter of 2025.
Funding and liquidity were characterized by a robust liquidity position and continued deposit growth. The Bank’s liquidity position was well in
excess of the stipulated minimum and the liquidity ratio at year-end 2025 was 199%, with the stipulated minimum being 100%.
In January, the Bank issued floating rate bonds in the amount of NOK 350 million and SEK 250 million, In February, the Bank issued €300
million senior preferred notes with a 5-year maturity, in June, the Bank issued senior preferred green bonds amounting to NOK 600 million and
SEK 900 million and in August, the Bank issued €300 million senior preferred notes with a 6-year maturity and the deal was close to five times
oversubscribed, with orders received from 105 investors spanning more than 20 countries across EMEA and APAC.
Lífeyrissjódur verzlunarmanna was the largest shareholder in Arion Bank with a shareholding of 9.56% at year-end and Arion Bank held 2.59%
of its own shares. The number of shareholders was 10,703 at the end of the period, compared with 10,200 at year-end 2024. Further information
on Arion Bank's shareholders can be found in Note 38.
The Group faces various risks arising from its day-to-day operations as a financial institution. Managing risk is therefore a core activity within the
Group. The key to effective risk management is a process of on-going identification of significant risk, quantification of risk exposure, actions to
limit risk and constant monitoring of risk. This process of risk management and the ability to manage and price risk factors is critical to the
Group's continuing profitability as well as ensuring that the Group's exposure to risk remains within acceptable levels. The Board of Directors is
ultimately responsible for the Bank’s risk management framework, ensuring that satisfactory risk policies and governance structures for
controlling the Bank’s risk exposure are in place. The Group’s risk management, its structure and main risk factors are described in the notes
and in the Bank’s unaudited Pillar 3 Risk Disclosures.
6
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Governance
Sustainability and non-financial disclosures
Corporate governance at Arion Bank is described in more detail in the Bank's Corporate Governance Statement which is contained in the
unaudited appendix to the Financial Statement and on the website www.arionbanki.is. The Corporate Governance Statement is based on
legislation, regulations, and recognised guidelines in force when the Bank's annual financial statements are adopted by the Board of Directors,
prepared in accordance with the Guidelines on Corporate Governance, 6th edition, issued by the Icelandic Chamber of Commerce, SA –
Business Iceland and Nasdaq Iceland in February 2021. Corporate governance at Arion Bank complies with the guidelines with two exceptions,
which are explained in more detail in the Corporate Governance Statement.
At Arion Bank, sustainability is integrated into the Group’s governance framework.
The Bank has a sustainability committee, and the management of risks related to environmental, social, and governance (ESG) factors is
defined as part of the risk management system. The CEO chairs the committee, whose main role is to monitor the Bank’s performance in terms
of its sustainability strategy and commitments and to ensure that ESG factors are incorporated into decision making and planning. The Bank’s
sustainable financing committee and equality committee are sub-committees of this body.
The Board of Directors of Arion Bank places great importance on good corporate governance and a corporate culture which fosters open and
honest relations between the Bank, its shareholders, and other stakeholders. The Board of Directors is the supreme authority in the affairs of the
Bank between shareholders’ meetings and tends to those operations of the Bank which are not considered part of the day-to-day business, i.e.,
taking decisions on issues which are unusual or of a significant nature. The Board of Directors appoints a Chief Executive Officer who is
responsible for the day-to-day operations in accordance with a strategy set out by the Board. The CEO hires the Executive Management.
Sustainability governance framework
Vörður has a sustainability group which addresses sustainability and related risks in operations. The group is composed of employees appointed
by the operating officer and it works in accordance with established rules of procedure. Its role is to promote sustainability across all operations
and to set and monitor progress toward the company’s goals. At Stefnir, an ESG committee operates and consists of employees involved in the
investment process of the funds. The committee works according to defined rules, supports investment decisions, and ensures adherence to
Stefnir’s responsible investment framework. It also decides on the ethical restrictions that apply to the funds’ investment decisions.
An incentive system is in operation for permanent employees of Arion Bank. The system is based on clear objectives and is subject to strict
conditions in accordance with applicable laws and regulations. In 2025, as in previous years, both financial and non financial metrics formed part
of the system. Non financial metrics include customer satisfaction, education and equality matters, and know your customer (KYC) performance.
ESG considerations are also incorporated into incentive schemes at Stefnir and Vörður.
There are five Board sub-committees: The Board Audit Committee, the Board Risk Committee, the Board Credit Committee, the Board
Remuneration Committee and the Board Tech Committee. One of the committee members on the Board Audit Committee is not a Board
member and is independent of the Bank and its shareholders.
The main roles of the Board, as further specified in the rules of procedure of the Board, include setting the Bank's strategy, supervising financial
affairs and accounting, and ensuring that appropriate internal controls are in place. The Board ensures that the Bank has active Internal Audit,
Compliance and Risk Management departments. The Internal Auditor is appointed by the Board of Directors and works independently of other
departments of the Bank in accordance with a charter from the Board. The Internal Auditor provides independent and objective assurance and
advice designed to add value and improve the Bank's operations. The Compliance Officer, who reports directly to the CEO, works independently
within the Bank in accordance with a charter from the Board. The main role of Compliance is to ensure that the Bank has in place proactive
measures to reduce the risk of rules being breached in the course of its activities. Compliance is also responsible for coordinating the Bank’s
measures against money laundering and terrorist financing. The duties of Compliance are carried out under a risk-based compliance plan
approved by the Board of Directors, including a monitoring and training schedule for employees which addresses the laws and rules under which
the Bank operates.
At the Bank’s AGM on 12 March 2025, five members were elected to serve on the Board of Directors until the next AGM, three women and two
men. Paul Horner was elected Chairman of the Board. Additionally, two Alternate Directors (one woman and one man) were elected. All
Directors and Alternates are independent of Arion Bank, its management and major shareholders. The Board’s composition meets statutory
requirements, which stipulate that companies employing more than 50 people must ensure that the gender ratio of the board of directors and
alternate board is no less than 40%.
The overarching theme of Arion Bank’s sustainability strategy is together we make good things happen, which, among other things, reflects our
ambition to lead by example when it comes to responsible and profitable business practices that take into account environmental and social
considerations. We place particular emphasis on ensuring that corporate responsibility and sustainability are fully integrated into daily
operations, decision making, and processes. The Bank’s code of ethics serves as guidance for employees to encourage ethical behaviour and
responsible decision making. The subsidiaries Vörður and Stefnir have likewise adopted sustainability policies aligned with that of the parent
company.
7
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
-
-
-
-
-
The Bank’s environmental and climate goals to 2030 include:
Supporting reductions in financed emissions (Scope 3) in sectors with the highest climate impact, aligned with Iceland’s 2040 net zero
goal, with updated targets published annually;
The Bank will continue to purchase only vehicles that use 100% renewable energy sources for its daily operations. Other vehicles acquired
for the Bank’s activities shall use renewable energy sources either partially or entirely. From 2030 onward, only vehicles that meet the
requirement of running on 100% renewable energy sources will be purchased;
Considerable progress has been made in reducing emissions from own operations of the Bank (Scopes 1 and 2), down 64.7% at year-end 2025
compared to 2015. This includes a 68.6% reduction from vehicles and 59.6% reduction from own business premises. Vörður and Stefnir refer to
the Bank’s environmental targets when setting their own targets. Combined emissions for Arion Bank, Stefnir, and Vörður were 622.9 tCO
₂
e in
2025, with Arion Bank accounting for 88.1%, Vörður 9.2%, and Stefnir 2.7%.
Domestically, the Bank and Vörður are members of Festa, the Icelandic Centre for Sustainability, and the Bank is a founding member of
Grænvangur, a partnership between the public and private sectors on climate and green solutions. Arion Bank, Stefnir, and Vörður are founding
members of IcelandSIF, the Icelandic Sustainable Investment Forum.
Arion Bank has set environmental and climate policies and targets. These emphasise minimising the environmental impact of operations and
reducing greenhouse gas emissions. The policy highlights the importance of financing projects that contribute to sustainable development and
green infrastructure, supporting Iceland’s national climate target of carbon neutrality by 2040, and committing to the same goal for the Bank
itself.
The Bank has published sustainability policies for lending to different industries and for business operations in the Arctic, designed to support
customers on their sustainability journey. These policies reflect the Bank’s sustainability priorities and commitments and have been approved by
the sustainability committee. The policies cover the industries that have the greatest impact on the Bank’s financed emissions, as well as the
important region which the Arctic represents, both in terms of environmental and social.
Environmental and climate strategy and actions
Commitment to sustainability
Increasing the share of sustainable lending to at least 20% of the Bank’s total loan book;
Reducing greenhouse gas emissions from own operations (Scope 1 and 2) by 80% from 2015 levels and offsetting remaining emissions;
Obtaining SBTi verification of financed emissions targets.
Arion Bank is a member of the Partnership for Carbon Accounting Financials (PCAF). This is a global partnership of financial institutions that
work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas emissions associated with their
loans and own investments (Scope 3). The Bank publishes annual financed emissions disclosures according to PCAF methodology, thereby
promoting transparency in progress on climate issues. Calculations are based on the most recent reliable data available, typically one year old.
Stefnir also reports financed emissions for its managed funds and publishes annual results, including emission intensity per ISK million invested
in particular funds.
Arion Bank’s total financed emissions for 2024, including sovereign bonds (excluding land use), amounted to 292.2 ktCO
₂
e, a 2% increase year
on year, primarily due to a 6% increase in the value of the loan book and own investments. Excluding sovereign bonds, financed emissions rose
by 5% from 158.8 ktCO
₂
e in 2023 to 167.2 ktCO
₂
e in 2024.
The Bank’s climate targets are based on emission intensity rather than absolute emissions. Emission intensity for lending and investments
(excluding sovereign bonds) decreased from 0.148 tCO
₂
e/ISKm to 0.146 tCO
₂
e/ISKm, a 1% reduction between years. Emissions intensity is
used to measure results because while amounts may change, percentages remain comparable and provide a better picture than just focusing
on the emissions figures for each category. The reduction on emission intensity is therefore an important metric and indicates that each ISK
million lent or invested now corresponds to proportionally lower emissions than the previous year.
In October 2025, Arion Bank published The Path to Net Zero, outlining updated climate targets for lending to 2030. The targets align with
Iceland’s 2040 goal and the Paris Agreement’s 1.5°C pathway. The targets are important steps in the Bank’s climate journey.
Arion Bank and its subsidiaries participate in extensive national and international collaboration within the fields of sustainability and corporate
responsibility and are signatories to numerous international commitments and declarations. The Bank is a participant in the UN Global Compact,
the UN Principles for Responsible Banking (UN PRB), and the UN Principles for Responsible Investment (UN PRI), with Stefnir also being a
signatory to the latter. At the end of 2023, the Bank joined the Science Based Targets initiative (SBTi) and the Net Zero Banking Alliance (NZBA)
under the auspices of the United Nations. The NZBA was discontinued in 2025; however, its net zero guidance remains valid, and the Bank will
continue to follow it. The Bank aims to have its climate targets validated by SBTi in 2027.
Financed emissions
8
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Human resources
Arion Group employs a strong and diverse team. At year end 2025, total full time equivalent positions numbered 883 across the Bank and
subsidiaries. The gender balance was 44% men and 56% women, with fewer than five employees identifying as another gender. The average
age was 41 and average length of employment was 9.5 years.
Since 2021, when it published the Sustainable Financing Framework, the Bank has regularly issued green bonds. In 2025, it issued a green
bond in Norwegian kroner and Swedish kronor which aligned with the Sustainable Financing Framework. Green liabilities decreased during the
year due to the maturity of a €300m green bond. Total sustainable finance liabilities at year end were ISK 63.4bn. In January 2026, the Bank
issued NOK 850m and SEK 850m in green bonds (approx. ISK 22bn), with a maturity of 3-5 years.
Women Invest
Women Invest is a long term initiative launched by Arion aimed at empowering women through increased participation in investment and
stronger financial literacy. The foundations for the project were laid in 2023 when Arion Bank decided to highlight the importance of bridging
gender disparity in terms of participation in the financial market. Women Invest was formally launched in January 2024 with a well attended
opening event, awareness campaign, nationwide educational programme, and extensive online content. Since its launch, around 8,000 women
have attended approximately 90 educational events. Topics have been diverse, and emphasis was placed on reaching all regions and engaging
with professional women’s groups.
To achieve gender balanced participation, women must increase investment activity faster than men. To this end, measurable objectives have
been set for three-year periods at a time, focusing among other things on incentives, financial education, and increasing women’s participation in
investments. In addition, short
‑
term indicators are established to ensure that the initiative remains on track.
Arion strives to foster a supportive and motivating work environment. Mutual respect characterizes all communication, and there is zero
tolerance of bullying, gender based harassment, sexual harassment, and violence. The Bank places great importance on employee health and
safety. We offer an attractive working environment and are a family friendly workplace. Through flexible work arrangements and a remote work
policy, we accommodate the needs of our employees and support a better balance between work and personal life.
Survey results indicate that employees are generally satisfied and feel good at work. The 2025 average score on the Arion Index was 4.49 for
the Bank and 4.44 for Vörður (on a scale of 1–5).
Arion Bank and the European Investment Fund (EIF) cooperate under a guarantee agreement within the EU’s InvestEU programme. The
agreement enables the Bank to extend loans to Icelandic companies on more favourable terms, with a total guarantee exposure of ISK 15bn.
The cooperation aligns with the Bank’s Sustainable Financing Framework and has led to the development of new products. This is the second
EIF agreement the Bank has operated under; the first, introduced in 2016, focused on innovation in SMEs and was widely used. The aim of the
EIF guarantee is to further support entrepreneurial activity and potentially enable the financing of projects earlier than would otherwise be
possible under the Bank’s credit appetite. The focus is on three key areas: sustainability and green investments, innovation and digitalization,
and culture and creative industries.
Arion updated its human resources policy in 2025. The policy consists of six guiding themes designed to support employee satisfaction, growth,
and engagement: the right people, continuous learning and development, a results driven culture, well-being and social interaction, strong
leadership, and a clear vision for equality. The strategy applies across the Group and is supported by various tools, including surveys, dialogue,
workplace audits, supervisor effectiveness evaluations, turnover analysis, absence metrics, recruitment data, equality statistics and more.
Under the EIF partnership, the Bank began offering car and equipment loans aimed at supporting the energy transition at companies in 2025.
The aim is to make it easier for companies to invest in electric vehicles, environmentally friendly equipment, and equipment that contributes to
lower emissions and improved energy efficiency. Loans under the EIF guarantee offer more favourable terms than traditional vehicle and
equipment loans but must support new financing and apply to SMEs. The guarantee has been used to finance a wide range of green, innovative,
and cultural projects.
Sustainable finance
EIF guarantee agreement
Arion Bank has issued a Sustainable Financing Framework covering green and sustainable bonds, green deposits, and green and sustainable
lending. The Framework comprises eleven categories which align with targets on mitigating or preventing climate change and which have a
positive social impact. The Framework was published in 2024 and builds on the Bank’s Green Finance Framework from 2021, which forms the
foundation for the Bank’s green product offering.
The Bank offers green business loans at preferential rates to projects which meet the terms of the Framework. Retail customers receive a 100%
discount on loan fees for mortgages on environmentally certified homes and a 50% discount on electric vehicle financing fees. Better interest
rates also apply to vehicles using 100% renewable energy and to plug in hybrids emitting under 50 g CO
₂
/km.
The Bank aims for sustainable lending to reach at least 20% of total lending by 2030. At year end 2025, sustainable lending accounted for
12.86% of the loan book, of which green loans made up 10.04% and loans with a positive social impact 2.82%. The total book value of
sustainable loans was nearly ISK 171 billion (ISK 133.4bn green, ISK 37.5bn social impact). A year on year decrease is mainly due to the
prepayment of a large loan.
9
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
-
-
-
-
-
There is zero tolerance of bullying, gender based or sexual harassment, and violence at Arion. A dedicated anti-bullying team oversees policy,
procedures, and training in this area and in 2025, all employees completed training on anti-bullying and harassment measures, and managers
completed additional in depth workshops. All new employees undergo mandatory digital learning on anti-bullying and harassment measures.
Measures against bribery and corruption
Zero tolerance: The Bank has zero tolerance for bribery and corruption.
Compliance: The Bank always operates in accordance with laws, regulations, and good business practices.
Preventive measures: The Bank takes appropriate steps to prevent bribery and corruption.
Due diligence: The Bank conducts due diligence checks on third parties to ensure their activities align with the Bank’s standards regarding
anti bribery and anti corruption measures.
In the Bank’s annual risk assessment, risks related to sustainability factors are also evaluated. The inherent risk associated with human
resources and social factors is generally assessed as low within the business. The main risks identified relate to employee competence and
development, as well as equality and diversity. In relation to environmental matters, the risk of greenwashing and the environmental and climate
impacts of lending and investments were assessed as the key risks. The results also showed that the Bank’s main governance related risks
concern anti money laundering measures, breaches related to know your customer (KYC) requirements, and data protection issues. Overall, the
controls in place for these risks within the Bank were assessed as adequate or strong.
The Bank’s credit policy places an emphasis on sustainability and the credit rules stipulate that ESG factors should be assessed when a credit
rating is required, or a company meets the conditions of Article 66d of the Annual Accounts Act. The Bank has analysed its loan book by
industry to assess ESG risk, producing a heat map based on potential impacts over the next 15 years. These findings have been integrated into
the Bank’s credit risk systems, ensuring ESG factors are evaluated at the individual customer level.
In compliance with Article 5 of SFDR, the remuneration policy states how the policy is consistent with the integration of sustainability risk in the
Bank’s activities. The policy explains how the remuneration policy, e.g. through the Bank’s incentive scheme, ensures that people integrate
sustainability risk into the investment decision process and investment advice. Stefnir’s remuneration policy includes corresponding provisions.
Reporting: The Bank encourages employees and third parties to report any suspicions or incidents of bribery or corruption. The Bank’s
policy on internal alerts sets out the framework for reporting misconduct and protecting whistleblowers. The Bank operates dedicated
whistleblowing software, available to all Group employees which allows individuals to submit reports anonymously.
Arion Bank maintains an exclusion list of activities in which it will not invest (own investments), provide corporate finance services, or extend
lending. Beyond these exclusions, the Bank refrains from doing business with entities engaged in illegal activities in their jurisdiction. Arion
Bank’s exclusion list is available on the Bank’s website. Stefnir integrates ESG considerations into the investment processes of the funds it
manages and specifically screens for companies that do not align with the ethical restrictions that have been established. These restrictions can
be seen on Stefnir’s website.
Arion’s goal is for all employees to enjoy the same terms for the same jobs or equally valuable jobs and to ensure that no unjustified wage gap
exists. Equal pay means that pay levels are determined in advance and that there is no discrimination on the basis of gender of other factors. It
must also be ensured that all pay decisions are predetermined and aligned with collective agreements. Arion works in accordance with an equal
pay system and the companies in the Group have equal pay certification. Vörður received certification in 2014, Arion in 2015, and Stefnir in
2024. All companies in the Group now operate under the same unified system. In 2025, the unexplained gender pay gap measured 0.2%,
meeting targets. In addition to the annual equal pay audit, we perform monthly equal pay analyses in order to ensure that decisions of salaries
are in compliance with our equal pay policy and our targets.
Targets have been set up to 2027 to reduce the ratio of median male compensation to median female compensation to below 1.25 measured on
an annual salary basis. In 2025, this figure was 1.26.
Arion Bank applies a zero tolerance approach to bribery and corruption, as outlined in its anti bribery and corruption policy. The policy is
reviewed and approved annually by the Board and aligns with international standards and applies to all employees.
Controls include policies, procedures, and mandatory training covering key risks such as gifts and hospitality, third party relationships, suppliers,
charitable donations, political contributions, and governance practices. The Bank’s main principles are:
Sustainability risk
Arion is committed to respecting human rights and equality in all operations. Arion works in accordance with the equality and human rights policy
and an action plan for 2024-2027. The objective of the policy and action plan is to create an environment where people of similar education,
work experience and responsibility have equal opportunities and terms, irrespective of gender, gender identity, sexual orientation, origin,
nationality, skin colour, age, disability or religion or any other factor. The policy and the action plan have been approved by the senior
management of the Group. The CEO sits on the equality committee, which is responsible for progress and is composed of representatives from
Arion, Vörður, and Stefnir.
Equality and human rights
The Bank’s sustainability risk policy is approved annually by the Board and reviewed regularly. Key performance indicators relating to ESG
factors are part of the risk report to the Board, and the Bank’s risk appetite with respect to these factors has been defined.
10
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Deloitte provides limited assurance over sustainability disclosures in the 2025 Annual and Sustainability Report under GRI and Nasdaq
guidelines.
In November 2025, Reitun issued a new sustainability rating for Arion Bank. The rating is based on the Bank’s performance in environmental,
social and governance (ESG). The Bank scored 90 out of 100, the highest score awarded to any company to date, and received an A3 rating for
the sixth year running. By retaining this rating, the Bank has successfully met the stricter requirements made this year. The average score
among companies rated by Reitun is 73. Arion is one of six companies rated A3, and no company has achieved a higher grade.
The international rating agency Morningstar Sustainalytics specializes in assessing companies’ ESG risk. The company evaluates Arion Bank’s
performance annually, and the result for 2025 was positive, as in previous years. According to their assessment, Arion Bank is among the best
performing banks globally in sustainability matters. Scores are given on a scale of 0–100, where fewer points indicate lower risk. Arion Bank
scores 11.7 points, meaning the Bank is considered to have a low risk of significant financial loss due to ESG factors. As of early January 2026,
Arion Bank’s performance ranks in the top 6% of more than 1,000 banks assessed worldwide by Morningstar Sustainalytics, and in the top 3% of
roughly 600 regional banks.
MSCI issued an updated rating for Arion in October 2025, awarding the Bank AA, classifying it as a sustainability leader. MSCI ratings range
from CCC to AAA and therefore Arion is towards the top end. Investors frequently use MSCI ratings to assess portfolio risks and to construct
sustainable portfolios.
Due diligence process
Arion Bank is subject to Article 66.d of the Annual Accounts Act on non financial reporting. Sustainability disclosures in the 2025 Annual and
Sustainability Report follow the Global Reporting Initiative (GRI Standards), supporting transparent and comparable ESG reporting.
Nasdaq Nordic ESG guidelines and the UN Global Compact’s ten principles are also used, alongside the UN Sustainable Development Goals.
The report includes updates on progress toward the UN PRB, of which Arion was a founding signatory in 2019.
In 2023, legislation on the European Union Taxonomy was enacted in Iceland. Arion is subject to the law and publishes information in
accordance with it in an annex to the Group’s annual financial statements. The changes proposed in the simplified EU sustainability framework
also apply to the EU Taxonomy and therefore depend on the EU’s final approval. Arion’s reporting is therefore unchanged from the previous
year, as the amendments have not yet been incorporated into Icelandic law.
The Bank’s Pillar 3 Risk Disclosures outline key risks, including sustainability risks, and provides extensive information on risk and capital
management. The report also includes information on the Bank’s governance structure in relation to risk, as well as its remuneration policy.
Further information on sustainability and non financial disclosures is available in the Arion Bank 2025 Annual and Sustainability Report, to be
published on the Bank’s website on 18 February 2026.
The reporting in Arion Bank’s Annual and Sustainability Report is based on the issues identified as material to the Bank’s operations and its
subsidiaries and is structured around five main themes: responsible operations, sustainable finance, environmental and climate matters, human
resources, and engagement with society. The report also includes the Group’s detailed sustainability accounts.
In 2023, Arion Bank began implementing the European Sustainability Reporting Standard (ESRS). The standard is part of the EU’s Corporate
Sustainability Reporting Directive (CSRD), which has not yet been enacted into Icelandic law. In 2025, the European Union announced
significant changes to the directive, both regarding its scope and the extent of required disclosures. In the second half of the year, draft
simplified ESRS standards were published, and the European Parliament approved a simplification of the regulatory framework. It was decided
to limit the scope of the regulation to companies with more than EUR 450 million in annual turnover and over 1,000 full time employees. These
changes are awaiting formal confirmation within the EU, but they are widely considered to be in their final form. If this revised scope is approved
and incorporated into Icelandic law, the Arion Group would, as things currently stand, fall just below the thresholds and therefore remain outside
the directive’s scope. Despite this uncertainty, we continue to apply the ESRS standard, and this year we are using the simplified version
published in November 2025.
11
Arion Bank Consolidated Financial Statements 2025
Endorsement and statement
by the Board of Directors and the CEO
Endorsement of the Board of Directors and the Chief Executive Officer
The Board of Directors and the CEO have today discussed the Consolidated Financial Statements of Arion Bank for the year ended 31
December 2025 and confirm them by means of their signatures. The Board of Directors and the CEO recommend that the Consolidated
Financial Statements be approved at the Annual General Meeting of Arion Bank.
It is our opinion that the Consolidated Financial Statements give a true and fair view of the financial performance and cash flow of the Group for
the year ended 31 December 2025 and its financial position as at 31 December 2025. Furthermore, in our opinion the Consolidated Financial
Statements and the Endorsement of the Board of Directors and the CEO give a fair view of the development and performance of the Group's
operations and its position and describe the principal risks and uncertainties faced by the Group.
Board of Directors
Paul Horner, Chairman
The Consolidated Financial Statements of Arion Bank for the year ended 31 December 2025 have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union and additional requirements in the Icelandic Financial
Statements Act, Financial Undertakings Act and Rules on Accounting for Credit Institutions.
In our opinion, the Consolidated Financial Statements of Arion Bank hf. for the year 2025 with the file name
RIL4VBPDB0M7Z3KXSF19-2025-12-
31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
Chief Executive Officer
Benedikt Gíslason
Steinunn Kristín Thórdardóttir
Kristín Pétursdóttir, Vice Chairman
Gunnar Sturluson
Marianne Gjertsen Ebbesen
Reykjavík, 11 February 2026
12
Arion Bank Consolidated Financial Statements 2025
Opinion
Basis for Opinion
Key Audit Matters
Impairment charges for loans and provisions for guarantees
To the Shareholders and the Board of Directors of Arion Bank hf.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of Arion Bank
hf. as at December 31, 2025, its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the EU and additional requirements, as applicable, in the Act on Annual
Accounts, the Act on Financial Undertakings and rules on accounting for credit institutions.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have audited the consolidated financial statements of Arion Bank hf. for the year ended December 31, 2025 which comprise the
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated
statement of changes in equity, consolidated statement of cash flows for the year then ended and the notes to the consolidated financial
statements, including a summary of material accounting policies.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of
Arion Bank hf. in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in Iceland, and we have
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
Our opinion in this report on the consolidated financial statements is consistent with the content of the additional report that has been submitted
to the parent company´s audit committee in accordance with the EU Audit Regulation 537/2014 Article 11.
Independent Auditor's report
Based on the best of our knowledge and belief, no prohibited services referred to in the EU Audit Regulation 537/2014 Article 5.1 has been
provided. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
How the matter was addressed in the audit
Key Audit Matters
Loans to customers for the Group amounted to ISK 1,341,618 million
at 31 December 2025, and the total allowance account for the Group
amounted to ISK 12,767 million (including off-balance positions) at 31
December 2025.
The Group evaluates it´s impairment on loans based of IFRS 9
resulting in impairment charges are recognised when losses are
expected based on forecasting models.
Management has provided further information about the accounting
policies for expected credit losses in Note 59 and about loan
impairment charges and provisions for guarantees in Notes 16 and
44.
Measurement of loan impairment charges for loans and provisions
for guarantees is deemed a key audit matter as the determination of
assumptions for expected credit losses is subjective due to the level
of judgement applied by Management.
The most significant judgements are:
• Assumptions used in the expected credit loss models to assess the
credit risk related to the exposure and the expected future cash flows
of the customer.
• Timely identification of exposures with significant increase in credit
risk and credit impaired exposures.
• Valuation of collateral and assumptions used for manually assessed
credit-impaired exposures.
Based on our risk assessment and industry knowledge, we have
examined the impairment charges for loans and provisions for
guarantees and evaluated the methodology applied as well as the
assumptions made according to the description of the key audit
matter.
As part of our audit we examined the Group's accounting policies to
ensure they are in accordance with IFRS 9. As part of our audit we
reviewed the Group's methodology related to expected credit losses
and examined the impairment models used for expected credit loss
calculations. We used risk modelling specialists as well as IFRS
specialists as part of our audit.
Our examination included the following elements:
• Testing of key controls over key assumptions used in the expected
credit loss models to assess the credit risk related to the exposure
and the expected future cash flows of the customer.
• Substantively testing evidence to support the assumptions used in
the expected credit loss models applied in stage allocation,
assumptions applied to derive lifetime possibility of default and
methods applied to derive loss given default.
• Testing of key controls and substantive testing of timely identification
of exposures with significant increase in credit risk and timely
identification of credit impaired exposures.
• Testing of key controls over models and manual processes for
valuation of collateral used in the expected credit loss calculations.
• Substantively testing evidence to support appropriate determination
of assumptions for loan impairment charges and provisions for
guarantees including valuation of collateral and assumptions of future
cash flows on manually assessed credit impaired exposures.
13
Arion Bank Consolidated Financial Statements 2025
Independent Auditor's report
Reliability of information from IT systems relevant to financial reporting
Other information
Responsibilities of the Board of Directors and the CEO for the Consolidated Financial Statements
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of Arion Bank hf.'s internal control.
The Board of Directors and the CEO are responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and additional requirements, as applicable, in the
Act on Annual Accounts, the Act on Financial Undertakings and rules on accounting for credit institutions, and for such internal control as the
Board of Directors and the CEO determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors and the CEO are responsible for assessing Arion Bank hf.’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Board of Directors and the CEO either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
The board of directors and the audit committee shall supervise the preparation and presentation of the consolidated financial statements.
In accordance with Paragraph 2 article 104 of the Icelandic Financial Statement Act no. 3/2006, we confirm to the best of our knowledge that the
accompanying report of the board of directors includes all information required by the Icelandic Financial Statement Act that is not disclosed
elsewhere in the consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We
also:
The Group’s financial reporting is highly dependent on IT systems
supporting the overall financial reporting process, due to the
significant number of transactions processed through various
systems needed to support the Group’s operations.
In the process of preparing the consolidated financial statements the
Group uses data from number of complex IT systems. The accuracy
and completeness of transactions is important to support the
reliability of financial reporting.
Due to the importance of data from IT systems to support the
financial reporting we consider their reliability a key audit matter.
The procedures performed to respond to the key audit matter included
the following, amongst others;
• We obtained an understanding of the Group’s IT systems and
environment that support the overall financial reporting process
• We reviewed the design, implementation and effectiveness of
control activities, as appropriate, related to access management,
change management, accuracy of key automated calculations and
operation for the systems considered important for the audit. Deloitte
IT audit specialists were involved in the audit
• For IT systems that are outsourced and are relevant to the audit we
obtained and assessed the ISAE 3402 report issued by the service
organisation
Key Audit Matters
How the matter was addressed in the audit
The Board of Directors and CEO are responsible for the other information. The other information comprises the unaudited appendix to the
Financial Statements, 5-year overview, key figures, unaudited quarterly statements in note number 6 and Endorsement and statements by the
Board of Directors and the CEO.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon, except the confirmation regarding the Endorsement and the statement by the Board of Directors and the CEO as
stated below.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information; we are required to report that fact. We have nothing to report in this regard.
14
Arion Bank Consolidated Financial Statements 2025
Independent Auditor's report
•
•
•
Report on other legal and regulatory requirements
Report on European single electronic format (ESEF Regulation)
Appointment of auditor
Signy Magnusdottir
State Authorized Public Accountant
Gunnar Thorvardarson
State Authorized Public Accountant
Deloitte ehf.
Kópavogur, 11 February 2026
Deloitte ehf. was appointed auditor of Arion Bank hf. By the general meeting of shareholders on 12 March 2025. Deloitte have been elected as
auditor of the Group since the general meeting 2015.
In our opinion, the Consolidated Financial Statements of Arion Bank hf. for the year 2025 with the file name RIL4VBPDB0M7Z3KXSF19-2025-12-
31-0-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation.
Management is responsible for preparing the consolidated financial statements in compliance with laws no. 20/2021 disclosure obligation of
issuers of securities and the obligation to flag. This responsibility includes preparing the consolidated financial statements in a XHTML format in
accordance to EU regulation 2019/815 on the European single electronic format (ESEF regulation).
Our responsibility is to obtain reasonable assurance, based on evidence that we have obtained, on whether the consolidated financial
statements is prepared in all material respects, in compliance with the ESEF Regulation, and to issue a report that includes our opinion. The
nature, timing and extent of procedures selected depend on the auditor's judgement, including the assessment of the risks of material
departures from the requirement set out in the ESEF regulation, whether due to fraud or error.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated and separate financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors and the Audit Committee a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
In addition to our work as the auditors of Arion Bank hf., Deloitte has provided the Bank with permitted additional services such as review of
interim financial statements and other assurance engagement. Deloitte has in place internal procedures in order to ensure its independence
before acceptance of additional services. Deloitte has confirmed in writing to the Audit Committee that we are independent of Arion banki hf.
From the matters communicated with the Board of Directors and the Audit Committee, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
As part of our audit of the consolidated financial statements of Arion Bank hf. we performed procedures to be able to issue an opinion on
whether the consolidated financial statements of Arion Bank hf. for the year 2025 with the file name RIL4VBPDB0M7Z3KXSF19-2025-12-31-
en.zip is prepared, in all material respects, in compliance with laws no. 20/2021 disclosure obligation of issuers of securities and the obligation to
flag relating to requirements regarding European single electronic format regulation EU 2019/815 which include requirements related to the
preparation of the Consolidated Financial Statements in XHTML format and iXBRL markup.
15
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Consolidated Income Statement
Notes 2025 2024
129,777 132,259
(77,235) (85,957)
7
52,542 46,302
21,151 19,171
(4,004) (3,811)
8
17,147 15,360
20,766 19,669
(18,655)
(17,503)
9
2,111 2,166
10 1,075 2,845
11 5,516 (222)
6,591 2,623
78,391 66,451
12-14 (28,248) (28,328)
15 (2,106) (1,924)
16 (3,053) (1,131)
44,984 35,068
17 (12,458) (8,919)
32,526 26,149
18 (19) (37)
32,507 26,112
Attributable to
30,626 26,111
1,881 1
32,507 26,112
Earnings per share
19
22.05 18.31
21.86 18.09
Net impairment ...........................................................................................................................................
Income tax expense ....................................................................................................................................
Shareholders of Arion Bank hf. ..................................................................................................................
Net earnings from continuing operations ................................................................................................
Net earnings ..............................................................................................................................................
Earnings before income tax .....................................................................................................................
Net earnings ..............................................................................................................................................
Basic earnings per share attributable to shareholders of Arion Bank (ISK) ..................................................
Diluted earnings per share attributable to shareholders of Arion Bank (ISK) ...............................................
Non-controlling interest ...............................................................................................................................
Discontinued operations held for sale, net of income tax .............................................................................
Insurance service expenses ........................................................................................................................
Net financial income ....................................................................................................................................
Bank levy ....................................................................................................................................................
Interest income ...........................................................................................................................................
Interest expense .........................................................................................................................................
Fee and commission income .......................................................................................................................
Net interest income ...................................................................................................................................
Other operating income ...............................................................................................................................
Operating expenses ....................................................................................................................................
Fee and commission expense .....................................................................................................................
Insurance revenue ......................................................................................................................................
Net fee and commission income ..............................................................................................................
Insurance service results .........................................................................................................................
Other net operating income ......................................................................................................................
Operating income ......................................................................................................................................
The accompanying Notes are an integral part of these Consolidated Financial Statements
16
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Consolidated Statement of Comprehensive Income
Notes
2025
2024
32,507 26,112
257 274
10 162 99
Changes to reserve for financial instruments at FV thr. OCI that
419 373
6 -
Other comprehensive income that is or may be reclassified
425 373
32,932 26,485
Attributable to
31,051 26,484
1,881 1
Total comprehensive income
32,932 26,485
Comprehensive income per share
19
22.36 18.57
22.17 18.35
Net change in FV of financial assets carried at FV through OCI, net of tax .................................................
transferred to the income statement ..........................................................................................................
is or may be reclassified subsequently to the income statement .........................................................
Shareholders of Arion Bank ........................................................................................................................
Non-controlling interest ...............................................................................................................................
Basic comprehensive income per share attributable to shareholders of Arion Bank (ISK) ...........................
Diluted comprehensive income per share attributable to shareholders of Arion Bank (ISK) .........................
Net realized loss on financial assets carried at FV through OCI, net of tax
Total comprehensive income ...................................................................................................................
Exchange difference on translating foreign subsidiaries ..............................................................................
Net earnings ..............................................................................................................................................
The accompanying Notes are an integral part of these Consolidated Financial Statements
subsequently to the Income Statement ..................................................................................................
17
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Consolidated Statement of Financial Position
Assets
Notes
20 150,111 124,094
21 22,567 25,690
22 1,329,056 1,230,058
23-25 215,816 206,417
25 7,305 9,387
27 760 814
28 7,533 7,688
29 2 2
30 98 111
31 22,517 14,006
1,755,765 1,618,267
Liabilities
24 12,003 6,618
24 921,182 857,443
24 3,129 8,394
29 12,983 11,060
32 50,736 49,950
24,33 494,823 433,178
24,34 43,518 44,538
1,538,374 1,411,181
Equity
37 1,383 5,686
14,382 13,949
201,562 186,947
217,327 206,582
64 504
217,391 207,086
1,755,765 1,618,267
The accompanying Notes are an integral part of these Consolidated Financial Statements
Loans to customers ......................................................................................................................
Financial instruments ...................................................................................................................
Subordinated liabilities .................................................................................................................
Total Equity ................................................................................................................................
Total Liabilities and Equity ........................................................................................................
Non-controlling interest ................................................................................................................
Other liabilities .............................................................................................................................
Borrowings ...................................................................................................................................
Share capital and share premium .................................................................................................
Other reserves .............................................................................................................................
Retained earnings ........................................................................................................................
Shareholders' Equity ..................................................................................................................
Total Liabilities ...........................................................................................................................
Tax liabilities ................................................................................................................................
Investment property .....................................................................................................................
Deposits .......................................................................................................................................
Financial liabilities at fair value .....................................................................................................
Investments in associates ............................................................................................................
Intangible assets ..........................................................................................................................
Tax assets ...................................................................................................................................
Other assets ................................................................................................................................
Due to credit institutions and Central Bank ...................................................................................
Assets and disposal groups held for sale .....................................................................................
Total Assets ................................................................................................................................
31.12.202431.12.2025
Cash and balances with Central Bank ..........................................................................................
Loans to credit institutions ............................................................................................................
18
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Debt invest-
Gain in
ments at
Foreign
Non-
subs. &
Gain in
Capitalized
fair value
currency
cont-
Share
Share
Share
assoc.,
securities,
develop-
thr. OCI,
translation
Statutory
Retained
holders'
rolling
Total
capital
premium
option
unrealized
unrealized
ment cost
unrealized
reserve
reserve
earnings
equity
interest
equity
1,412 4,274 411 10,957 513 759 (328) - 1,637 186,947 206,582 504 207,086
30,626 30,626 1,881 32,507
257 257 257
162 162 162
6 6 6
- - - - - - 419 6 - 30,626 31,051 1,881 32,932
(16,114) (16,114) (16,114)
(36) (5,218) (699) (5,953) (5,953)
87 87 87
6 715 (119) 602 602
(88) 88 - -
536 304 840 840
1 229 230 230
1,803 (193) (759) (1,259) 408 - -
- (2,321) (2,321)
1,383 - 827 12,760 320 - 91 6 378 201,562 217,327 64 217,391
The accompanying Notes are an integral part of these Consolidated Financial Statements
Share option charge - incentive scheme ............
Sale of a subsidiary ............................................
Net realized loss transferred to P/L ......................
Transactions with owners
Share option forfeited .........................................
Net changes in reserves .....................................
Equity 31 December 2025 ..................................
Total comprehensive income ............................
Share option vested ...........................................
Incentive scheme ...............................................
Purchase of treasury shares ...............................
Net changes in reserves .......................................
Consolidated Statement of Changes in Equity
Total
share-
Net earnings .........................................................
Restricted reserves
Equity 1 January 2025 ........................................
Share option charge ...........................................
Dividend paid .....................................................
Net change in fair value ........................................
19
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Consolidated Statement of Changes in Equity
Debt invest-
Gain in
ments at
Non-
subs. &
Gain in
Capitalized
fair value
cont-
Share
Share
Share
assoc.,
securities,
develop-
thr. OCI,
Warrants
Statutory
Retained
holders'
rolling
Total
capital
premium
option
unrealized
unrealized
ment cost
unrealized
reserve
reserve
earnings
equity
interest
equity
1,446 9,188 408 7,772 1,462 880 (701) 825 1,637 175,881 198,798 503 199,301
26,111 26,111 1 26,112
274 274 274
99 99 99
- - - - - - 373 - - 26,111 26,484 1 26,485
(13,058) (13,058) (13,058)
(90) (12,362) (12,452) (12,452)
53 6,187 6,240 6,240
162 162 162
2 280 (40) 242 242
(119) 119 - -
1 165 166 166
816 (825) 9 - -
3,185 (949) (121) (2,115) - -
1,412 4,274 411 10,957 513 759 (328) - 1,637 186,947 206,582 504 207,086
The accompanying Notes are an integral part of these Consolidated Financial Statements
Net earnings .........................................................
Net changes in reserves .....................................
Equity 31 December 2024 ..................................
Warrants excercised ..........................................
Share capital increase ........................................
Incentive scheme ...............................................
Purchase of treasury shares ...............................
Share option vested ...........................................
Dividend paid .....................................................
Share option forfeited .........................................
Share option charge ...........................................
Total comprehensive income ............................
Restricted reserves
Total
share-
Equity 1 January 2024 ........................................
Net change in fair value ........................................
Net realized loss transferred to P/L ......................
Transactions with owners
20
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
2025 2024
Operating activities
32,507 26,112
(39,943) (38,148)
(527) 211
(76,733) (55,406)
(3,475) (4,890)
67,529 68,876
46,667 16,946
(52) (9,433)
100,654 102,793
(79,776) (74,623)
204 146
(10,535) (8,990)
36,521 23,593
Investing activities
4,949 -
(191) (233)
447 -
(463) (325)
23 27
19 (1)
8 -
(852) (622)
3,940 (1,154)
Financing activities
(16,114) (13,058)
- 6,240
(5,953) (12,452)
10,040 19,735
(8,769) (6,775)
- (10,471)
602 242
(20,194) (16,539)
20,266 5,901
117,310 114,993
972 (3,584)
138,548 117,310
Cash and cash equivalents
150,111 124,094
22,040 25,690
(33,603) (32,474)
138,548 117,310
* Interest paid includes interest on deposits at the end of the year.
The accompanying Notes are an integral part of these Consolidated Financial Statements
Consolidated Statement of Cash flows
Net earnings .............................................................................................................................................................
Non-cash items included in net earnings ...................................................................................................................
Changes in operating assets and liabilities
Interest received .......................................................................................................................................................
Proceeds from sale of property and equipment .........................................................................................................
Mandatory reserve deposit with Central Bank ...........................................................................................................
Cash and balances with Central Bank .......................................................................................................................
Other changes in operating assets and liabilities ...................................................................................................
Proceeds from vested share options .........................................................................................................................
Cash and cash equivalents ....................................................................................................................................
Issued subordinated liabilities ...................................................................................................................................
Dividend received .....................................................................................................................................................
Income tax paid ........................................................................................................................................................
Purchase of treasury stock .......................................................................................................................................
Dividend paid to shareholders of Arion Bank .............................................................................................................
Net cash used in financing activities .....................................................................................................................
Net cash from (used) in investing activities ..........................................................................................................
Settlement of subordinated liabilities .........................................................................................................................
Bank accounts ..........................................................................................................................................................
Cash and cash equivalents at beginnning of the year ...............................................................................................
Effect of exchange rate changes on cash and cash equivalent .................................................................................
Issued new share capital ...........................................................................................................................................
Repurchase of subordinated liabilities .......................................................................................................................
Net increase in cash and cash equivalents ...............................................................................................................
Proceeds from sale of subsidiary, net of minority interest .........................................................................................
Cash and cash equivalents ....................................................................................................................................
Financial instruments and financial liabilities at fair value .......................................................................................
Loans to credit institutions, excluding bank accounts .............................................................................................
Loans to customers ...............................................................................................................................................
Acquisition of property and equipment ......................................................................................................................
Acquisition of intangible assets .................................................................................................................................
Net cash from operating activities .........................................................................................................................
Decreased (increased) share capital of associates ...................................................................................................
Deposits .................................................................................................................................................................
Borrowings .............................................................................................................................................................
Interest paid * ...........................................................................................................................................................
Acquisition of investment property ............................................................................................................................
Dividend from associates ..........................................................................................................................................
Proceeds from sale of investment property ...............................................................................................................
21
Arion Bank Consolidated Financial Statements 2025
page page
General information
Basis of preparation .......................................................... 23 Offsetting financial assets and financial liabilities .............. 44
Changes in accounting policies ......................................... 23 Investment in associates .................................................. 44
Material accounting estimates and judgments Intangible assets .............................................................. 45
in applying accounting policies ....................................... 23 Tax assets and tax liabilities ............................................. 46
The Group ........................................................................ 24 Assets and disposal groups held for sale .......................... 46
Other assets ..................................................................... 47
Operating segment reporting Other liabilities .................................................................. 48
Operating segments ......................................................... 25 Borrowings ....................................................................... 49
Subordinated liabilities ...................................................... 50
Quarterly statements Liabilities arising from financial activities .......................... 50
Operations by quarters ..................................................... 28 Pledged assets ................................................................. 51
Equity ............................................................................... 51
Notes to the Consolidated Income Statement
Net interest income ........................................................... 29 Other information
Net fee and commission income ....................................... 30 Shareholders of Arion Bank .............................................. 53
Insurance service results .................................................. 30 Legal matters ................................................................... 53
Net financial income ......................................................... 31 Events after the reporting period ...................................... 54
Other operating income .................................................... 31
Operating expenses .......................................................... 32 Off Balance sheet information
Personnel and salaries ..................................................... 32 Commitments ................................................................... 55
Other operating expense ................................................... 34 Assets under management, supervision and custody ....... 55
Bank levy .......................................................................... 34
Net impairment ................................................................. 34 Related party
Income tax expense .......................................................... 35 Related party .................................................................... 55
Discontinued operations held for sale, net of income tax .. 35
Earnings per share ........................................................... 35 Risk management disclosures
Credit risk ......................................................................... 57
Notes to the Consolidated Statement of Market risk ........................................................................ 69
Financial Position Liquidity and Funding risk ................................................. 75
Cash and balances with Central Bank ............................... 36 Capital management ........................................................ 79
Loans to credit institutions ................................................ 36 Operational risk ................................................................ 81
Loans to customers .......................................................... 36 Sustainability risk .............................................................. 82
Financial instruments ........................................................ 36
Financial assets and financial liabilities ............................. 37 Material accounting policies 83
Fair value hierarchy .......................................................... 39
Notes to the Consolidated Financial Statements
Contents
22
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
General information
1. Basis of preparation
Statement of compliance
Basis of measurement
Functional and presentation currency
2. Changes in accounting policies
3. Material accounting estimates and judgements in applying accounting policies
Estimates and assumptions
- investment properties are measured at fair value; and
Notes to the Consolidated Financial Statements
The same accounting policies, presentation and methods of computation are followed in these Consolidated Financial Statements as were
applied in the Consolidated Financial Statements for the year 2024.
- bonds and debt instruments, shares and equity instruments, short positions in listed bonds and equities, derivatives and certain loans to
customers. For details on the accounting policy, see Note 59;
Arion Bank hf., the Parent Company, was established on 18 October 2008 and is incorporated and domiciled in Iceland. The registered office
of Arion Bank hf. is located at Borgartún 19, Reykjavík. The Consolidated Financial Statements for the year 2025 comprise the Parent
Company and its subsidiaries (together referred to as "the Group").
The Consolidated Financial Statements were approved and authorized for publication by the Board of Directors of Arion Bank on 11
February 2026.
In preparing these Consolidated Financial Statements, the Group has applied the concept of materiality to the presentation and level of
disclosure. Only essential and mandatory information is disclosed which is relevant to an understanding by the reader of these Consolidated
Financial Statements.
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS
Accounting Standards), as adopted by the European Union and additional requirements in the Icelandic Financial Statements Act, Financial
Undertakings Act and rules on Accounting for Credit Institutions.
These Consolidated Financial Statements have been prepared on a historical cost basis except for the following:
- non-current assets and disposal groups held for sale are stated at the lower of their carrying amounts and fair value, less cost to sell.
These Consolidated Financial Statements are presented in Icelandic krona (ISK), which is the Parent Company's functional currency,
rounded to the nearest million, unless otherwise stated. At the end of the year the exchange rate of the ISK against USD was 125.44 and
147.28 for EUR (31.12.2024: USD 138.99 and EUR 143.89).
The preparation of these Consolidated Financial Statements requires management to make judgments, estimates and assumptions that
affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the
carrying amount of assets or liabilities affected in future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The
Group based its assumptions and estimates on parameters available when the Consolidated Financial Statement were prepared. Existing
circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are
beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Amendments to standards effective from 1 January 2025 did not have a material impact on theses Consolidated Financial Statements. The
Group has not early adopted any standards, interpretations or amendments that have been issued but are not effective, see Note 77.
23
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
3.
Material accounting estimates and judgements in applying accounting policies, continued
Impairment of financial assets
Macroeconomic outlook
Impairment of intangible assets
Revaluation of investment properties
4. The Group
In June 2025 Arion Bank acquired all shareholdings in Arion (Financial) Advisory Services Ltd (formerly Arngrimsson Advisors Ltd), an
entity offering financial service for institutional investors investing in international markets. The acquisition was defined as asset purchase,
mainly affecting other assets in the Statement of Financial position whereas the effects on the Income Statement were mainly on net fee
and commission income.
The sale of the subsidiary Arnarland ehf. was completed on 23 October 2025. Arion Bank owned a 51% stake in Arnarland through its
subsidiary Landey and recognized a minority interest accordingly.
The carrying amounts of goodwill, infrastructure and customer relationship and related agreements are reviewed annually to determine
whether there is any indication of impairment. If any such indication exists the asset's recoverable amount is estimated. An impairment loss
is recognized if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the Consolidated
Income Statement. The recoverable amount of an asset is the greater of its value in use and its fair value less cost to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
The Group carries its investment properties at fair value, with changes in fair value being recognized in the income statement. For
investment properties, either a valuation methodology based on present value calculations is used, as there is a lack of comparable market
data because of the nature of the properties, or the investment properties are valued by reference to transactions involving properties of a
similar nature, location and condition.
The macroeconomic scenario applied for 2026 reflects management's judgment that, despite elevated inflation and continued uncertainty
affecting key export sectors, the Icelandic economy is expected to avoid a severe downturn. Inflation is anticipated to remain elevated in
early 2026, partly due to changes in taxes and levies, before moderating as underlying disinflationary pressures emerge.
The book value of financial assets which fall under the impairment requirements of IFRS 9 are presented net of expected credit losses in
the statement of financial position. On a monthly basis expected credit losses for stages 1 and 2 are recalculated for each asset, the
calculations are based on probability of default (PD), loss given default (LGD) and exposure at default (EAD) models. Stage 3 calculations
are based on LGD and EAD parameters. In addition to the model outcomes, the assessment of expected credit losses is based on three
key factors: management's assumptions regarding the development of macroeconomic factors over the next five years, how those factors
affect each model and how to estimate a significant increase in credit risk. The assumptions for macroeconomic development are
incorporated into each model for three scenarios: a base case, an optimistic case, and a pessimistic case. Management estimates the
probability weight for each scenario used for calculations of the probability weighted expected credit losses. The amount of expected credit
losses to be recognized is dependent on the Bank's definition of significant increase in credit risk, which controls the impairment stage each
asset is allocated to. Management has estimated factors to measure significant increase in credit risk from origination, by comparison of
changes in PD values, annualized lifetime PD values, days past due and watch list. For further information see Note 59.
Notes to the Consolidated Financial Statements
Management has judged that signs of a cooling labour market and weaker forward looking indicators of labour demand, together with the
Central Bank’s signalling of a continued easing bias and its stated approach of looking through one-off inflationary shocks, support the use
of a baseline scenario assuming moderate GDP growth. This judgement is made notwithstanding ongoing uncertainties related to wage
growth, which is expected to remain elevated, and the extent to which softer labour market conditions may dampen domestic demand.
The applied scenario further reflects management’s assessment that the housing market is expected to continue to cool in an orderly
manner and that domestic demand will remain sufficiently resilient to offset external headwinds. However, given the inherent uncertainty
surrounding inflation persistence, wage dynamics, and exchange rate valuation, the assumptions applied are subject to estimation
uncertainty and may differ from actual outcomes.
Shares in the main subsidiaries in which Arion Bank holds a direct interestEquity interestOperating activityCurrency 31.12.2025 31.12.2024Arion (Financial) Advisory Services Ltd, 30-32 Fleet Street, London, UK ..........Financial serviceGBP100.0% -Eignabjarg ehf., Borgartún 19, Reykjavík, Iceland ............................................Holding companyISK 100.0% 100.0% Landey ehf., Borgartún 19, Reykjavík, Iceland ..................................................Real estateISK 100.0% 100.0% Leiguskjól ehf., Bjargargata 1, Reykjavík, Iceland .............................................Rental guaranteeISK 51.0% 51.0% Stefnir hf., Borgartún 19, Reykjavík, Iceland .....................................................Asset managementISK 100.0% 100.0% Vördur tryggingar hf., Borgartún 19, Reykjavík, Iceland ....................................InsuranceISK 100.0% 100.0%
24
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Operating segment reporting
5. Operating segments
Markets & Stefnir
Corporate & Investment Banking (CIB)
Retail Banking
Treasury
Vördur tryggingar hf.
Supporting units
Corporate Banking's experienced account managers specialize in key economic sectors such as retail and services, seafood, energy and
real estate. The division serves companies ranging from SMEs to large cap´s and provides full range lending and insurance products,
including guarantees, deposit accounts, payment solutions, and a variety of value-added digital solutions. The Corporate portfolio
composition is diversified between sectors, customers and currencies which include international exposures, partly through syndicates with
other Icelandic or international banks.
Arion Bank‘s Corporate Finance works closely with Corporate Banking and provides the Bank’s clients with comprehensive financial
advisory services, with a key focus on M&A advisory, private placements, IPOs and other offerings of securities.
Retail Banking provides a diverse range of financial services in 12 branches and service points across Iceland in addition to service centre
and digital solutions both in the Arion app and online banking. These services include deposits and loans, savings, payment cards,
pensions, securities and funds. In order to improve efficiency the branch network is split into four regions, and smaller branches can
therefore benefit from the strength of larger units within each region.
Corporate & Investment Banking provides comprehensive financial services to companies and investors with focus on meeting the needs
of each client, both in Iceland and internationally. The division is divided into Corporate Banking and Corporate Finance.
Markets & Stefnir comprise Asset Management and Capital Markets. Asset Management manages financial assets on behalf of its clients
according to a pre-determined investment strategy. Asset Management also handles the operation and development of securities and
pension funds. Asset Management comprises Institutional Asset Management, Premia Services, development and operations, research,
and sales and services. Premía Services are divided into three service streams: Premia; Premia - Private Banking; and Premia – Wealth
Management and provide customers with comprehensive and personal financial services. Capital Markets is a securities brokerage and
brokers listed securities transactions for the Bank’s international and domestic clients on all the world’s major securities exchanges.The
operation of Stefnir hf. is presented under the segment. Stefnir hf. is an independently operating financial company owned by Arion Bank
and manages a broad range of mutual funds, investment funds and institutional investor funds for investors. Markets also offer a
comprehensive selection of funds from some of the leading international fund management companies, both through the Bank and the
Bank's subsidiary Arion (Financial) Advisory Services Ltd.
Segment information is presented in respect of the Group's operating segments and is based on the Group's management and internal
reporting structure. The business units are segmented according to customers, products and services characteristics. Segment
performance is evaluated based on earnings before tax.
Inter segment pricing is determined on an arm's length basis. Operating segments pay and receive interest to and from Treasury on an
arm's length basis to reflect the allocation of capital, funding cost and relevant risk premium.
Supporting units include the Bank's headquarters which carry out support functions such as the CEO office, Risk Management, Finance
(excluding Treasury), IT and Operations & Culture. The information presented relating to the supporting units does not represent an
operating segment. A significant proportion of expenses from support functions is allocated to operating segments in a separate line in the
operating segment overview.
Treasury is responsible for the Bank's funding, liquidity and asset-and-liability management. Treasury oversees the internal funds‘s transfer
pricing and manages the relationship with investors, credit rating agencies and financial institutions. Market making activities in domestic
securities and FX as well as FX brokerage sits within Treasury.
Vördur is a comprehensive insurance company that services both individuals and companies and focuses on simple and convenient
services. Vördur collaborates closely with Retail Banking and Corporate and Investment Banking on insurance sales and customer
services.
25
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
5. Operating segments, continued
Subsidi- Supporting2025 aries excl. unitsMarkets Retail Stefnir and and elimi-Income Statement and Stefnir CIB Banking Treasury Vördur Vördur nations TotalNet interest income ................................... 1,387 29,890 16,163 5,315 (75) 6 (144) 52,542 Net fee and commission income ............... 5,686 6,844 3,261 796 (180) 210 530 17,147 Insurance service results .......................... - - - - 2,174 (5) (58) 2,111 Net financial income .................................. 3 5 - 211 815 69 (28) 1,075 Other operating income ............................. 2 9 29 3 9 5,465 (1) 5,516 Operating income .................................... 7,078 36,748 19,453 6,325 2,743 5,745 299 78,391 Operating expenses .................................. (2,855) (2,528) (3,688) (687) 1,121 (577) (19,034) (28,248)Allocated expenses ................................... (3,217) (5,284) (7,105) (1,428) (1,204) (96) 18,334 - Bank levy .................................................. (42) (801) (830) (434) - - 1 (2,106)Net impairment ......................................... 21 (2,753) (201) (15) - - (105) (3,053)Earnings before income tax ................... 985 25,382 7,629 3,761 2,660 5,072 (505) 44,984 Net seg. rev. from ext. customers ............. 3,600 45,962 37,116 (16,944) 2,770 5,920 (33) 78,391 Net seg. rev. from other segments ............ 3,478 (9,214) (17,663) 23,269 (27) (175) 332 - Operating income .................................... 7,078 36,748 19,453 6,325 2,743 5,745 299 78,391 Statement of financial positionLoans to customers .................................. 9,242 678,151 640,225 - - - 1,438 1,329,056 Financial instruments ................................ 19,591 - - 162,790 36,277 164 (3,006) 215,816 Other external assets ................................ 6,199 69 1,573 172,826 4,421 12,700 13,105 210,893 Internal assets .......................................... 68,213 - - 265,545 - - (333,758) - Total assets ............................................. 103,245 678,220 641,798 601,161 40,698 12,864 (322,221) 1,755,765 Deposits .................................................... 91,930 405,169 408,750 20,160 - - (4,827) 921,182 Other external liabilities ............................. 2,496 6,792 2,763 561,457 25,790 1,529 16,365 617,192 Internal liabilities ....................................... - 148,194 177,791 - - 7,774 (333,759) - Total liabilities ......................................... 94,426 560,155 589,304 581,617 25,790 9,303 (322,221) 1,538,374 Allocated equity ...................................... 8,819 118,065 52,494 19,544 14,908 3,561 - 217,391
Notes to the Consolidated Financial Statements
26
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
5. Operating segments, continued
207,086
Subsidi-Supporting2024 aries excl. unitsMarkets Retail Stefnir and and elimi-Income Statement and Stefnir CIB Banking Treasury Vördur Vördur nations TotalNet interest income ................................... 1,257 26,086 15,103 4,079 (76) (194) 47 46,302 Net fee and commission income ............... 5,315 5,213 3,471 672 (137) 292 534 15,360 Insurance service results .......................... - - - - 2,231 - (65) 2,166 Net financial income .................................. 94 853 - (580) 2,468 23 (13) 2,845 Other operating income ............................. 4 (1) 37 - 11 (309) 36 (222)Operating income .................................... 6,670 32,151 18,611 4,171 4,497 (188) 539 66,451 Operating expenses .................................. (2,793) (2,524) (3,883) (917) 1,064 (409) (18,866) (28,328)Allocated expenses ................................... (2,894) (5,132) (7,780) (1,463) (1,164) (123) 18,556 - Bank levy .................................................. (46) (694) (829) (355) - - - (1,924)Net impairment ......................................... (24) (1,016) (71) (20) - - - (1,131)Earnings before income tax ................... 913 22,785 6,048 1,416 4,397 (720) 229 35,068 Net seg. rev. from ext. customers ............. 3,390 41,220 37,276 (20,279) 4,529 39 314 66,489 Net seg. rev. from other segments ............ 3,280 (9,069) (18,665) 24,459 (38) (227) 222 (38)Operating income .................................... 6,670 32,151 18,611 4,180 4,491 (188) 536 66,451 Statement of financial positionLoans to customers .................................. 6,105 588,483 634,959 4 - - 507 1,230,058 Financial instruments ................................ 25,317 587 - 147,478 35,790 117 (2,872) 206,417 Other external assets ................................ 6,521 414 1,675 141,379 4,634 19,215 7,954 181,792 Internal assets .......................................... 63,261 - - 261,499 - - (324,760) - Total assets ............................................. 101,204 589,484 636,634 550,360 40,424 19,332 (319,171) 1,618,267 Deposits .................................................... 87,630 394,512 355,787 22,003 - - (2,489) 857,443 Other external liabilities ............................. 4,569 4,644 1,923 501,793 25,076 7,655 8,078 553,738 Internal liabilities ....................................... - 89,733 232,638 - - 2,389 (324,760) - Total liabilities ......................................... 92,199 488,889 590,348 523,796 25,076 10,044 (319,171) 1,411,181 Allocated equity ...................................... 9,005 100,596 46,286 26,564 15,348 9,288 - 56,608 826 67,914 34,490 34,490 34,812 4,061
Income taxes and discontinued operations held for sale are excluded from the profit and loss segment information.
27
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Notes to the Consolidated Income Statement
Quarterly statements
6. Operations by quarters, unaudited
The half-year results were reviewed by the Bank's auditors. Other quarterly statements and the split between quarters were not audited or
reviewed by the Bank's auditors.
2025 Q1 Q2 Q3 Q4 TotalNet interest income ............................................................................................12,166 14,200 13,826 12,350 52,542 Net fee and commission income ........................................................................4,536 4,553 4,003 4,055 17,147 Insurance service results ...................................................................................(31) 1,066 630 446 2,111 Net financial income ..........................................................................................(951) 179 483 1,364 1,075 Other operating income .....................................................................................3,321 1,324 45 826 5,516 Operating income ............................................................................................19,041 21,322 18,987 19,041 78,391 Operating expenses ...........................................................................................(6,601) (6,697) (6,194) (8,756) (28,248)Bank levy ...........................................................................................................(508) (521) (530) (547) (2,106)Net impairment ..................................................................................................(378) 147 (1,128) (1,694) (3,053)Earnings before income tax ............................................................................11,554 14,251 11,135 8,044 44,984 Income tax expense ..........................................................................................(3,726) (3,984) (2,928) (1,820) (12,458)Net earnings from continuing operations .......................................................7,828 10,267 8,207 6,224 32,526 Discontinued operations, net of tax ....................................................................(11) (11) 3 - (19)Net earnings .....................................................................................................7,817 10,256 8,210 6,224 32,507 2024Net interest income ............................................................................................11,245 11,948 11,863 11,246 46,302 Net fee and commission income ........................................................................3,365 3,979 3,880 4,136 15,360 Insurance service results ...................................................................................(215) 523 1,532 326 2,166 Net financial income ..........................................................................................29 99 524 2,193 2,845 Other operating income .....................................................................................50 38 (313) 3 (222)Operating income ............................................................................................14,474 16,587 17,486 17,904 66,451 Operating expenses ...........................................................................................(6,554) (7,154) (6,021) (8,599) (28,328)Bank levy ...........................................................................................................(460) (476) (500) (488) (1,924)Net impairment ..................................................................................................(315) (775) (954) 913 (1,131)Earnings before income tax ............................................................................7,145 8,182 10,011 9,730 35,068 Income tax expense ..........................................................................................(2,704) (2,671) (2,114) (1,430) (8,919)Net earnings from continuing operations .......................................................4,441 5,511 7,897 8,300 26,149 Discontinued operations, net of tax ....................................................................(9) (11) (6) (11) (37)Net earnings .....................................................................................................4,432 5,500 7,891 8,289 26,112
28
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
7. Net interest income
Interest spread
2025 2024
Interest spread (the ratio of net interest income to the average carrying amount
3.2% 3.1%
of interest bearing assets) .........................................................................................................................................
Net interest income calculated using the effective interest rate method were ISK 127,752 million (2024: ISK 125,974 million).
2025 Amortized Fair value Fair valueInterest incomecost thr. P/L thr. OCI TotalCash and balances with Central Bank ..................................................................................6,795 - - 6,795 Loans to credit institutions ....................................................................................................864 - - 864 Loans to customers ..............................................................................................................114,697 119 - 114,816 Securities .............................................................................................................................- 675 6,520 7,195 Other ....................................................................................................................................107 - - 107 Interest income ...................................................................................................................122,463 794 6,520 129,777 Interest expenseDeposits ...............................................................................................................................(48,552) - - (48,552)Borrowings ............................................................................................................................(23,406) (1,623) - (25,029)Subordinated liabilities ..........................................................................................................(3,217) (295) - (3,512)Other ....................................................................................................................................(142) - - (142)Interest expense .................................................................................................................(75,317) (1,918) - (77,235)Net interest income ............................................................................................................47,146 (1,124) 6,520 52,542 2024Interest incomeCash and balances with Central Bank ..................................................................................7,752 - - 7,752 Loans to credit institutions ....................................................................................................1,242 - - 1,242 Loans to customers ..............................................................................................................115,425 65 - 115,490 Securities .............................................................................................................................- 1,532 6,147 7,679 Other ....................................................................................................................................96 - - 96 Interest income ...................................................................................................................124,515 1,597 6,147 132,259 Interest expenseDeposits ...............................................................................................................................(53,865) - - (53,865)Borrowings ............................................................................................................................(22,372) (5,542) - (27,914)Subordinated liabilities ..........................................................................................................(3,396) (647) - (4,043)Other ....................................................................................................................................(135) - - (135)Interest expense .................................................................................................................(79,768) (6,189) - (85,957)Net interest income ............................................................................................................44,747 (4,592) 6,147 46,302
29
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
9. Insurance service results
Operation results of Vördur
Combined ratio
89.8% 88.9%
Asset management fees are earned by the Group for trust and fiduciary activities where the Group holds or invests assets on behalf of the
customers.
Fee and commission income on collection and payment services is generated billing services, such as issuing invoices and payment
collection notices, wire transfer services and other payment services.
Vördur's operation resulted in a profit of ISK 2,037 million in 2025, with a return on equity of 13.7%, compared with a profit of ISK 3,675
2025 2024Insurance revenue .....................................................................................................................................................20,766 19,669 Incurred claims ...........................................................................................................................................................(14,406) (13,723)Service expenses .......................................................................................................................................................(4,010) (3,749)Insurance service expenses .......................................................................................................................................(18,416) (17,472)Net expense from reinsurance contracts held .............................................................................................................(239) (31)Insurance service results ........................................................................................................................................2,111 2,166
Fee and commission income from capital markets and corporate finance includes miscellaneous corporate finance services plus
commission from capital markets relating to sales of shares, bonds, FX and derivatives.
million in 2024 and a return on equity of 30.8%.2025 2024Insurance service results ............................................................................................................................................2,111 2,166 Insurance revenue elimination and reclassification .....................................................................................................14 23 Insurance service results according to the Financial Statements of Vördur ................................................................2,125 2,189 Investment return .......................................................................................................................................................1,608 3,260 Net financial loss from insurance contracts ................................................................................................................(1,083) (1,063)Total investment return ...............................................................................................................................................525 2,197 Other income .............................................................................................................................................................9 11 Earnings before income tax .....................................................................................................................................2,659 4,397 Income tax .................................................................................................................................................................(622) (721)Net earnings .............................................................................................................................................................2,037 3,675
Combined ratio of Vördur, including insurance revenue from the Group .....................................................................
8. Net fee and commission income20252024Net NetIncome Expense income Income Expense incomeAsset management .........................................................................5,508 (495) 5,013 5,346 (563) 4,783 Capital markets and corporate finance ............................................2,475 (37) 2,438 1,787 (40) 1,747 Lending and financial guarantees ....................................................5,244 - 5,244 4,326 - 4,326 Collection and payment services .....................................................1,403 (81) 1,322 1,590 (109) 1,481 Cards and payment solution ............................................................5,766 (2,783) 2,983 5,286 (2,617) 2,669 Other ..............................................................................................755 (959) (204) 836 (839) (3)Commission expense from insurance operation ..............................- 351 351 - 357 357 Net fee and commission income ..................................................21,151 (4,004) 17,147 19,171 (3,811) 15,360
Commission expense from insurance operation is transferred to insurance service results in accordance with IFRS 17.
Fee and commission income from lending and financial guarantees is mainly related to lending activities, extension fees, advisory services
and documentation, notification and payment fees plus fees from the issuing of guarantees on behalf of customers.
Other fee and commission income is mainly fees relating to sale, custody and market making on the Icelandic stock exchange.
Commission from cards and payment solutions is mainly from the Bank's issuance of credit and debit cards and other card related
commission, e.g. yearly fee on cards and transaction fees.
30
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
10. Net financial income
11. Other operating income
Real estates and other assets classified as assets held for sale are generally the result of foreclosures on companies and individuals.
2025 2024Fair value changes on investment property ................................................................................................................5,277 (339)Realised loss on investment property .........................................................................................................................(429) - Net gain on disposal of assets ....................................................................................................................................600 1 Net gain on assets held for sale .................................................................................................................................13 7 Share of (loss) profit of associates .............................................................................................................................(27) 24 Other income .............................................................................................................................................................82 85 Other operating income ...........................................................................................................................................5,516 (222)Net gain on assets held for sale Net gain from real estates and other assets ...............................................................................................................18 16 Expense related to real estates and other assets .......................................................................................................(5) (9)Net gain on assets held for sale ..............................................................................................................................13 7
20252024Net gain on financial assets and financial liabilities mandatorily measured at fair value through the income statement ...............................................................................................................1,760 4,686 Net gain (loss) on prepayments of borrowings ............................................................................................................33 (182)Net loss on fair value hedge of interest rate swap ......................................................................................................(13) (383)Net realized loss on financial assets carried at fair value through OCI ........................................................................(219) (134)Net financial loss from insurance contracts ................................................................................................................(1,083) (1,063)Net foreign exchange gain (loss) ................................................................................................................................597 (79)Net financial income .................................................................................................................................................1,075 2,845 Net gain on financial assets and financial liabilities mandatorily measured at fair value through the income statementEquity instruments ......................................................................................................................................................(729) 2,778 Debt instruments ........................................................................................................................................................2,147 1,866 Derivatives .................................................................................................................................................................372 56 Loans .........................................................................................................................................................................(30) (14)Net gain on financial assets and financial liabilities mandatorily measured at fair value through the income statement ....................................................................1,760 4,686 Net loss on fair value hedge of interest rate swapFair value change of interest rate swaps designated as hedging instruments .............................................................1,185 4,867 Fair value change on bonds issued by the Group attributable to interest rate risk ......................................................(1,198) (5,250)Net loss on fair value hedge of interest rate swap .................................................................................................(13) (383)
31
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
12. Operating expenses
13. Personnel and salaries
* Fixed remuneration represents Board Member compensation for their attendance at meetings of the Board of Directors.
*** Steinunn K. Thórdardóttir also serves on the Board of Vördur.
20252024Remuneration to the Board of DirectorsFixed Additional Fixed Additionalremuner- remuner- Pension remuner- remuner- Pensionation* ation** contribution Total ation* ation**contributionTotalPaul Horner, Chairman ............................. 18.8 14.8 - 33.7 17.2 13.7 - 30.9 Kristín Pétursdóttir, Vice Chairman ........... 10.7 13.3 2.8 26.8 9.5 12.2 2.5 24.1 Gunnar Sturluson, Director ....................... 7.1 11.5 2.1 20.8 6.7 9.8 1.9 18.4 Marianne Gjertsen Ebbesen, Director (elected 12 March '25) ........................... 8.9 5.9 - 14.8 - - - - Steinunn K. Thórdardóttir, Director*** ........ 16.6 14.7 3.6 34.9 13.5 12.9 3.0 29.5 Liv Fiksdahl (until 12 March '25) ................ 2.2 2.2 - 4.4 10.7 11.2 - 21.9 Brynjólfur Bjarnason (until 13 March '24) ... - - - - 2.7 2.2 0.6 5.4 Alternate directors of the Board ................. 1.2 0.6 0.2 2.0 1.1 1.5 0.3 3.0 Total remuneration .................................. 65.5 63.1 8.7 137.4 61.4 63.5 8.3 133.2
2025 2024Salaries and related expenses ...................................................................................................................................19,217 18,694 Other operating expenses ..........................................................................................................................................12,690 13,026 Operating expenses from insurance operation ...........................................................................................................(3,659) (3,392)Operating expenses .................................................................................................................................................28,248 28,328
** Additional remuneration represents Board Member compensation for their participation in Board Committees.
2025 2024Number of employeesAverage number of full-time equivalent positions during the year ...............................................................................878 836 Full-time equivalent positions at the end of the year ...................................................................................................901 858 Salaries and related expensesSalaries ......................................................................................................................................................................13,739 12,914 Incentive scheme, including salary related expense ...................................................................................................1,325 1,813 Share-based payment expenses ................................................................................................................................86 162 Defined contribution pension plans ............................................................................................................................2,016 1,901 Salary-related expenses .............................................................................................................................................2,051 1,904 Salaries and related expenses .................................................................................................................................19,217 18,694
32
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
13. Personnel and salaries, continued
Incentive schemes
Share-based payment expense
Arion Bank has in place a share option plan for all employees of the Bank, Vördur and Stefnir, approved at the Banks annual general
meeting. A total expense of ISK 86 million was recognised in the Income Statement during the year (2024: ISK 122 million). Estimated
remaining expenses due the share option contracts are ISK 9 million and will be expensed over the next four months. For further
information on the share option program, see Note 37.
* Members of the Executive Committee are listed in Note 43.
The current incentive scheme for Arion Bank hf. and Vördur came into effect in 2021. The scheme is in compliance with the FSA’s rules on
remuneration policy for financial institutions. The scheme is divided into two parts. Firstly, employees can receive up to 10% of their fixed
salary for each fiscal year in the form of a cash payment. Secondly, a limited group can receive up to 25% of their fixed salary as a payment
in the form of shares or share options in the Bank. Of this 25%, (i) a total of 20% will be settled instantly with cash, 40% will be settled
instantly with shares subject to a 3-year lock-up period and the remaining 40% will be settled with shares or share options after 4-5 years or
(ii) a total of 20% will be settled instantly with cash and the remaining 80% will be settled with share options after 4-5 years. The key metric
used to determine whether incentive scheme payments will be paid by the Bank, in part or in full, is whether the Bank’s return on equity is
higher than the weighted ROE of the Bank’s main competitors. Other supporting metrics include ROE and cost-to-income ratio vs target,
compliance, staff NPS etc. Stefnir hf. has a special incentive scheme where other criteria are used as a basis.
Board Members receive remuneration for their involvement in board committees. In addition to 21 Board meetings (2024: 13) during the
year 4 Board Credit Committee meetings (2024: 7), 5 Board Audit Committee meetings (2024: 5), 8 Board Risk Committee meetings (2024:
8), 5 Board Remuneration Committee meetings (2024: 5) and 4 Board Tech committee meetings (2024: 5) were held.
The 2025 Annual General Meeting of the Bank held on 12 March 2025 approved the monthly salaries for 2025 for the Chairman, Vice
Chairman and for other Board Members of amounts ISK 1,200,000, ISK 900,000 and ISK 600,000 (2024: ISK 1,130,000; 847,500; 565,000)
respectively. Alternate Board Members receive a payment of ISK 600,000 per year and ISK 300,000 for each meeting attended but cannot
exceed ISK 600,000 per month (2024: ISK 565,000 per year, ISK 282,500 for each meeting but cannot exceed ISK 565,000 per month).
Board members residing outside of Iceland receive a further ISK 387,500 for each Board meeting they attend in person (2024: ISK
365,000). In addition, it was approved to pay Board Members who serve on board sub-committees of the Bank a maximum of ISK 250,000
(2024: ISK 235,000) per month for each committee they serve on and the Chairman of the board committees ISK 375,000 (2024: ISK
352,500).
In 2025 the Group made a ISK 1,325 million provision for the incentive scheme, including salary-related expenses (2024: ISK 1,813 million).
At year end the Group's accrual for the incentive scheme payments amounted to ISK 1,678 million (31.12.2024: ISK 2,853 million). The
estimated cost of the deferred part of the incentive scheme from the fiscal years 2022–2025, to be settled in 2026–2030, amounting to ISK
546 million, will be expensed on a proportional basis over the years leading up to their settlement.
Remuneration to key management personnel20252024Performance- Performance-based Pension based PensionSalaries paymentscontributionTotal Salaries paymentscontributionTotalBenedikt Gíslason, CEO ........................... 69.5 14.5 10.3 94.3 68.4 6.1 10.5 85.0 Members of the Executive Committee* ..... 358.2 83.0 53.0 494.2 350.7 30.6 54.2 435.4 Former members of Executive Committee - - - - 7.0 3.8 1.5 12.3 Other key employees ................................ 68.3 - 10.2 78.5 66.1 - 9.9 75.9 Total remuneration .................................. 496.1 97.5 73.5 667.0 492.2 40.5 76.0 608.7
33
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
14. Other operating expenses
15. Bank levy
Auditor's feeAudit and review of the Consolidated Financial Statements for the relevant fiscal year ..............................................180 189 Other audit related services for the relevant fiscal year ..............................................................................................16 17 Other services from auditors ......................................................................................................................................5 13 Auditor's fee .............................................................................................................................................................201 219
16. Net impairment2025 2024Net impairment on financial instruments and value changes on loansNet impairment on loans to customers and financial institutions .................................................................................(3,064) (1,738)Net impairment on other financial instruments at FVOCI ............................................................................................(4) - Other value changes of loans - corporates .................................................................................................................- 83 Other value changes of loans - individuals .................................................................................................................15 524 Net impairment .........................................................................................................................................................(3,053) (1,131)Net impairment by customer typeIndividuals ..................................................................................................................................................................(154) 1 Corporates .................................................................................................................................................................(2,899) (1,132)Net impairment .........................................................................................................................................................(3,053) (1,131)
* Included ISK 585 million fine following settlement with the Financial supervision of the Central Bank in June 2024.
2025 2024IT expenses ...............................................................................................................................................................5,127 5,074 Professional services .................................................................................................................................................1,565 1,435 Marketing ...................................................................................................................................................................1,283 1,215 Housing expenses ......................................................................................................................................................522 502 Other administration expenses* ..................................................................................................................................2,532 3,103 Depreciation of property and equipment .....................................................................................................................493 573 Depreciation of right of use asset ...............................................................................................................................161 139 Amortization of intangible assets ................................................................................................................................1,007 985 Other operating expenses .......................................................................................................................................12,690 13,026
The Bank levy is 0.145% on total debts excluding tax liabilities, in excess of ISK 50 billion. The Bank levy is assessed on Financial
Undertakings but non-financial subsidiaries are exempt from this tax.
Other value changes of loans to individuals and corporates are mainly due to release of discount from loans acquired with discount during
the years 2008 to 2013, both due to impairments and other discount rate than reflected in the interest rates of the loans. There are no
further discounts related to the aforementioned loans on balance.
34
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
17. Income tax expense
18. Discontinued operations held for sale, net of income tax
2025 2024
(19) (37)
(19) (37)
19. Earnings per share
Net loss from discontinued operations held for sale, net of income tax .......................................................................
Tax exempt revenues / loss consist mainly of profit / loss from equity positions.
Financial undertakings pay 6% additional tax on taxable profit exceeding ISK 1 billion.
Sólbjarg ehf., a subsidiary of Eignabjarg is classified as held for sale.
Basic earnings per share is based on net earnings attributable to the shareholders of Arion Bank and the weighted average number of
shares outstanding during the year. Diluted earnings per share is calculated by adjusting the weighted average number of outstanding
shares to assume conversion of all dilutive potential ordinary shares. Arion Bank has issued share options, share rights and warrants
(terminated in 2024) that have dilutive effects.ContinuedDiscontinuedoperations operationsNet earnings2025 2024 2025 2024 2025 2024Net earnings attributable to the shareholders of Arion Bank ............30,645 26,148 (19) (37) 30,626 26,111 Total comprehensive income attributable to the shareholders .........31,070 26,521 (19) (37) 31,051 26,484 Weighted average number of outstanding shares (millions) ............1,389 1,426 1,389 1,426 1,389 1,426 Weighted average number of outstanding shares including options and warrants (2024) (millions) ..........................1,401 1,443 1,401 1,443 1,401 1,443 Basic earnings per share (ISK) ....................................................22.07 18.34 (0.01) (0.03) 22.05 18.31 Diluted earnings per share (ISK) ..................................................21.88 18.12 (0.01) (0.03) 21.86 18.09 Basic comprehensive income per share (ISK) ............................22.37 18.59 (0.01) (0.03) 22.36 18.57 Diluted comprehensive income per share (ISK) ..........................22.18 18.38 (0.01) (0.03) 22.17 18.35
Discontinued operations held for sale, net of income tax .....................................................................................
2025 2024Current tax expense ...................................................................................................................................................11,386 9,651 Deferred tax expense .................................................................................................................................................1,072 (732)Current tax expense .................................................................................................................................................12,458 8,919 Reconciliation of effective tax rate20252024Earnings before income tax ..................................................................................................44,984 35,068 Income tax using the Icelandic corporate tax rate .................................................................20.0% 8,997 21.0% 7,364 Additional 6% tax on Financial Undertakings ........................................................................5.0% 2,258 5.6% 1,977 Non-deductible expenses .....................................................................................................0.2% 82 0.5% 163 Tax exempt revenues / loss ..................................................................................................1.7% 757 (1.9%) (664)Non-deductible taxes (Bank levy) .........................................................................................0.9% 421 1.1% 385 Effect of tax rates in foreign jurisdictions ...............................................................................0.0% 17 0.0% - Tax incentives not recognized in the Income Statement .......................................................0.1% 44 (0.2%) (78)Other changes ......................................................................................................................(0.3%) (118) (0.7%) (228)Effective tax rate .................................................................................................................27.7% 12,458 25.4% 8,919
35
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Notes to the Consolidated Statement of Financial Position
20. Cash and balances with Central Bank
23. Financial instruments
Further analysis of loans is provided in Risk management disclosures.
The mandatory reserve deposit with the Central Bank is not available for the Group to use in its daily operations. The minimum interest-free
fixed reserve requirement of the Central Bank is 3%.
31.12.2025 31.12.2024Bonds and debt instruments .......................................................................................................................................170,985 158,735 Shares and equity instruments with variable income ..................................................................................................21,260 18,470 Derivatives .................................................................................................................................................................8,624 6,715 Securities used for economic hedging ........................................................................................................................14,947 22,497 Financial instruments ..............................................................................................................................................215,816 206,417
31.12.2025 31.12.2024Cash on hand .............................................................................................................................................................2,022 2,481 Cash with Central Bank ..............................................................................................................................................114,486 89,139 Mandatory reserve deposit with Central Bank .............................................................................................................33,603 32,474 Cash and balances with Central Bank ....................................................................................................................150,111 124,094
The total book value of pledged loans that were pledged against outstanding borrowings was ISK 286 billion at the end of the year
(31.12.2024: ISK 304 billion). Pledged loans comprised mortgage loans to individuals.
21. Loans to credit institutions31.12.2025 31.12.2024Bank accounts ...........................................................................................................................................................22,040 25,690 Other loans ................................................................................................................................................................527 - Loans to credit institutions ......................................................................................................................................22,567 25,690
22. Loans to customersIndividualsCorporatesTotalGross Gross Grosscarrying Book carrying Book carrying Book31.12.2025 amount value amount value amount valueOverdrafts .......................................................................................15,373 14,666 53,125 50,643 68,498 65,309 Credit cards ....................................................................................17,558 17,301 2,561 2,478 20,119 19,779 Loans to customers at fair value .....................................................- - 1,933 1,450 1,933 1,450 Mortgage loans ...............................................................................577,492 576,828 91,007 89,765 668,499 666,593 Construction loans ..........................................................................- - 57,705 56,224 57,705 56,224 Capital lease ...................................................................................681 674 7,174 7,046 7,855 7,720 Other loans .....................................................................................31,851 30,925 485,158 481,056 517,009 511,981 Loans to customers ......................................................................642,955 640,394 698,663 688,662 1,341,618 1,329,056 31.12.2024Overdrafts .......................................................................................14,575 13,925 42,233 41,222 56,808 55,147 Credit cards ....................................................................................16,873 16,647 2,297 2,230 19,170 18,877 Loans to customers at fair value .....................................................- - 1,751 1,313 1,751 1,313 Mortgage loans ...............................................................................571,525 570,842 74,287 73,712 645,812 644,554 Construction loans ..........................................................................- - 49,508 48,806 49,508 48,806 Capital lease ...................................................................................1,298 1,283 7,344 7,295 8,642 8,578 Other loans .....................................................................................37,627 36,707 420,530 416,076 458,157 452,783 Loans to customers ......................................................................641,898 639,404 597,950 590,654 1,239,848 1,230,058
36
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24. Financial assets and financial liabilities
31.12.2025Fair value Fair valueFinancial assetsAmortized through throughcost OCI P/L TotalLoansCash and balances with Central Bank ..................................................................................150,111 - - 150,111 Loans to credit institutions ....................................................................................................22,567 - - 22,567 Loans to customers ..............................................................................................................1,327,606 - 1,450 1,329,056 Loans ...................................................................................................................................1,500,284 - 1,450 1,501,734 Bonds and debt instrumentsListed ....................................................................................................................................- 138,302 32,479 170,781 Unlisted ................................................................................................................................- - 204 204 Bonds and debt instruments ..............................................................................................- 138,302 32,683 170,985 Shares and equity instruments with variable incomeListed ....................................................................................................................................- - 11,499 11,499 Unlisted ................................................................................................................................- - 9,008 9,008 Bond funds with variable income, unlisted ............................................................................- - 753 753 Shares and equity instruments with variable income ......................................................- - 21,260 21,260 DerivativesOTC derivatives ....................................................................................................................- - 5,414 5,414 Derivatives used for hedge accounting .................................................................................- - 3,210 3,210 Derivatives ..........................................................................................................................- - 8,624 8,624 Securities used for economic hedgingBonds and debt instruments, listed .......................................................................................- - 1,732 1,732 Shares and equity instruments with variable income, listed ..................................................- - 13,215 13,215 Securities used for economic hedging ..............................................................................- - 14,947 14,947 Other financial assetsAccounts receivable .............................................................................................................3,465 - - 3,465 Other financial assets ...........................................................................................................13,566 - - 13,566 Other financial assets ........................................................................................................17,031 - - 17,031 Financial assets ..................................................................................................................1,517,315 138,302 78,964 1,734,581 Financial liabilitiesDue to credit institutions and Central Bank ...........................................................................12,003 - - 12,003 Deposits ...............................................................................................................................921,182 - - 921,182 Borrowings * .........................................................................................................................494,823 - - 494,823 Subordinated liabilities * .......................................................................................................43,518 - - 43,518 Derivatives ...........................................................................................................................- - 1,411 1,411 Derivatives used for hedge accounting .................................................................................- - 1,718 1,718 Other financial liabilities ........................................................................................................11,792 - - 11,792 Financial liabilities ..............................................................................................................1,483,318 - 3,129 1,486,447 * Including effect from hedge accounting derivatives.
37
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24. Financial assets and financial liabilities, continued
31.12.2024Fair value Fair valueFinancial assetsAmortized through throughcost OCI P/L TotalLoansCash and balances with Central Bank ..................................................................................124,094 - - 124,094 Loans to credit institutions ....................................................................................................25,690 - - 25,690 Loans to customers ..............................................................................................................1,228,745 - 1,313 1,230,058 Loans ...................................................................................................................................1,378,529 - 1,313 1,379,842 Bonds and debt instrumentsListed ....................................................................................................................................- 126,898 31,217 158,115 Unlisted ................................................................................................................................- - 620 620 Bonds and debt instruments ..............................................................................................- 126,898 31,837 158,735 Shares and equity instruments with variable incomeListed ....................................................................................................................................- - 11,499 11,499 Unlisted ................................................................................................................................- - 6,291 6,291 Bond funds with variable income, unlisted ............................................................................- - 680 680 Shares and equity instruments with variable income ......................................................- - 18,470 18,470 DerivativesOTC derivatives ....................................................................................................................- - 3,685 3,685 Derivatives used for hedge accounting .................................................................................- - 3,030 3,030 Derivatives ..........................................................................................................................- - 6,715 6,715 Securities used for economic hedgingBonds and debt instruments, listed .......................................................................................- - 2,664 2,664 Shares and equity instruments with variable income, listed ..................................................- - 19,833 19,833 Securities used for economic hedging ..............................................................................- - 22,497 22,497 Other financial assetsAccounts receivable .............................................................................................................2,552 - - 2,552 Other financial assets ...........................................................................................................5,924 - - 5,924 Other financial assets ........................................................................................................8,476 - - 8,476 Financial assets ..................................................................................................................1,387,005 126,898 80,832 1,594,735 Financial liabilitiesDue to credit institutions and Central Bank ...........................................................................6,618 - - 6,618 Deposits ...............................................................................................................................857,443 - - 857,443 Borrowings * .........................................................................................................................433,178 - - 433,178 Subordinated liabilities * .......................................................................................................44,538 - - 44,538 Derivatives ...........................................................................................................................- - 4,096 4,096 Derivatives used for hedge accounting .................................................................................- - 4,298 4,298 Other financial liabilities ........................................................................................................10,631 - - 10,631 Financial liabilities ..............................................................................................................1,352,408 - 8,394 1,360,802 * Including effect from hedge accounting derivatives.
38
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
24. Financial assets and financial liabilities, continued
25. Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of assets and liabilities by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: valuation techniques for which all significant inputs are market observable, either directly or indirectly; and
The total amount of pledged bonds was ISK 3.2 billion at the end of the year (31.12.2024: ISK 3.1 billion). Pledged bonds comprise
Icelandic Government Bonds that were pledged against funding received and included in Due to credit institutions and Central Bank as well
as short positions included in Financial liabilities at fair value.
For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred
between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
Manda-Fair value torily atBonds and debt instruments measured at fair value, specified by issuerthrough fair valueOCI thr. P/L Total31.12.2025Financial and insurance activities ............................................................................................................1,434 8,667 10,101 Public sector ............................................................................................................................................136,868 20,366 157,234 Corporates ..............................................................................................................................................- 3,650 3,650 Bonds and debt instruments at fair value ............................................................................................138,302 32,683 170,985 31.12.2024Financial and insurance activities ............................................................................................................975 8,494 9,469 Public sector ............................................................................................................................................125,923 20,257 146,180 Corporates ..............................................................................................................................................- 3,086 3,086 Bonds and debt instruments at fair value ............................................................................................126,898 31,837 158,735
Assets and liabilities recorded at fair value by level of the fair value hierarchy31.12.2025Assets at fair valueLevel 1 Level 2 Level 3 TotalLoans to customers ..............................................................................................................- - 1,450 1,450 Bonds and debt instruments .................................................................................................167,250 3,732 3 170,985 Shares and equity instruments with variable income .............................................................11,201 6,055 4,004 21,260 Derivatives ...........................................................................................................................- 5,414 - 5,414 Derivatives used for hedge accounting .................................................................................- 3,210 - 3,210 Securities used for economic hedging ..................................................................................14,947 - - 14,947 Investment property ..............................................................................................................- - 7,305 7,305 Assets at fair value .............................................................................................................193,398 18,411 12,762 224,571 Liabilities at fair valueDerivatives ...........................................................................................................................- 1,411 - 1,411 Derivatives used for hedge accounting .................................................................................- 1,718 - 1,718 Liabilities at fair value ........................................................................................................- 3,129 - 3,129
Level 3: valuation techniques which include significant inputs that are not based on observable market data.
39
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25. Fair value hierarchy, continued
Methods for establishing fair value
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.
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.
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
31.12.2024Assets at fair valueLevel 1 Level 2 Level 3 TotalLoans to credit institutions ....................................................................................................- - 1,313 1,313 Bonds and debt instruments .................................................................................................155,316 3,414 5 158,735 Shares and equity instruments with variable income .............................................................9,269 7,546 1,655 18,470 Derivatives ...........................................................................................................................- 3,685 - 3,685 Derivatives used for hedge accounting .................................................................................- 3,030 - 3,030 Securities used for economic hedging ..................................................................................21,585 912 - 22,497 Investment property ..............................................................................................................- - 9,387 9,387 Assets at fair value .............................................................................................................186,170 18,587 12,360 217,117 Liabilities at fair valueDerivatives ...........................................................................................................................- 4,096 - 4,096 Derivatives used for hedge accounting .................................................................................- 4,298 - 4,298 Liabilities at fair value ........................................................................................................- 8,394 - 8,394 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).
40
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
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.
Movements in Level 3 assets measured at fair valueInvestmentFinancial assets2025propertyLoans Bonds Shares TotalBalance at the beginning of the year ..................................................................9,387 1,313 5 1,655 12,360 Net fair value changes .......................................................................................5,277 92 - (218) 5,151 Additions ............................................................................................................191 45 - 2,570 2,806 Disposals ...........................................................................................................(7,550) - (2) (3) (7,555)Balance at the end of the year .........................................................................7,305 1,450 3 4,004 12,762 2024Balance at the beginning of the year ..................................................................9,493 - 27 3,595 13,115 Net fair value changes .......................................................................................(339) 51 (20) 468 160 Additions ............................................................................................................233 1,262 - 26 1,521 Disposals ...........................................................................................................- - (2) (2,434) (2,436)Balance at the end of the year .........................................................................9,387 1,313 5 1,655 12,360 Line items where effects of Level 3 assets are recognized in the Income StatementInvestmentFinancial assetsproperty2025Loans Bonds Shares TotalNet interest income ............................................................................................- 122 - - 122 Net financial income ..........................................................................................- (30) - (218) (248)Other operating income .....................................................................................4,848 - - - 4,848 Effects recognized in the Income Statement ..................................................4,848 92 - (218) 4,722 2024Net interest income ............................................................................................- 65 - - 65 Net financial income ..........................................................................................- (14) (20) 468 434 Other operating income .....................................................................................(339) - - - (339)Effects recognized in the Income Statement ..................................................(339) 51 (20) 468 160
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
25. Fair value hierarchy, continued
DerivativesNotionalFair value31.12.2025valueAssets LiabilitiesForward exchange rate agreements ........................................................................................................95,591 430 419 Fair value hedge of interest rate swap .....................................................................................................268,565 3,210 1,718 Interest rate and exchange rate agreements ...........................................................................................33,616 167 204 Bond swap agreements ...........................................................................................................................1,882 70 5 Share swap agreements ..........................................................................................................................18,025 4,747 783 Derivatives .............................................................................................................................................417,680 8,624 3,129 31.12.2024Forward exchange rate agreements ........................................................................................................60,780 180 1,286 Fair value hedge of interest rate swap .....................................................................................................235,504 3,030 4,297 Interest rate and exchange rate agreements ...........................................................................................43,027 235 791 Bond swap agreements ...........................................................................................................................3,243 87 2 Share swap agreements ..........................................................................................................................20,789 2,596 2,018 Options - purchased agreements, unlisted ..............................................................................................- 587 - Derivatives .............................................................................................................................................363,343 6,715 8,394
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.
Carrying values and fair values of financial assets and financial liabilities not carried at fair value31.12.2025Carrying Fair UnrealizedFinancial assets not carried at fair valuevalue value (loss) gainCash and balances with Central Bank .....................................................................................................150,111 150,111 - Loans to credit institutions .......................................................................................................................22,567 22,567 - Loans to customers .................................................................................................................................1,327,606 1,329,204 1,598 Other financial assets ..............................................................................................................................17,031 17,031 - Financial assets not carried at fair value .............................................................................................1,517,315 1,518,913 1,598 Financial liabilities not carried at fair valueDue to credit institutions and Central Bank ..............................................................................................12,003 12,003 - Deposits ..................................................................................................................................................921,182 921,182 - Borrowings ..............................................................................................................................................494,823 501,211 (6,388)Subordinated liabilities .............................................................................................................................43,518 50,461 (6,943)Other financial liabilities ...........................................................................................................................11,792 11,792 - Financial liabilities not carried at fair value .........................................................................................1,483,318 1,496,649 (13,331)31.12.2024Financial assets not carried at fair valueCash and balances with Central Bank .....................................................................................................124,094 124,094 - Loans to credit institutions .......................................................................................................................25,690 25,690 - Loans to customers .................................................................................................................................1,228,745 1,222,223 (6,522)Other financial assets ..............................................................................................................................8,476 8,476 - Financial assets not carried at fair value .............................................................................................1,387,005 1,380,483 (6,522)Financial liabilities not carried at fair valueDue to credit institutions and Central Bank ..............................................................................................6,618 6,618 - Deposits ..................................................................................................................................................857,443 857,443 - Borrowings ..............................................................................................................................................433,178 429,199 3,979 Subordinated liabilities .............................................................................................................................44,538 48,226 (3,688)Other financial liabilities ...........................................................................................................................10,631 10,631 - Financial liabilities not carried at fair value .........................................................................................1,352,408 1,352,117 291
42
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
on FV
- - 693
- 1,395 1,387
1,815 - (248)
53 - 30
656 - (447)
178 - 422
508 - (229)
- 323 (423)
- - 213
- - 157
- 94 441
- 988 1,621
- 2,953 1,955
1,977 - (25)
27 - 26
1,026 - 1,090
- 263 (611)
Gain (loss)
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.
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.
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.Gain (loss)Notional MaturityFair value1.1.-31.12.2025ValuedateAssets LiabilitieschangesInterest rates swaps - EUR .............................................................- - Interest rates swaps - EUR .............................................................73,640 6-12 mthInterest rates swaps - EUR .............................................................44,184 3-6 mthInterest rates swaps - USD .............................................................2,509 1-5 yearsInterest rates swaps - EUR .............................................................44,184 1-5 yearsInterest rates swaps - USD .............................................................15,680 1-5 yearsInterest rates swaps - EUR .............................................................44,184 1-5 yearsInterest rates swaps - EUR .............................................................44,184 over 5 years3,210 1,718 1,185 1.1.-31.12.2024Interest rates swaps - EUR .............................................................- - Interest rates swaps - EUR .............................................................- - Interest rates swaps - USD .............................................................13,899 6-12 mthInterest rates swaps - EUR .............................................................43,168 6-12 mthInterest rates swaps - EUR .............................................................71,947 1-5 yearsInterest rates swaps - EUR .............................................................43,168 1-5 yearsInterest rates swaps - USD .............................................................2,780 1-5 yearsInterest rates swaps - EUR .............................................................43,168 1-5 yearsInterest rates swaps - USD .............................................................17,374 1-5 years3,030 4,298 4,867 Hedged borrowings and subordinated liabilities Accumulated Bookfair valueon FV1.1.-31.12.2025valueAssets LiabilitieschangesEUR 300 million - issued 2021 - 4 years ...............................................................................- - - (648)EUR 500 million - issued 2021 - 5 years ...............................................................................72,265 1,038 - (1,391)EUR 300 million - issued 2025 - 5 years ...............................................................................44,731 209 - 196 EUR 300 million - issued 2023 - 3 years ...............................................................................46,252 - 154 247 USD 21 million - issued 2024 - 3 years .................................................................................2,893 - 53 (31)EUR 300 million - issued 2024 - 4 years ...............................................................................44,916 - 622 427 USD 125 million - issued 2024 - Perpetual ............................................................................15,635 218 - (434)EUR 300 million - issued 2025 - 6 years ...............................................................................43,835 423 - 436 Hedged borrowings and subordinated liabilities ..............................................................270,527 1,888 829 (1,198)1.1.-31.12.2024EUR 300 million - issued 2020 - 4 years ...............................................................................- - - (205)USD 100 million - issued 2020 - Perpetual ............................................................................3,150 - - (615)EUR 500 million - issued 2021 - 5 years ...............................................................................68,775 2,395 - (1,948)EUR 300 million - issued 2021 - 4 years ...............................................................................42,597 646 - (1,619)EUR 300 million - issued 2022 - 2 years ...............................................................................- - - (469)EUR 300 million - issued 2023 - 3 years ...............................................................................45,384 - 397 24 USD 21 million - issued 2024 - 3 years .................................................................................2,989 - 27 (27)EUR 300 million - issued 2024 - 4 years ...............................................................................44,272 - 1,039 (1,087)USD 125 million - issued 2024 - Perpetual ............................................................................16,854 705 - 696 Hedged borrowings and subordinated liabilities ..............................................................224,021 3,746 1,463 (5,250)
43
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
26. Offsetting financial assets and financial liabilities
Total assets
27. Investments in associates
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.
Financial assets subject to enforceable master netting arrangements and similar arrangementsNetting potential not Assets subject to netting recognized in the arrangementsBalance SheetAssets not Assets Assets after subject toGross assets Nettings recognized consideration enforceable recognizedbefore with gross on Balance Financial Collateral of netting netting arr- on Balance31.12.2025nettings liabilities Sheet, net liabilities received potential angements Sheet, netReverse 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 31.12.2024Reverse 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 Financial liabilities subject to enforceable master netting arrangements and similar arrangementsNetting potential not Liabilities subject to netting recognized in the arrangementsBalance SheetLiabilitiesLiabilities notTotalGross Liabilities after subject to liabilitiesliabilities Nettings recognized consideration enforceable recognizedbefore with gross on Balance Financial Collateral of netting netting arr- on balance31.12.2025nettings assets Sheet, net assets pledged potential angements sheet, netRepurchase 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 31.12.2024Repurchase 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
31.12.2025 31.12.2024Carrying amount at the beginning of the year .............................................................................................................814 789 Decreased share capital .............................................................................................................................................(19) - Dividend received .......................................................................................................................................................(8) - Share of (loss) profit of associates .............................................................................................................................(27) 25 Investment in associates .........................................................................................................................................760 814 The Group's interest in its principal associatesBílafrágangur ehf., Lágmúli 5, Reykjavík, Iceland .......................................................................................................- 33.4% Háblær ehf., Sudurlandsbraut 18, Reykjavík, Iceland .................................................................................................31.8% 31.8% Reiknistofa bankanna hf., Dalvegur 30, Reykjavík, Iceland ........................................................................................23.0% 23.0% SER eignarhaldsfélag ehf., Borgartún 19, Reykjavík, Iceland .....................................................................................35.3% 35.3% Matorka ehf., Eyrartröd 12, Grindavik, Iceland ...........................................................................................................19.7% -
44
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
Software Total
Impairment testing
Customer relationship
Acquired
Useful lives .....................................................................................
Straight-line basis
over 3-10 years
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.
Acquired
Internally generated or acquired .....................................................
Finite 6-15 years
and undefined
Acquired and internally
generated
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.
20252024Discount and growth ratesDiscount Growth Discount Growthrates rates rates ratesAsset Management operation ...............................................................................................14.3% 3.5-10% 14.3% 3.5-15%Insurance operation ..............................................................................................................13.9% 3.6% 14.3% 4.0%
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.
Software
Goodwill
and infrastructure
and related agreements
Straight-line basis over
6-15 years and
impairment test
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
CustomerrelationshipInfra- and related2025Goodwill structure agreementsBalance at the beginning of the year ..................................................................730 2,383 427 4,148 7,688 Additions ............................................................................................................- - - 852 852 Amortization .......................................................................................................- - (60) (947) (1,007)Balance at the end of the year .........................................................................730 2,383 367 4,053 7,533 2024Balance at the beginning of the year ..................................................................730 2,383 487 4,451 8,051 Additions ............................................................................................................- - - 622 622 Amortization .......................................................................................................- - (60) (925) (985)Balance at the end of the year .........................................................................730 2,383 427 4,148 7,688
45
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
30. Assets and disposal groups held for sale
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.
31.12.2025 31.12.2024Real estate and other assets ......................................................................................................................................98 111 Assets and disposal groups held for sale ..............................................................................................................98 111 Real estates and other assets classified as assets held for sale are generally the result of foreclosures on companies and individuals.
RecognizedRecognizedChanges in deferred tax assets and tax liabilities throughin incomeAt 1 Jan.equity statementAt 31 Dec.2025Investment property and property and equipment .................................................................(1,179) - 411 (768)Financial assets ....................................................................................................................313 - (1,343) (1,030)Other assets and liabilities ....................................................................................................(216) - (17) (233)Deferred foreign exchange differences .................................................................................(370) - 158 (212)Tax loss carry forward ...........................................................................................................281 - (281) - Change in deferred tax assets and tax liabilities ..............................................................(1,171) - (1,072) (2,243)2024 .....................................................................................................................................Investment property and property and equipment .................................................................(1,227) - 48 (1,179)Financial assets ....................................................................................................................(361) - 674 313 Other assets and liabilities ....................................................................................................(268) - 52 (216)Deferred foreign exchange differences .................................................................................(205) - (165) (370)Tax loss carry forward ...........................................................................................................158 - 123 281 Change in deferred tax assets and tax liabilities ..............................................................(1,903) - 732 (1,171)
29. Tax assets and tax liabilities31.12.202531.12.2024Assets Liabilities Assets LiabilitiesCurrent tax ............................................................................................................................- 10,738 - 9,887 Deferred tax ..........................................................................................................................2 2,245 2 1,173 Tax assets and tax liabilities ..............................................................................................2 12,983 2 11,060 Deferred tax assets and tax liabilities are attributable to the following:Investment property and property and equipment .................................................................1 (769) 1 (1,180)Financial assets ....................................................................................................................- (1,030) 313 - Other assets and liabilities ....................................................................................................33 (266) 33 (249)Deferred tax related to foreign exchange gain ......................................................................2 (214) 6 (376)Tax loss carry forward ...........................................................................................................- - 281 - 36 (2,279) 634 (1,805)Set-off of deferred tax assets together with tax liabilities of the same taxable entities ...........(34) 34 (632) 632 Deferred tax assets and tax liabilities ...............................................................................2 (2,245) 2 (1,173)
46
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
31. Other assets
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).
31.12.2025 31.12.2024Property and equipment .............................................................................................................................................3,354 3,403 Right-of-use asset ......................................................................................................................................................745 808 Accounts receivable ...................................................................................................................................................3,465 2,552 Unsettled securities trading ........................................................................................................................................9,174 2,342 Sundry assets ............................................................................................................................................................5,779 4,901 Other assets .............................................................................................................................................................22,517 14,006 Property and equipment Real Equip- Total Total estate ment 2025 2024Gross carrying amount at the beginning of the year ..............................................................2,727 3,687 6,414 6,533 Additions ..............................................................................................................................- 463 463 325 Disposals ..............................................................................................................................- (42) (42) (27)Write-offs ..............................................................................................................................- (23) (23) (179)Gross carrying amount at the end of the year ..................................................................2,727 4,085 6,812 6,652 Accumulated depreciation at the beginning of the year .........................................................(1,190) (1,821) (3,011) (2,861)Depreciation .........................................................................................................................(74) (409) (483) (555)Disposals ..............................................................................................................................- 23 23 6 Write-offs ..............................................................................................................................- 13 13 161 Accumulated depreciation at the end of the year .............................................................(1,264) (2,194) (3,458) (3,249)Property and equipment .....................................................................................................1,463 1,891 3,354 3,403
31.12.2025 31.12.2024Right-of-use assetBalance at the beginning of the year ..........................................................................................................................808 872 New lease agreements ...............................................................................................................................................72 36 Indexation ..................................................................................................................................................................26 39 Depreciation ...............................................................................................................................................................(161) (139)Right-of-use asset ....................................................................................................................................................745 808 Right-of-use asset is due to real estates for own use.
47
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
32. Other liabilities
31.12.2025 31.12.2024Accounts payable .......................................................................................................................................................1,496 1,402 Unsettled securities trading ........................................................................................................................................3,041 2,550 Insurance contract liabilities .......................................................................................................................................22,435 21,478 Withholding tax ..........................................................................................................................................................6,560 7,329 Bank levy ...................................................................................................................................................................2,107 1,925 Accrued expenses ......................................................................................................................................................5,508 6,136 Prepaid income ..........................................................................................................................................................1,466 1,475 Impairment of off-balance items .................................................................................................................................682 511 Lease liability ..............................................................................................................................................................867 975 Sundry liabilities .........................................................................................................................................................6,574 6,169 Other liabilities .........................................................................................................................................................50,736 49,950 Insurance contract liabilitiesLiabilities for remaining coverage ...............................................................................................................................3,739 3,851 Liabilities for incurred claims ......................................................................................................................................17,866 16,819 Risk adjustment .........................................................................................................................................................830 808 Insurance contract liabilities ...................................................................................................................................22,435 21,478 Lease liabilityBalance at the beginning of the year ..........................................................................................................................975 1,074 New and extended lease agreements .........................................................................................................................74 37 Indexation ..................................................................................................................................................................32 47 Interest expense .........................................................................................................................................................50 53 Lease payments .........................................................................................................................................................(264) (236)Lease liability ............................................................................................................................................................867 975
48
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
33. Borrowings
23,286 12,887
8,299 -
12,732 12,663
- 42,597
- 2,451
4,091 3,775
46,252 45,384
3,182 3,129
2,893 2,989
6,840 6,324
6,288 6,185
7,479 -
12,248 -
18,271 12,580
44,916 44,272
3,418 -
3,015 -
4,397 -
44,731 -
43,835 -
* 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.
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).
First Maturity 31.12.2025 31.12.2024Currency, original nominal value issued Maturity type Terms of interestARION CBI 25, ISK 37,940 million ............ 2017 4/2025At maturity Fixed CPI linked 3.00% .................- 34,805 ARION CBI 26 ISK 17,080 million ............. 2019 10/2026At maturity Fixed CPI linked 2.00% .................20,094 21,775 ARION CB EUR 500 million * .................... 2021 10/2026At maturity Fixed EUR 0.05% ..........................72,265 68,775 ARION CB 27, ISK 53,100 million ............. 2022 10/2027At maturity Fixed 5.50% ..................................26,083 25,652 ARION CBI 28, ISK 27,420 million ............ 2024 9/2028 At maturity Fixed CPI linked 4.25% .................ARION CBI 29, ISK 27,200 million ............ 2014 12/2029At maturity Fixed CPI linked 3.50% .................41,370 39,939 ARION CBI 30, ISK 31,920 million ............ 2023 11/2030At maturity Fixed CPI linked 2.75% .................33,421 31,896 ARION CBI 31, ISK 9,060 million .............. 2025 8/2031 Amortizing Fixed CPI linked 3.65% .................ARION CBI 48, ISK 11,680 million ............ 2018 1/2048 Amortizing Fixed CPI linked 2.50% .................Statutory covered bonds ..........................................................................................................................................237,550 248,392 EUR 300 million Green * ........................... 2021 7/2025 At maturity Fixed 0.375% ...............................NOK 550 million ........................................ 2022 8/2025At maturity Floating NIBOR 3M +2.35% ..........- 6,783 SEK 230 million ........................................ 2022 8/2025At maturity Floating STIBOR 3M +2.35% ........- 2,906 NOK 200 million ........................................ 2023 3/2025 At maturity Floating NIBOR 3M +2.55% ..........ARION 26 1222 Green, ISK 5,760 million . 2021 12/2026At maturity Fixed 4.70% ..................................5,417 5,411 SEK 300 million ........................................ 2023 3/2026 At maturity Floating STIBOR 3M +3.00% ........EUR 300 million* ....................................... 2023 5/2026 At maturity Fixed 7.25% ..................................NOK 250 million ........................................ 2017 4/2027 At maturity Fixed 3.40% .................................USD 21 million* ......................................... 2024 12/2027 At maturity Fixed 6.25% ..................................SEK 500 million Green .............................. 2024 10/2027 At maturity Floating STIBOR 3M +1.20% ........NOK 500 million Green ............................ 2024 10/2027 At maturity Floating NIBOR 3M +1.20% ..........NOK 600 million Green ............................ 2025 12/2027 At maturity Floating NIBOR 3M +1.17% ..........SEK 900 million Green .............................. 2025 12/2027 At maturity Floating STIBOR 3M +1.20% ........ARION 28 1512, ISK 16,920 million .......... 2023 12/2028 At maturity Fixed CPI linked 4.35% .................EUR 300 million * ...................................... 2024 11/2028 At maturity Fixed 4.625% ................................SEK 250 million ........................................ 2025 1/2028 At maturity Floating STIBOR 3M +1.13% ........USD 27 million .......................................... 2025 7/2028 At maturity Fixed 5.00% .................................NOK 350 million ........................................ 2025 1/2028 At maturity Floating NIBOR 3M +1.11% ..........EUR 300 million * ...................................... 2025 5/2030 At maturity Fixed 3.625% ................................EUR 300 million * ...................................... 2025 9/2031 At maturity Fixed 3.50% ..................................Senior unsecured bonds ..........................................................................................................................................257,273 184,786 Borrowings ...............................................................................................................................................................494,823 433,178
49
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
34. Subordinated liabilities
- 6,607
- 905
753 735
11,613 11,195
2,249 2,249
3,078 2,843
10,190 -
- 3,150
15,635 16,854
35. Liabilities arising from financial activities
* 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.
Additional Tier 1 and Tier 2 subordinated liabilities are eligible as regulatory capital under the Icelandic Financial Undertakings Act No.
161/2002.
First call 31.12.2025 31.12.2024Currency, original nominal value Issued Maturity date Terms of interestARION T2I 30 ISK 4,800 million ................ 2019 1/2030 4 Jan '25 Fixed CPI linked 3.875% ...............ARION T2 30 ISK 880 million .................... 2019 1/2030 4 Jan '25 Fixed 6.75% ..................................EUR 5 million ............................................ 2019 1/2026 6 Mar '26 Fixed 3.24% .................................ARION T2I ISK 33 9,860 million ................ 2022 12/2033 15 Dec '28 Fixed CPI linked 4.95% ................ARION T2 33 ISK 2,240 million ................. 2022 12/2033 15 Dec '28 Fixed 9.25% .................................SEK 225 million ........................................ 2024 11/2034 20 Nov '29 Floating 3 mth STIBOR +2.65% ....ARION T2I 36 ISK 10,040 million .............. 2025 12/2036 2 Dec '31 Fixed CPI linked 5.00% .................Tier 2 subordinated liabilities ..................................................................................................................................27,883 24,534 ARION AT1 USD 100 million * .................. 2020 Perpetual 26 Aug '25 Fixed 6.25% ..................................ARION AT1 USD 125 million * .................. 2024 Perpetual 24 Mar '30 Fixed 8.125% ................................Additional Tier 1 subordinated liabilities ...............................................................................................................15,635 20,004 Subordinated liabilities ............................................................................................................................................43,518 44,538
NetNon-cash changescash Interest Foreign EffectAt period2025 At 1 Jan. flows expenses exchange from hedgeendCovered bonds in ISK - CPI linked...................................................153,965 (24,357) 9,594 - - 139,202 Covered bonds in ISK......................................................................25,652 (1,458) 1,889 - - 26,083 Covered bonds in FX.......................................................................68,775 (1,555) 1,958 1,648 1,439 72,265 Senior unsecured bonds in FX.........................................................166,795 53,098 9,843 4,552 (703) 233,585 Senior unsecured bonds in ISK........................................................5,411 (285) 291 - - 5,417 Senior unsecured bonds in ISK - CPI linked.....................................12,580 4,237 1,454 - - 18,271 Subordinated bond T2 in ISK - CPI linked........................................17,802 2,556 1,445 - - 21,803 Subordinated bond T2 ISK...............................................................3,153 (1,116) 212 - - 2,249 Subordinated bond T2 FX................................................................3,579 (174) 171 255 - 3,831 Subordinated bond AT1 FX..............................................................20,004 (4,832) 1,684 (1,683) 462 15,635 Liabilities arising from financial activities...................................477,716 26,114 28,541 4,772 1,198 538,341 2024Covered bonds in ISK - CPI linked...................................................132,391 10,580 10,994 - - 153,965 Covered bonds in ISK......................................................................31,344 (7,455) 1,763 - - 25,652 Covered bonds in FX.......................................................................69,337 (4,660) 3,125 2,971 (1,998) 68,775 Senior unsecured bonds in FX.........................................................167,106 (15,407) 10,295 7,864 (3,063) 166,795 Senior unsecured bonds in ISK........................................................11,510 (6,905) 806 - - 5,411 Senior unsecured bonds in ISK - CPI linked.....................................8,772 2,877 931 - - 12,580 Subordinated bond T2 in ISK - CPI linked........................................16,997 (795) 1,600 - - 17,802 Subordinated bond T2 ISK...............................................................3,157 (267) 264 - - 3,154 Subordinated bond T2 FX................................................................7,908 (5,099) 430 339 - 3,578 Subordinated bond AT1 FX..............................................................13,217 5,265 1,749 (421) 194 20,004 Liabilities arising from financial activities...................................461,739 (21,866) 31,957 10,753 (4,867) 477,716
50
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
36. Pledged assets
37. Equity
Share capital and share premium
Share Own Share 2025 Share Own Share 2024capital shares premium total capital shares premium totalBalance 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)Share option vested ...................................- 6 715 721 - 2 280 282 Incentive scheme ......................................- 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%
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.
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).
31.12.2025 31.12.2024Pledged assets against liabilitiesAssets, pledged as collateral against borrowings .......................................................................................................359,645 398,505 Assets pledged as a collateral against loans from banks and other financial liabilities ................................................5,049 7,452 Pledged assets against liabilities ............................................................................................................................364,694 405,957 Thereof pledged assets against issued covered bonds held by the Bank ...................................................................(85,549) (105,265)Assets against repoed issued bonds ..........................................................................................................................15,727 15,429 Pledged assets against liabilities on balance .........................................................................................................294,872 316,121
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
37. Equity, continued
Share options
Warrants
All outstanding share options, if exercised, represent approximately 0.8% of the total issued shares.
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.
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.
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.
Movements in share options during the year.31.12.202531.12.2024Weighted WeightedNumberaverageNumberaverageof sharescontractof sharescontract(in ths.) rate (in ths.) rateOutstanding at the beginning of the year ..............................................................................17,116 135.1 24,435 136.3 Share options granted ..........................................................................................................1,203 172.0 1,953 153.6 Share options forfeited ..........................................................................................................(4,523) 130.1 (6,766) 148.2 Share options exercised, WAVG share price ISK 169.5 at exercise date (2024: 154.3) ........(4,844) 124.2 (2,506) 96.7 Outstanding share options pursuant to Icelandic income tax act ...................................8,952 139.1 17,116 135.1 Share options granted - incentive scheme ............................................................................2,330 Indeterminate - - Outstanding share options at the end of the year ............................................................11,281 17,116
The following share option contracts are in existence at year end.Number Exerciseof shares Exercise price(in ths.) year (ISK)Issued in 2021 (ISK 600,000) - employees of Arion Bank ........................................................................2,488 2026 95.50 Issued in 2023 (ISK 900,000) - employees of Arion Bank ........................................................................2,306 2026 153.75 Issued in 2023 (ISK 1,500,000) - employees of Arion Bank .....................................................................1,463 2026 153.75 Issued in 2024 (ISK 1,500,000) - employees of Arion Bank .....................................................................751 2026 155.75 Issued in 2025 (ISK 1,500,000) - employees of Arion Bank .....................................................................1,040 2026 174.56 Issued in 2023 (ISK 1,500,000) - employees of subsidiaries ....................................................................583 2026 140.56 Issued in 2024 (ISK 1,500,000) - employees of subsidiaries ....................................................................157 2026 143.36 Issued in 2025 (ISK 1,500,000) - employees of subsidiaries ....................................................................164 2026 155.93 Issued in 2025 - incentive scheme - employees of Group ........................................................................2,330 2028-2030 Indeterminate11,281
52
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Other information
38. Shareholders of Arion Bank
of shares
39. Legal matters
Contingent liabilities
Legal proceedings regarding damages
* Key management personnel are defined in Note 43.
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.
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:
31.12.2025 31.12.2024Lífeyrissjódur verzlunarmanna ....................................................................................................................................9.56% 9.06% Gildi lífeyrissjódur .......................................................................................................................................................9.55% 9.17% Lífeyrissjódur starfsmanna ríkisins .............................................................................................................................9.24% 8.79% Brú lífeyrissjódur ........................................................................................................................................................5.22% 5.31% Stodir hf. ...................................................................................................................................................................5.07% 5.29% Frjálsi lífeyrissjódurinn ................................................................................................................................................4.07% 3.60% Vanguard ...................................................................................................................................................................3.97% 3.59% Birta lífeyrissjódur .......................................................................................................................................................2.97% 3.15% Stapi lífeyrissjódur ......................................................................................................................................................2.92% 3.02% Festa lífeyrissjódur .....................................................................................................................................................2.61% 2.25% Hvalur hf. ...................................................................................................................................................................2.59% 2.43% Arion banki hf. ............................................................................................................................................................2.59% 6.65% Lífsverk lífeyrissjódur .................................................................................................................................................2.06% 1.51% Almenni lífeyrissjódur .................................................................................................................................................1.81% 1.63% Stefnir funds ...............................................................................................................................................................1.73% 2.08% Íslandsbanki hf. ..........................................................................................................................................................1.44% 1.52% Landsbréf hf. ..............................................................................................................................................................1.05% 0.94% Íslandssjódir ...............................................................................................................................................................0.91% 1.01% Other shareholders with less than 1% shareholding ...................................................................................................30.66% 29.00% 100.0% 100.0%
31.12.202531.12.2024Number NumberOptionsof shares OptionsSteinunn K. Thórdardóttir, Director .......................................................................................- 12,000 - 12,000 Alternate directors of the Board ............................................................................................- 49,933 - 32,000 Benedikt Gíslason, CEO .......................................................................................................12,136 3,181,575 24,273 3,133,450 Key management personnel* ................................................................................................627,353 3,328,222 189,171 3,138,856
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
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
Off balance sheet information
41. Commitments
Related party
43. Related party
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.
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.
42. Assets under management, supervision and custody31.12.2025 31.12.2024Assets under management .........................................................................................................................................1,563,569 1,417,450 Assets under supervision ...........................................................................................................................................425,248 215,251 Assets under custody .................................................................................................................................................1,107,656 1,699,260
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.
31.12.2025 31.12.2024Financial guarantees, unused credit facilities and undrawn loan commitmentsFinancial guarantees ..................................................................................................................................................25,450 21,804 Unused overdrafts ......................................................................................................................................................90,187 74,270 Undrawn loan commitments .......................................................................................................................................85,329 67,658 Financial guarantees, unused credit facilities and undrawn loan commitments .................................................200,966 163,732
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.
Key managementAssociatedpersonnelcompanies31.12.2025 31.12.2024 31.12.2025 31.12.2024Loans ...................................................................................................................................3,940 229 1,072 340 Other assets .........................................................................................................................4 3 - - Total assets .........................................................................................................................3,944 232 1,072 340 Deposits ...............................................................................................................................(995) (1,385) (10) (157)Other liabilities ......................................................................................................................- - (24) (28)Total liabilities ....................................................................................................................(995) (1,385) (33) (186)Interest income .....................................................................................................................197 19 78 39 Interest expenses .................................................................................................................(45) (49) (2) (6)Commission income .............................................................................................................21 14 - - Commission expenses ..........................................................................................................- - (45) (74)Other income ........................................................................................................................11 11 - - Other expenses ....................................................................................................................(45) (2) (1,412) (1,361)Net expenses ......................................................................................................................139 (7) (1,380) (1,402)
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
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
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
Maximum exposure to credit risk and collateral held against different types of financial instruments subject to the impairment requirementsof IFRS 9CollateralMaximum Cash and Real Other Total 31.12.2025exposure securities estate Vessels collateral collateralCash and balances with Central Bank ..........................................150,111 - - - - - Loans to credit institutions at amortized cost ...............................22,567 - - - - - Loans to customers at amortized cost .........................................1,327,606 15,816 982,047 65,647 111,401 1,174,911 Individuals ................................................................................640,394 161 589,706 28 14,604 604,499 Mortgages ........................................................................................576,828 134 576,297 - - 576,431 Other ................................................................................................63,566 27 13,409 28 14,604 28,068 Corporates ...............................................................................687,212 15,655 392,341 65,619 96,797 570,412 Real estate activities ........................................................................126,000 2,168 118,383 11 294 120,856 Construction .....................................................................................108,071 222 98,010 6 2,886 101,124 Fishing industry ................................................................................107,416 1,294 26,435 58,230 13,314 99,273 Commerce and services ...................................................................87,036 1,554 36,263 1,063 25,114 63,994 Accommodation and food service activities .....................................46,775 34 44,842 - 206 45,082 Financial and insurance activities .....................................................58,606 9,528 18,072 4,069 20,174 51,843 Industry, energy and manufacturing .................................................69,908 532 32,288 - 18,288 51,108 Transportation ..................................................................................17,925 40 1,223 2,208 9,038 12,509 Information and communication technology .....................................40,458 275 1,606 - 6,810 8,691 Public sector .....................................................................................11,354 8 2,678 11 104 2,801 Agriculture and forestry ....................................................................13,663 - 12,541 21 569 13,131 Other assets with credit risk .........................................................17,031 - - - - - Financial guarantees ...................................................................25,450 1,348 4,989 274 6,597 13,208 Undrawn loan commitments and unused overdrafts ....................175,516 - - - - - Fair value through OCI ................................................................138,302 - - - - - Government bonds ...................................................................136,868 - - - - - Bonds issued by financial institutions and corporates ...............1,434 - - - - - Balance at the end of the year ..................................................1,856,583 17,164 987,036 65,921 117,998 1,188,119 31.12.2024Cash and balances with Central Bank ..........................................124,094 - - - - - Loans to credit institutions at amortized cost ...............................25,690 - - - - - Loans to customers at amortized cost .........................................1,228,745 12,589 931,451 63,466 117,745 1,125,251 Individuals ................................................................................639,404 526 584,014 23 20,342 604,905 Mortgages ........................................................................................570,842 404 569,959 - - 570,363 Other ................................................................................................68,562 122 14,055 23 20,342 34,542 Corporates ...............................................................................589,341 12,063 347,437 63,443 97,403 520,346 Real estate activities ........................................................................117,929 1,610 113,229 - 1,582 116,421 Construction .....................................................................................84,419 198 74,662 17 4,104 78,981 Fishing industry ................................................................................87,696 1,124 17,612 60,155 6,838 85,729 Commerce and services ...................................................................74,814 899 28,035 1,235 31,004 61,173 Accommodation and food service activities .....................................47,755 14 42,570 - 4,173 46,757 Financial and insurance activities .....................................................52,600 7,435 16,455 - 16,220 40,110 Industry, energy and manufacturing .................................................61,481 750 38,534 - 17,607 56,891 Transportation ..................................................................................10,249 4 1,189 2,031 6,636 9,860 Information and communication technology .....................................30,633 16 1,437 - 8,534 9,987 Public sector .....................................................................................9,509 13 2,224 5 187 2,429 Agriculture and forestry ....................................................................12,256 - 11,490 - 518 12,008 Other assets with credit risk .........................................................8,476 - - - - - Financial guarantees ...................................................................21,804 2,335 4,212 280 4,688 11,515 Undrawn loan commitments and unused overdrafts ....................141,928 - - - - - Fair value through OCI ................................................................126,898 - - - - - Government bonds ...................................................................125,923 - - - - - Bonds issued by financial institutions and corporates ...............975 - - - - - Balance at the end of the year ..................................................1,677,635 14,924 935,663 63,746 122,433 1,136,766
58
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
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.
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.
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).
Thereof in Stage 331.12.2025 31.12.2024 31.12.2025 31.12.2024Less than 50% ..................................................................................................................223,975 233,652 2,832 2,647 50-60% ..............................................................................................................................107,698 113,874 2,110 1,531 60-70% ..............................................................................................................................102,661 96,331 1,587 1,185 70-80% ..............................................................................................................................88,631 75,063 1,427 1,269 80-90% ..............................................................................................................................51,163 48,341 708 344 90-100% ............................................................................................................................1,669 2,075 114 135 More than 100% ................................................................................................................1,497 2,172 261 319 Not classified .....................................................................................................................198 17 5 - Gross carrying amount ...................................................................................................577,492 571,525 9,044 7,430
Thereof in Stage 331.12.2025 31.12.2024 31.12.2025 31.12.2024Less than 55% ..................................................................................................................516,063 514,309 7,925 6,484 55-70% ..............................................................................................................................45,445 42,063 743 589 70-80% ..............................................................................................................................12,363 11,461 230 165 80-90% ..............................................................................................................................2,521 2,694 77 63 90-100% ............................................................................................................................385 434 41 27 More than 100% ................................................................................................................517 560 23 102 Not classified .....................................................................................................................198 4 5 - Gross carrying amount ...................................................................................................577,492 571,525 9,044 7,430
59
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
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 requirements31.12.2025Stage 1 Stage 2 Stage 3 POCI Total Loans to customersRisk class 0 - (Grades AAA to A-) ...................................................................441,647 256 - 117 442,020 Risk class 1 - (Grades BBB+ to BBB-) ...........................................................413,457 1,827 - 124 415,408 Risk class 2 - (Grades BB+ to BB-) .................................................................289,610 6,889 - 63 296,562 Risk class 3 to 4 - (Grades B+ to CCC-) .........................................................105,819 46,753 - 23 152,595 Risk class 5 - (DD) ..........................................................................................- - 32,255 406 32,661 Unrated ..........................................................................................................439 - - - 439 Gross carrying amount ................................................................................1,250,972 55,725 32,255 733 1,339,685 Loss allowance ...............................................................................................(2,833) (1,551) (7,508) (187) (12,079)Book value ....................................................................................................1,248,139 54,174 24,747 546 1,327,606 Loans to customers - IndividualsRisk class 0 - (Grades AAA to A-) .............................................................345,978 256 - 117 346,351 Risk class 1 - (Grades BBB+ to BBB-) .....................................................216,374 518 - 124 217,016 Risk class 2 - (Grades BB+ to BB-) ...........................................................46,562 4,108 - 63 50,733 Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................8,883 8,932 - 23 17,838 Risk class 5 - (DD) ....................................................................................- - 10,892 120 11,012 Unrated ....................................................................................................5 - - - 5 Gross carrying amount ..........................................................................617,802 13,814 10,892 447 642,955 Loss allowance .........................................................................................(611) (332) (1,617) (1) (2,561)Book value ..............................................................................................617,191 13,482 9,275 446 640,394 Loans to customers - Corporates and public sector entitiesRisk class 0 - (Grades AAA to A-) .............................................................95,669 - - - 95,669 Risk class 1 - (Grades BBB+ to BBB-) .....................................................197,083 1,309 - - 198,392 Risk class 2 - (Grades BB+ to BB-) ...........................................................243,048 2,781 - - 245,829 Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................96,936 37,821 - - 134,757 Risk class 5 - (DD) ....................................................................................- - 21,363 286 21,649 Unrated ....................................................................................................434 - - - 434 Gross carrying amount ..........................................................................633,170 41,911 21,363 286 696,730 Loss allowance .........................................................................................(2,222) (1,219) (5,891) (186) (9,518)Book value ..............................................................................................630,948 40,692 15,472 100 687,212 Loan commitments, guarantees and unused credit facilitiesRisk class 0 to 1 (Grades AAA to BBB-) .........................................................114,147 46 - - 114,193 Risk class 2 to 4 (Grades BB+ to CCC-) ........................................................76,291 4,758 1,116 - 82,165 Unrated ..........................................................................................................4,608 - - - 4,608 Nominal .........................................................................................................195,046 4,804 1,116 - 200,966 Loss allowance ...............................................................................................(342) (266) (73) - (681)Nominal less loss allowance ........................................................................194,704 4,538 1,043 - 200,285
61
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
31.12.2024Stage 1 Stage 2 Stage 3 POCI Total Loans to customersRisk class 0 - (Grades AAA to A-) ...................................................................436,790 93 - 52 436,935 Risk class 1 - (Grades BBB+ to BBB-) ...........................................................323,053 1,783 - 155 324,991 Risk class 2 - (Grades BB+ to BB-) .................................................................250,011 26,076 - 32 276,119 Risk class 3 to 4 - (Grades B+ to CCC-) .........................................................108,985 62,430 - 24 171,439 Risk class 5 - (DD) ..........................................................................................- - 28,388 180 28,568 Unrated ..........................................................................................................45 - - - 45 Gross carrying amount ................................................................................1,118,884 90,382 28,388 443 1,238,097 Loss allowance ...............................................................................................(2,282) (1,746) (5,323) (1) (9,352)Book value ....................................................................................................1,116,602 88,636 23,065 442 1,228,745 Loans to customers - IndividualsRisk class 0 - (Grades AAA to A-) .............................................................337,617 93 - 52 337,762 Risk class 1 - (Grades BBB+ to BBB-) .....................................................215,576 215 - 155 215,946 Risk class 2 - (Grades BB+ to BB-) ...........................................................41,708 17,943 - 32 59,683 Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................9,477 9,305 - 24 18,806 Risk class 5 - (DD) ....................................................................................- - 9,514 180 9,694 Unrated ....................................................................................................7 - - - 7 Gross carrying amount ..........................................................................604,385 27,556 9,514 443 641,898 Loss allowance .........................................................................................(545) (410) (1,538) (1) (2,494)Book value ..............................................................................................603,840 27,146 7,976 442 639,404 Loans to customers - Corporates and public sector entitiesRisk class 0 - (Grades AAA to A-) .............................................................99,173 - - - 99,173 Risk class 1 - (Grades BBB+ to BBB-) .....................................................107,477 1,568 - - 109,045 Risk class 2 - (Grades BB+ to BB-) ...........................................................208,303 8,133 - - 216,436 Risk class 3 to 4 - (Grades B+ to CCC-) ...................................................99,508 53,125 - - 152,633 Risk class 5 - (DD) ....................................................................................- - 18,874 - 18,874 Unrated ....................................................................................................230 - - - 230 Gross carrying amount ..........................................................................514,691 62,826 18,874 - 596,391 Loss allowance .........................................................................................(1,737) (1,336) (3,785) - (6,858)Book value ..............................................................................................512,954 61,490 15,089 - 589,533 Loan commitments, guarantees and unused credit facilitiesRisk class 0 to 1 - (Grades AAA to BBB-) .......................................................82,245 5 - - 82,250 Risk class 2 to 4 - (Grades BB+ to CCC-) ......................................................71,991 5,370 544 - 77,905 Unrated ..........................................................................................................3,577 - - - 3,577 Nominal .........................................................................................................157,813 5,375 544 - 163,732 Loss allowance ...............................................................................................(399) (112) - - (511)Nominal less loss allowance ........................................................................157,414 5,263 544 - 163,221
62
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
Sector split, gross carrying value and loss allowance for financial instruments subject to IFRS 9 impairment requirementsStage 1Stage 2Stage 3Gross Gross Gross Carrying Loss Carrying Loss Carrying Loss Book31.12.2025amount allowance amount allowance amount allowance valueLoans to credit instit., securities & cash ....................310,987 (7) - - - - 310,980 Loans to individuals ..................................................617,802 (611) 14,141 (332) 11,012 (1,618) 640,394 Mortgages .............................................................556,668 (201) 11,780 (123) 9,044 (340) 576,828 Other .....................................................................61,134 (410) 2,361 (209) 1,968 (1,278) 63,566 Loans to corporates and public sector entities ..........633,170 (2,222) 41,911 (1,219) 21,649 (6,077) 687,212 Real estate activities .............................................117,560 (237) 5,623 (68) 3,919 (797) 126,000 Construction ..........................................................93,971 (475) 9,159 (279) 7,639 (1,944) 108,071 Fishing industry .....................................................105,252 (197) 1,086 (31) 1,934 (628) 107,416 Commerce and services ........................................79,503 (331) 5,911 (212) 2,685 (520) 87,036 Accommodation and food service activities ...........35,122 (133) 10,897 (274) 1,653 (490) 46,775 Financial and insurance activities ..........................55,466 (288) 3,433 (138) 191 (58) 58,606 Industry, energy and manufacturing ......................69,437 (168) 390 (46) 582 (287) 69,908 Transportation .......................................................14,596 (49) 3,440 (69) 22 (15) 17,925 Information and communication technology ...........38,092 (274) 1,255 (75) 2,792 (1,332) 40,458 Public Sector .........................................................11,299 (32) 53 (7) 41 - 11,354 Agriculture and forestry .........................................12,872 (38) 664 (20) 191 (6) 13,663 Balance at the end of the year ................................1,561,959 (2,840) 56,052 (1,551) 32,661 (7,695) 1,638,586 31.12.2024Loans to credit instit., securities & cash ....................276,685 (3) - - - - 276,682 Loans to individuals ..................................................604,385 (545) 27,819 (410) 9,694 (1,539) 639,404 Mortgages .............................................................540,494 (162) 23,600 (229) 7,431 (292) 570,842 Other .....................................................................63,891 (383) 4,219 (181) 2,263 (1,247) 68,562 Loans to corporates and public sector entities ..........514,499 (1,737) 62,826 (1,336) 18,874 (3,785) 589,341 Real estate activities .............................................107,012 (239) 8,418 (62) 3,667 (867) 117,929 Construction ..........................................................70,037 (342) 7,317 (93) 8,588 (1,088) 84,419 Fishing industry .....................................................79,542 (66) 6,992 (135) 2,427 (1,064) 87,696 Commerce and services ........................................66,003 (279) 7,923 (160) 1,694 (367) 74,814 Accommodation and food service activities ...........34,515 (107) 12,408 (417) 1,544 (188) 47,755 Financial and insurance activities ..........................41,791 (272) 11,235 (155) 1 - 52,600 Industry, energy and manufacturing ......................60,593 (101) 631 (48) 517 (111) 61,481 Transportation .......................................................6,119 (13) 4,207 (79) 23 (8) 10,249 Information and communication technology ...........28,960 (259) 1,981 (147) 162 (64) 30,633 Public Sector .........................................................9,145 (27) 344 (4) 51 - 9,509 Agriculture and forestry .........................................10,782 (32) 1,370 (36) 200 (28) 12,256 Balance at the end of the year ................................1,395,569 (2,285) 90,645 (1,746) 28,568 (5,324) 1,505,427
63
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
** During the year the loss allowance balance for stage 3 loans was reduced by ISK 995 million due to unwinding of interest income.
*** During the year an amount of ISK 547 million was written off but is still subject to enforcement activities subject to Icelandic law.
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.
* 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.
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.
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:
31.12.2025Stage 1 Stage 2 Stage 3 POCI Total Impairment loss allowance *Balance at the beginning of the year ...............................................................(2,681) (1,858) (5,323) (1) (9,863)Transfers of financial assets:Transfers to Stage 1 (12-month ECL) ......................................................(697) 561 136 - - Transfers to Stage 2 (lifetime ECL) ...........................................................193 (350) 157 - - Transfers to Stage 3 (credit impaired financial assets) .............................63 189 (252) - - Net remeasurement of loss allowance ** ........................................................644 (341) (3,373) - (3,070)New financial assets, originated or purchased ................................................(1,458) (408) (1,141) (186) (3,193)Derecognitions and maturities ........................................................................731 363 1,527 - 2,621 Write-offs *** ..................................................................................................30 27 688 - 745 Impairment loss allowance **** ....................................................................(3,175) (1,817) (7,581) (187) (12,760)Impairment loss allowances for assets only carrying 12-month ECL ...............(7) - - - (7)Total impairment loss allowance .................................................................(3,182) (1,817) (7,581) (187) (12,767)
64
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 customersStage 1 Stage 2 Stage 3 POCI Total Balance at the beginning of the year .........................................................(2,282) (1,746) (5,323) (1) (9,352)Transfers of financial assets:Transfers to Stage 1 (12-month ECL) ................................................(655) 519 136 - - Transfers to Stage 2 (lifetime ECL) .....................................................138 (295) 157 - - Transfers to Stage 3 (credit impaired financial assets) .......................61 183 (244) - - Net remeasurement of loss allowance ......................................................532 (203) (3,308) - (2,979)New financial assets, originated or purchased ..........................................(1,282) (373) (1,141) (186) (2,982)Derecognitions and maturities ..................................................................625 337 1,527 - 2,489 Write-offs ..................................................................................................30 27 688 - 745 Total loss allowance for loans to customers ........................................(2,833) (1,551) (7,508) (187) (12,079)Impairment loss allowance for loans to customers - IndividualsBalance at the beginning of the year ...................................................(545) (410) (1,538) (1) (2,494)Transfers of financial assetsTransfers to Stage 1 (12-month ECL) ..........................................(283) 199 84 - - Transfers to Stage 2 (lifetime ECL) ...............................................32 (58) 26 - - Transfers to Stage 3 (credit impaired financial assets) .................12 54 (66) - - Net remeasurement of loss allowance ................................................254 (126) (381) - (253)New financial assets, originated or purchased ....................................(189) (82) (124) - (395)Derecognitions and maturities ............................................................78 66 151 - 295 Write-offs ............................................................................................30 25 231 - 286 Total loss allowance for loans to individuals .................................(611) (332) (1,617) (1) (2,561)Impairment loss allowance for loans to customers - CorporatesBalance at the beginning of the year ...................................................(1,737) (1,336) (3,785) - (6,858)Transfers of financial assetsTransfers to Stage 1 (12-month ECL) ..........................................(372) 320 52 - - Transfers to Stage 2 (lifetime ECL) ...............................................106 (237) 131 - - Transfers to Stage 3 (credit impaired financial assets) .................49 129 (178) - - Net remeasurement of loss allowance ................................................278 (77) (2,927) - (2,726)New financial assets, originated or purchased ....................................(1,093) (291) (1,017) (186) (2,587)Derecognitions and maturities ............................................................547 271 1,376 - 2,194 Write-offs ............................................................................................- 2 457 - 459 Total loss allowance for loans to corporates ..................................(2,222) (1,219) (5,891) (186) (9,518)Impairment loss allowance for loan commitments, guarantees and unused credit facilities Balance at the beginning of the year .........................................................(399) (112) - - (511)TransfersTransfers to 12-month ECL ...............................................................(42) 42 - - - Transfers to lifetime ECL ....................................................................55 (55) - - - Transfers to credit impaired ................................................................2 6 (8) - - Net remeasurement of loss allowance ......................................................112 (138) (65) - (91)New financial commitments originated ......................................................(176) (35) - - (211)Derecognitions and maturities ..................................................................106 26 - - 132 Total loss allowance for loan commit., guarantees, unused facilities .....(342) (266) (73) - (681)
65
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
** During the year the loss allowance balance for stage 3 loans was reduced by ISK 961 million due to unwinding of interest income.
* 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.
Impairment loss allowance for loans to customersStage 1 Stage 2 Stage 3 POCI Total Balance at the beginning of the year .........................................................(2,348) (2,091) (4,020) (92) (8,551)Transfers of financial assets:Transfers to Stage 1 (12-month ECL) ................................................(666) 458 208 - - Transfers to Stage 2 (lifetime ECL) .....................................................121 (168) 47 - - Transfers to Stage 3 (credit impaired financial assets) .......................90 138 (228) - - Net remeasurement of loss allowance ......................................................792 (230) (2,500) - (1,938)New financial assets, originated or purchased ..........................................(829) (606) (649) - (2,084)Derecognitions and maturities ..................................................................438 636 843 91 2,008 Write-offs ..................................................................................................120 117 976 - 1,213 Total loss allowance for loans to customers ........................................(2,282) (1,746) (5,323) (1) (9,352)Impairment loss allowance for loans to customers - IndividualsBalance at the beginning of the year ...................................................(559) (532) (1,381) (1) (2,473)Transfers of financial assetsTransfers to Stage 1 (12-month ECL) ..........................................(290) 205 85 - - Transfers to Stage 2 (lifetime ECL) ...............................................26 (42) 16 - - Transfers to Stage 3 (credit impaired financial assets) .................29 65 (94) - - Net remeasurement of loss allowance ................................................327 (152) (551) - (376)New financial assets, originated or purchased ....................................(173) (92) (136) - (401)Derecognitions and maturities ............................................................77 30 289 - 396 Write-offs ............................................................................................18 108 234 - 360 Total loss allowance for loans to individuals .................................(545) (410) (1,538) (1) (2,494)
**** Loss allowance for all assets other than cash, bonds and loans to credit institutions.
31.12.2024Stage 1 Stage 2 Stage 3 POCI Total Impairment loss allowance *Balance at the beginning of the year ...............................................................(2,584) (2,216) (4,022) (92) (8,914)Transfers of financial assets:Transfers to Stage 1 (12-month ECL) ......................................................(744) 536 208 - - Transfers to Stage 2 (lifetime ECL) ...........................................................131 (178) 47 - - Transfers to Stage 3 (credit impaired financial assets) .............................94 140 (234) - - Net remeasurement of loss allowance ** ........................................................886 (263) (2,494) - (1,871)New financial assets, originated or purchased ................................................(1,108) (658) (649) - (2,415)Derecognitions and maturities ........................................................................524 664 845 91 2,124 Write-offs *** ..................................................................................................120 117 976 - 1,213 Impairment loss allowance **** ....................................................................(2,681) (1,858) (5,323) (1) (9,863)Impairment loss allowances for assets only carrying 12-month ECL ...............(3) - - - (3)Total impairment loss allowance .................................................................(2,684) (1,858) (5,323) (1) (9,866)
66
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
Macroeconomic forecast
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).
Base case2026 2027 2028Unemployment rate ..............................................................................................................................4.5% 3.9% 3.8%Housing prices, year-on-year change ...................................................................................................0.9% 4.0% 5.0%Private consumption, growth ................................................................................................................2.6% 2.9% 2.9%GDP growth ..........................................................................................................................................1.6% 2.7% 2.4%Key interest rate ...................................................................................................................................6.6% 5.8% 5.0%OptimisticPessimistic2026 2027 2028 2026 2027 2028Unemployment rate .....................................................................3.0% 2.9% 3.5% 6.1% 5.1% 4.4%Housing prices, year-on-year change ...........................................6.2% 10.7% 7.2% -2.9% 1.3% 3.9%Private consumption, growth ........................................................4.2% 3.5% 3.2% -0.2% 1.7% 2.5%GDP growth .................................................................................3.1% 3.4% 2.7% -0.8% 1.3% 1.9%Key interest rate ..........................................................................6.3% 5.4% 4.6% 7.0% 6.2% 5.4%
Stage 1 Stage 2 Stage 3 POCI Total Impairment loss allowance for loans to customers - CorporatesBalance at the beginning of the year ...................................................(1,789) (1,559) (2,639) (91) (6,078)Transfers of financial assetsTransfers to Stage 1 (12-month ECL) ..........................................(376) 253 123 - - Transfers to Stage 2 (lifetime ECL) ...............................................95 (126) 31 - - Transfers to Stage 3 (credit impaired financial assets) .................61 73 (134) - - Net remeasurement of loss allowance ................................................465 (78) (1,949) - (1,562)New financial assets, originated or purchased ....................................(656) (514) (513) - (1,683)Derecognitions and maturities ............................................................361 606 554 91 1,612 Write-offs ............................................................................................102 9 742 - 853 Total loss allowance for loans to corporates ..................................(1,737) (1,336) (3,785) - (6,858)Impairment loss allowance for loan commitments, guarantees and unused credit facilities Balance at the beginning of the year .........................................................(236) (125) (2) - (363)TransfersTransfers to 12-month ECL ...............................................................(78) 78 - - - Transfers to lifetime ECL ....................................................................10 (10) - - - Transfers to credit impaired ................................................................4 2 (6) - - Net remeasurement of loss allowance ......................................................94 (33) 6 - 67 New financial commitments originated ......................................................(279) (52) - - (331)Derecognitions and maturities ..................................................................86 28 2 - 116 Total loss allowance for loan commit., guarantees, unused facilities ............(399) (112) - - (511)
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
44. Credit risk, continued
Forbearance
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 1Stage 2Stage 3TotalGross Gross Gross Grosscarrying Loss carrying Loss carrying Loss carrying LossGross Gross Gross Loss31.12.2025amountallowancecarrying allowancecarrying allowancecarrying allowanceIndividuals .............................................. 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)31.12.2024Individuals .............................................. 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)
68
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
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.
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.
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.
31.12.2025Up to 3 3-12 1-5 5-10 Over 10months months years years years TotalAssetsBalances with Central Bank .........................................................150,111 - - - - 150,111 Loans to credit institutions ...........................................................22,567 - - - - 22,567 Loans to customers .....................................................................914,513 158,023 242,825 5,328 8,515 1,329,204 Bonds and debt instruments ........................................................56,829 56,544 45,016 7,406 5,190 170,985 Bonds and debt instruments used for hedging .............................451 41 328 627 285 1,732 Derivatives ...................................................................................139,972 131,248 110,295 44,184 - 425,699 Assets .........................................................................................1,284,443 345,856 398,464 57,545 13,990 2,100,298 LiabilitiesDue to credit institutions and Central Bank ..................................12,003 - - - - 12,003 Deposits ......................................................................................912,492 8,690 - - - 921,182 Derivatives ...................................................................................329,767 83,102 9,138 - - 422,007 Borrowings ..................................................................................31,840 159,158 243,888 53,241 13,084 501,211 Subordinated liabilities .................................................................3,535 - 34,327 868 11,731 50,461 Liabilities ....................................................................................1,289,637 250,950 287,353 54,109 24,815 1,906,864 Net interest gap .........................................................................(5,194) 94,906 111,111 3,436 (10,825) 193,434
69
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45. Market risk, continued
Sensitivity analysis of interest rate risk
31.12.2024Up to 3 3-12 1-5 5-10 Over 10months months years years years TotalAssetsBalances with Central Bank .........................................................124,094 - - - - 124,094 Loans to credit institutions ...........................................................25,690 - - - - 25,690 Loans to customers .....................................................................867,139 148,051 194,711 2,521 9,801 1,222,223 Bonds and debt instruments ........................................................102,606 22,938 14,916 13,551 4,724 158,735 Bonds and debt instruments used for hedging .............................- 1 1,014 979 670 2,664 Derivatives ...................................................................................105,825 77,146 181,495 - - 364,466 Assets .........................................................................................1,225,354 248,136 392,136 17,051 15,195 1,897,872 LiabilitiesDue to credit institutions and Central Bank ..................................6,618 - - - - 6,618 Deposits ......................................................................................844,816 12,627 - - - 857,443 Derivatives ...................................................................................229,251 130,700 4,820 - - 364,771 Borrowings ..................................................................................27,898 76,473 279,837 32,282 12,709 429,199 Subordinated liabilities .................................................................10,985 3,363 15,047 18,831 - 48,226 Liabilities ....................................................................................1,119,568 223,163 299,704 51,113 12,709 1,706,257 Net interest gap .........................................................................105,786 24,973 92,432 (34,062) 2,486 191,615
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.
31.12.202531.12.2024NPV change in the banking book -100 bps +100 bps -100 bps +100 bpsISK, CPI index-linked .........................................................................................................(1,781) 1,728 (1,724) 1,652 ISK, Non index-linked ........................................................................................................638 (610) (2,181) 2,146 Foreign currencies .............................................................................................................45 (35) (229) 197 NPV change in the trading bookISK, CPI index-linked .........................................................................................................215 (194) 137 (125)ISK, Non index-linked ........................................................................................................339 (317) 247 (234)Foreign currencies .............................................................................................................(37) 37 (33) 33
70
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45. Market risk, continued
Indexation risk
* Consolidated situation as per EU Regulation No 575/2013 (CRR)
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.
Book value and maturity profile of indexed assets and liabilities31.12.2025Up to 1 1 to 5 Over 5year years years TotalAssets, CPI index-linkedLoans to customers ...........................................................................................................24,567 119,753 376,058 520,378 Financial instruments ........................................................................................................6,335 8,772 5,137 20,244 Assets, CPI index-linked .................................................................................................30,902 128,525 381,195 540,622 Liabilities, CPI index-linkedDeposits ............................................................................................................................118,029 12,687 4,371 135,087 Borrowings ........................................................................................................................20,522 118,169 18,782 157,473 Subordinated liabilities .......................................................................................................- - 21,803 21,803 Other .................................................................................................................................- - 1,243 1,243 Off-balance sheet position .................................................................................................4,241 - - 4,241 Liabilities, CPI index-linked ............................................................................................142,792 130,856 46,199 319,847 Net on-balance sheet position ...........................................................................................(107,649) (2,331) 334,996 225,016 Net off-balance sheet position ...........................................................................................(4,241) - - (4,241)CPI balance ......................................................................................................................(111,890) (2,331) 334,996 220,775 CPI balance for prudential consolidation, excluding insurance operations * ..............(114,555) (10,683) 329,939 204,697 31.12.2024Assets, CPI index-linkedLoans to customers ...........................................................................................................14,792 107,828 357,789 480,409 Financial instruments ........................................................................................................6,702 7,304 10,564 24,570 Assets, CPI index-linked .................................................................................................21,494 115,132 368,353 504,979 Liabilities, CPI index-linkedDeposits ............................................................................................................................114,696 13,998 4,196 132,890 Borrowings ........................................................................................................................35,207 88,891 42,447 166,545 Subordinated liabilities .......................................................................................................6,607 - 11,195 17,802 Other .................................................................................................................................- - 1,122 1,122 Off-balance sheet position .................................................................................................105 54 - 159 Liabilities, CPI indexed linked ........................................................................................156,615 102,943 58,960 318,518 Net on-balance sheet position ...........................................................................................(135,016) 12,243 309,393 186,620 Net off-balance sheet position ...........................................................................................(105) (54) - (159)CPI balance ......................................................................................................................(135,121) 12,189 309,393 186,461 CPI balance for prudential consolidation, excluding insurance operations * ..............(135,223) 4,885 298,830 168,491
71
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 currency31.12.2025ISK EUR USD GBP DKK NOK Other TotalFinancial assetsCash and balances with CB ....................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 liabilitiesDue 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 assetsInvestment property ............................... 7,305 - - - - - - 7,305 Investments in associates ...................... 760 - - - - - - 760 Intangible assets .................................... 7,533 - - - - - - 7,533 Tax assets ............................................. 2 - - - - - - 2 Assets and disposal groupsheld 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 equityTax 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 reportingof currency risk ** .............................(1,000) 2,015 (148) 273 (558) (7) (575)
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
45. Market risk, continued
31.12.2024ISK EUR USD GBP DKK NOK Other TotalFinancial assetsCash and balances with CB ....................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 liabilitiesDue 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 assetsInvestment property ............................... 9,387 - - - - - - 9,387 Investments in associates ...................... 814 - - - - - - 814 Intangible assets .................................... 7,688 - - - - - - 7,688 Tax assets ............................................. 2 - - - - - - 2 Assets and disposal groupsheld 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 equityTax 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 reportingof currency risk ** ............................. (2,369) 2,248 537 5 (70) 53 (403)
** 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
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
Equity risk
Sensitivity analysis for equity risk
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.
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.
31.12.202531.12.2024Equity -10% +10% -10% +10%Trading book - listed ..........................................................................................................(367) 367 (374) 374 Banking book - listed .........................................................................................................(759) 759 (740) 740 Banking book - unlisted .....................................................................................................(594) 594 (286) 286
31.12.202531.12.2024Currency -10% +10% -10% +10%EUR ..................................................................................................................................(202) 202 (225) 225 USD ..................................................................................................................................15 (15) (54) 54 GBP ..................................................................................................................................(27) 27 (1) 1 DKK ...................................................................................................................................56 (56) 7 (7)NOK ..................................................................................................................................1 (1) (5) 5 Other .................................................................................................................................58 (58) 40 (40)
74
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
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.
Contractual cash flow of assets and liabilities31.12.2025 On Up to 3 3-12 1-5 Over 5 With no Bookdemand months months years years maturity Total valueFinancial assetsCash 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 liabilitiesDue to credit inst. and Central Bank .......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 itemsFinancial 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
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
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
46. Liquidity and Funding risk, continued
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%.
31.12.2024On Up to 3 3-12 1-5 Over 5 With no Bookdemand months months years years maturity Total valueFinancial assetsCash 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 liabilitiesDue to credit inst. and Central Bank .......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 itemsFinancial 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 31.12.2024Available stable funding .........................................................................................................................................1,319,265 1,223,464 Required stable funding .........................................................................................................................................1,115,682 1,040,677 Net stable funding ratio .......................................................................................................................................118% 118%
76
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
*** 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.
** Short-term deposits with other banks are defined as cash inflows in LCR calculations.
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.
* 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.
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.
The following table shows the breakdown for the Group's LCR calculations.Total all31.12.2025ISK EURcurrenciesLiquid assets level 1 * .........................................................................................................................205,171 47,836 290,759 Liquid assets level 2 ............................................................................................................................11,898 - 11,898 Liquid assets ......................................................................................................................................217,069 47,836 302,657 Deposits ..............................................................................................................................................146,016 15,407 185,886 Borrowings ..........................................................................................................................................376 - 598 Other cash outflows .............................................................................................................................9,395 9,014 15,375 Cash outflows .....................................................................................................................................155,787 24,421 201,859 Short-term deposits with other banks ** ...............................................................................................- 4,874 18,089 Other cash inflows ...............................................................................................................................24,805 2,917 31,822 Cash inflows .......................................................................................................................................24,805 7,791 49,911 Liquidity coverage ratio (LCR) *** ....................................................................................................166% 288% 199%31.12.2024Liquid assets level 1 * .........................................................................................................................180,898 39,790 253,753Liquid assets level 2 ............................................................................................................................10,753 - 10,753 Liquid assets ......................................................................................................................................191,651 39,790 264,506 Deposits ..............................................................................................................................................138,492 14,537 176,642Borrowings ..........................................................................................................................................7,919 - 8,079Other cash outflows .............................................................................................................................9,012 10,009 14,657Cash outflows .....................................................................................................................................155,423 24,546 199,378Short-term deposits with other banks ** ...............................................................................................1 6,935 22,051Other cash inflows ...............................................................................................................................25,264 2,588 30,882Cash inflows .......................................................................................................................................25,265 9,523 52,933 Liquidity coverage ratio (LCR) *** ....................................................................................................147% 265% 181%
77
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
46. Liquidity and Funding risk, continued
LCR deposit categorization
4,950
As per the LCR methodology, the Group's deposit base is split into different categories depending on customer type. A second
categorization is used where term deposits refer to deposits with residual maturity greater than 30 days. Deposits that can be withdrawn
within 30 days are marked stable if the customer has a business relationship with the Group and the amount is covered by the Deposit
Insurance Scheme. Other deposit funds are considered less stable. A weight is attributed to each category, representing the expected
outflow under stressed conditions, i.e. the level of stickiness.
The table below shows the breakdown of the Group's deposit base according to the LCR categorization, with the associated weighted
average of the stressed outflow weights.
LCR categorization - amounts and LCR outflow weightsDeposits maturing within 30 daysLess Weight Weight Term Total31.12.2025 stable % Stable % deposits* depositsIndividuals ...................................................................................142,436 12% 136,146 5% 200,648 479,230 Small and medium enterprises .....................................................119,944 12% 19,563 5% 30,998 170,505 Operational relationship ...............................................................4,950 25% - - - Corporations ................................................................................102,655 41% 17,125 20% 28,642 148,422 Sovereigns, central banks and PSE .............................................16,229 40% 15 20% 1,051 17,295 Pension funds ..............................................................................62,075 100% - - 18,442 80,517 Domestic financial entities ...........................................................23,521 100% - - 1,069 24,590 Foreign financial entities ..............................................................7,676 100% - - - 7,676 Total ............................................................................................479,486 172,849 280,850 933,185 31.12.2024Individuals ...................................................................................121,798 11% 121,208 5% 178,686 421,692 Small and medium enterprises .....................................................114,856 12% 17,835 5% 28,483 161,174 Operational relationship ...............................................................4,748 25% - - - 4,748 Corporations ................................................................................98,482 41% 16,561 21% 30,430 145,473 Sovereigns, central banks and PSE .............................................19,262 40% 14 20% 1,091 20,367 Pension funds ..............................................................................70,477 100% - - 17,915 88,392 Domestic financial entities ...........................................................18,510 100% - - 2,380 20,890 Foreign financial entities ..............................................................1,325 100% - - - 1,325 Total ............................................................................................449,458 155,618 258,985 864,061 * Here term deposits refer to deposits with maturities greater than 30 days.
Composition of liquid assetsThe following table shows the composition of the Group's liquidity buffer.ISK USD EUR Other Total31.12.2025Cash and balances with Central Bank ...........................................................149,766 56 167 122 150,111 Short-term deposits with financial institutions ................................................- 9,271 4,874 3,944 18,089 Domestic bonds eligible as collateral with Central Bank .................................69,404 - - - 69,404 Foreign government bonds ............................................................................- 3,762 47,669 33,811 85,242 Liquidity reserve ...........................................................................................219,170 13,089 52,710 37,877 322,846 31.12.2024Cash and balances with Central Bank ...........................................................123,395 189 355 155 124,094 Short-term deposits with financial institutions ................................................1 11,507 6,935 3,608 22,051 Domestic bonds eligible as collateral with Central Bank .................................70,298 - - - 70,298 Foreign government bonds ............................................................................- 10,394 39,435 22,183 72,012 Liquidity reserve ...........................................................................................193,694 22,090 46,725 25,946 288,455
78
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
47. Capital management
Capital adequacy
The focus of capital management at the Group is to normalize the capital structure in the medium term and consequently maintain the
Group's capitalization comfortably above regulatory requirements, including the Pillar 2 and combined capital buffer requirements.
* On 31 December 2025, the deduction consists of 50% of audited profits as per the Bank's dividend policy and a ISK 5 billion buyback program approved by the
Board (in December 2025) and the FSA (in January 2026, after the accounting period end). On 31 December 2024, the deduction consists of a dividend payment
of ISK 16 billion to be paid in Q1 2025 as approved by the Board, representing 61% of 2024 net earnings, and a ISK 3 billion buyback program approved by the
Board and the FSA.
31.12.2025 31.12.2024Own fundsTotal equity .............................................................................................................................................................217,391 207,086 Non-controlling interest not eligible for inclusion in CET1 capital .............................................................................(64) (504)Common Equity Tier 1 capital before regulatory adjustments ...........................................................................217,327 206,582 Intangible assets .....................................................................................................................................................(7,273) (7,390)Additional value adjustments ..................................................................................................................................(228) (226)Foreseeable dividend and buyback * .......................................................................................................................(20,313) (19,000)Adjustment under IFRS 9 transitional arrangements as amended ...........................................................................- 427 Insufficient coverage for non-performing exposures ................................................................................................(314) (345)Common Equity Tier 1 capital ..............................................................................................................................189,199 180,048 Non-controlling interest eligible for inclusion in T1 capital ........................................................................................- 112 Additional Tier 1 capital ...........................................................................................................................................15,635 20,004 Tier 1 capital ..........................................................................................................................................................204,834 200,164 Tier 2 instruments ...................................................................................................................................................27,883 24,534 Tier 2 instruments of financial sector entities (significant investments) ....................................................................(1,355) (1,306)Tier 2 capital ..........................................................................................................................................................26,528 23,228 Total own funds .....................................................................................................................................................231,362 223,392 Risk-weighted exposure amount (REA) Credit risk, loans and off-balance sheet items .........................................................................................................862,862 798,562 Credit risk, securities and other ...............................................................................................................................59,140 59,113 Credit risk, derivatives and repos ............................................................................................................................4,222 5,875 Market risk due to currency imbalance ....................................................................................................................2,309 2,947 Market risk due to trading book positions ................................................................................................................13,516 12,846 Credit valuation adjustment .....................................................................................................................................2,501 2,257 Operational risk .......................................................................................................................................................84,635 106,011 Total risk-weighted exposure amount .................................................................................................................1,029,185 987,611 Capital ratios CET1 ratio ...............................................................................................................................................................18.4% 18.2% Tier 1 ratio ...............................................................................................................................................................19.9% 20.3% Capital adequacy ratio ............................................................................................................................................22.5% 22.6%
The Group's consolidated situation as stipulated in CRR is the Group's accounting consolidation excluding insurance subsidiaries, in
particular Vördur.
The Group's capital ratios are calculated in accordance with the Icelandic Financial Undertakings Act No. 161/2002 with later changes,
through which CRD V and CRR III have been adopted. The Group applies the standardized approach to calculate capital requirements for
credit risk, including counterparty credit risk, and market risk and the basic approach for credit valuation adjustment risk.
79
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
47. Capital management, continued
Leverage ratio
** The SREP result based on the Group's Financial Statement at 31 December 2024. The Pillar 2R requirement is 1.9% of risk-weighted exposure amount based
on the Group's prudential consolidation under CRR, which excludes Vördur.
* The Icelandic buffer value shown. In the combined buffer requirement, the effective countercyclical capital buffer is determined by calculating the weighted
average of the corresponding buffer levels of each country, the weights being the total risk-weighted exposures for credit risk against counterparties residing in
those countries. The systemic risk buffer only applies to domestic exposures and is calculated using the same weighting method.
The leverage ratio is seen as a complementary measure to the risk-based capital ratios. The ratio is calculated on the basis of the Group's
consolidated situation as per the CRR, which excludes the Group's insurance subsidiaries. The minimum leverage ratio requirement is 3%
as stated in the Icelandic Financial Undertakings Act No. 161/2002.
Capital requirement, % of REACET1 Tier 1 TotalPillar 1 capital requirement ...................................................................................................................4.5% 6.0% 8.0% Pillar 2R capital requirement ** .............................................................................................................1.1% 1.4% 1.9% Combined buffer requirement * ............................................................................................................9.7% 9.7% 9.7% Regulatory capital requirement .........................................................................................................15.3% 17.1% 19.6% Available capital ..................................................................................................................................18.4% 19.9% 22.5%
The following table outlines the implementation of the capital buffer requirements in accordance with the Icelandic Financial Undertakings
Act No. 161/2002, as prescribed by the Financial Stability Committee and approved by the FSA.
The Bank carries out an ongoing process, the Internal Capital Adequacy Assessment Process (ICAAP), with the aim to ensure that the
Group has in place sufficient risk management processes and systems to identify, manage and measure the Group's total risk exposure.
The ICAAP is aimed at identifying and measuring the Group's risk across all risk types and ensure that the Group has sufficient capital in
accordance with its risk profile. The FSA supervises the Group, receives the Group's internal estimation on the capital adequacy and sets
the Pillar 2R capital requirements for the Group as a whole following the Supervisory Review and Evaluation Process (SREP). The Group's
own funds exceed the FSA's SREP requirements.
31.12.2025 31.12.2024Capital buffer requirement, % of REACapital conservation buffer .....................................................................................................................................2.5% 2.5% Capital buffer for systematically important institutions .............................................................................................3.0% 3.0% Systemic risk buffer * ..............................................................................................................................................2.0% 2.0% Countercyclical capital buffer * ................................................................................................................................2.5% 2.5% Combined capital buffer requirement ..................................................................................................................10.0% 10.0%
31.12.2025 31.12.2024Capital ratios of the parent companyCET1 ratio ...............................................................................................................................................................18.3% 18.5% Tier 1 ratio ...............................................................................................................................................................19.8% 20.5% Capital adequacy ratio ............................................................................................................................................22.4% 22.9%
The Pillar 1 and Pillar 2R capital requirements may comprise 56.25% CET1 capital, 18.75% AT1 capital and 25% Tier 2 capital.
31.12.2025 31.12.2024On-balance sheet exposures ..................................................................................................................................1,696,618 1,562,622 Derivative exposures ..............................................................................................................................................12,582 16,078 Repos .....................................................................................................................................................................11,181 10,358 Off-balance sheet exposures ..................................................................................................................................71,258 50,982 Total exposure .......................................................................................................................................................1,791,639 1,640,040 Tier 1 capital ..........................................................................................................................................................204,834 200,164 Leverage ratio .........................................................................................................................................................11.4% 12.2%
80
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
47. Capital management, continued
MREL
48. Operational risk
The solvency capital requirement for the subsidiary Vördur is calculated in accordance with the Icelandic Insurance Companies Act No
100/2016.
The Group must fulfil a minimum requirement for own funds and eligible liabilities (MREL) in accordance with the Act on Resolution of
Credit Institutions and Investment Firms, no. 70/2020, as amended, which transposes BRRD I/II into Icelandic law. Own funds which are
not used to fulfil the combined buffer requirement can be used towards the MREL requirements. In October 2025, the Icelandic Resolution
Authority presented the Group with the MREL requirements based on year-end 2024 financials. The requirements are expressed as a
fraction of total REA, and as a fraction of the total exposure measure. Both ratios are shown in the table below. An MREL subordination
requirement of 13.5% REA will apply to the Bank from Q3 2027.
31.12.2025 31.12.2024Minimum requirement for own funds and eligible liabilitiesOwn funds ...............................................................................................................................................................231,362 223,392 Eligible liabilities ......................................................................................................................................................201,513 130,048 Own funds and eligible liabilities .........................................................................................................................432,875 353,440 Combined buffer requirement (CBR) .......................................................................................................................99,831 96,786 Own funds and eligible liabilities not used for CBR ...........................................................................................333,044 256,654 Risk-weighted exposure amount (REA) ...................................................................................................................1,029,185 987,611 Own funds and eligible liabilities not used for CBR (% REA) ...................................................................................32.4% 26.0% MREL requirement (% REA) ..................................................................................................................................19.8% 19.6% Total exposure measure (TEM) ...............................................................................................................................1,791,639 1,640,040 Own funds and eligible liabilities (% TEM) ...............................................................................................................24.2% 21.6% MREL requirement (% TEM) .................................................................................................................................6.0% 6.0% Solvency II for insurance subsidiary VördurExcess of assets over liabilities in accordance with Solvency II ..............................................................................14,228 14,468 Subordinated liabilities ............................................................................................................................................1,372 1,323 Foreseeable dividends ............................................................................................................................................- - Own funds .............................................................................................................................................................15,600 15,791 Solvency capital requirements (SCR) ......................................................................................................................10,049 9,347 SCR ratio ................................................................................................................................................................155.2% 168.9%
The Group uses the standardized approach for the calculation of capital requirements for operational risk.
Operational risk is the risk of direct or indirect loss, or damage to the Group's reputation resulting from inadequate or failed internal
processes or systems, from human error or external events.
Each business unit within the Group is responsible for managing their own operational risks. Risk management and Compliance support
the first line through monitoring, complementary expertise, and by challenging the adequacy and effectiveness of risk management
practices. The second line is responsible for developing and maintaining a framework for identifying, measuring, and reporting the Group's
operational risk.
81
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Notes to the Consolidated Financial Statements
49. Sustainability risk
Sustainable financing framework
31.12.2025 31.12.2024
Sustainable Financing Instruments
24,755 28,802
38,272 60,518
63,027 89,320
Identified eligible sustainable assets by category
18,000 19,075
534 271
545 608
8,875 7,545
97,512 92,689
- 17,309
7,914 7,799
133,380 145,296
20,958 28,835
1,637 2,374
424 1,146
14,447 13,336
37,465 45,691
170,845 190,987
Sustainability risk is a driver of other risk types, such as credit risk and market risk. It can materialize in the short term, the medium term
and the long term. The Bank assesses both inside-out risks (negative impact from the Bank’s operations on people and/or the
environment) and outside-in risks (negative materialization of ESG factors on the Bank through their counterparties or invested assets).
The Bank’s Sustainability Committee is responsible for reviewing the Bank’s performance with respect to its commitments and policies in
relation to environmental, social and governance (ESG) factors and aligning the Bank’s strategy and risk appetite with them.
Education ................................................................................................................................................................
Healthcare ..............................................................................................................................................................
Sustainable waste and wastewater management ....................................................................................................
Book value .............................................................................................................................................................
Affordable housing ..................................................................................................................................................
The Bank’s Sustainability Financing Framework applies to the Bank’s financing, deposits and loans which are classed as environmentally
and/or socially sustainable. The Sustainability Financing Framework includes social categories which define projects having a positive
impact on society. Special importance is also given to the circular economy, and the classification of green projects has also been refined.
Under this framework the Bank can issue Sustainable Financing Instruments including, but not limited to, covered bonds, bonds, loans,
commercial paper, repurchase agreements and deposits. The use of proceeds from these instruments is restricted to the financing of
eligible assets as defined in the Framework. Eligible assets are divided into several eligible categories with inclusion and exclusion criteria.
The Framework details the processes for identifying eligible assets, for reporting on the use of the framework and for external review. The
following table excludes committed green exposures.
Sustainable book value .........................................................................................................................................
Energy efficiency .....................................................................................................................................................
Green buildings .......................................................................................................................................................
Sustainable marine value chains and marine ecosystem management ...................................................................
Renewable energy ..................................................................................................................................................
Sustainable forestry and agriculture ........................................................................................................................
Green book value ..................................................................................................................................................
Green deposits ........................................................................................................................................................
Employment generation and alleviate unemployment ..............................................................................................
Social book value ..................................................................................................................................................
Green borrowings ....................................................................................................................................................
Clean transportation ................................................................................................................................................
82
Arion Bank Consolidated Financial Statements 2025
Material accounting policies
50. Going concern assumption
51. Principles underlying the consolidation
Subsidiaries
Business combinations
–
–
–
–
–
–
–
Non-controlling interests
–
–
For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:
if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
the recognized amount of any non-controlling interests in the acquiree; less
When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.
Non-controlling interests represent the portion of profit or loss and equity not owned, directly or indirectly, by the Group; such interests are
presented separately in the Income Statement and are included in equity in the Statement of Financial Position, separately from equity
attributable to owners of the Group.
at fair value; or
the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
The Group measures goodwill at the acquisition date as:
Notes to the Consolidated Financial Statements
the fair value of the consideration transferred; plus
power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
the ability to use its power over the investee to affect its returns.
Business combinations are accounted for using the acquisition method as at the acquisition date, i.e. when control is transferred to the
Group. The Group controls an investee if, and only if, the Group has:
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less
than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether
it has power over an investee, including (i) the contractual arrangement with the other vote holders of the investee, (ii) rights arising from
other contractual arrangements and (iii) the Group's voting rights and potential voting rights. The Group re-assesses whether or not it
controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
exposure, or rights, to variable returns from its involvement with the investee; and
Transaction costs incurred are expensed and included in administration expense.
Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
The Group's management has made an assessment of the ability to continue as a going concern and is satisfied that the Group has the
resources to continue. In making this assessment, management has taken into consideration the risk exposures facing the Group, which
are further described in the Risk Management Disclosures. The Consolidated Financial Statements are prepared on a going concern basis.
The accounting policies adopted in the preparation of these Consolidated Financial Statements are consistent with those followed in the
preparation of the Annual Financial Statements for year ended 31 December 2024, except for when there have been made amendmends to
current IFRS valid from 1 January 2025, Icelandic Act on Financial Statements, Act on Financial Undertakings and rules on Accounting for
Credit Institutions. Amendments to standards effective from 1 January 2025 did not have a material impact on theses Consolidated
Financial Statements.
Subsidiaries are entities controlled by the Group. The Financial Statements of subsidiaries are included in the Consolidated Financial
Statements from the date that control commences until the date that control ceases. The Financial Statements of the subsidiaries are
prepared for the same reporting period as the parent entity, using consistent accounting policies.
at their proportionate share of the acquiree's identifiable net assets, which are generally at fair value.
83
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
51. Principles underlying the consolidation, continued
Loss of control
Transactions eliminated on consolidation
Funds management
52. Associates
Impairment on investments in associates
53. Foreign currency
Foreign currency transactions
After applying the equity method to account for investments in associates, the Group determines whether it is necessary to recognize any
impairment loss with respect to its investments in associates. The Group first determines whether there is any objective evidence that an
investment in an associate is impaired. If such evidence exists, the Group then tests the entire carrying amount of the investment for
impairment, by comparing its recoverable amount, which is the higher of value in use and fair value less costs to sell, with its carrying
amount. The recoverable amount of an investment in an associate is assessed for each associate, unless the associate does not generate
cash inflows from continuing use that are largely independent of those from other assets of the Group. The excess of the carrying amount
over the recoverable amount is recognized in the Income statement as an impairment loss. Impairment losses are subsequently reversed
through the Income Statement if the reasons for the impairment loss no longer apply.
Items included in the Consolidated Financial Statements of each of the Group's subsidiaries are measured using the functional currency of
the respective entity.
The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.
The Group manages and administers assets held in unit trusts and investment vehicles on behalf of investors. The Financial Statements of
these entities are not included in these Consolidated Financial Statements except when the Group controls the entity.
Associates are those entities over which the Group has a significant influence, i.e. the power to participate in the financial and operating
policy decisions of the associates but not control or joint control over those policies. Significant influence generally exists when the Group
holds 20% or more of the voting power, including potential voting rights, unless it can be clearly demonstrated that this is not the case.
Investments in associates are initially recognized at cost. The carrying amount of investments in associates includes intangible assets and
accumulated impairment loss.
The Group's investments in its associate are accounted for using the equity method.
Upon loss of significant influence over the associate, the Group measures and recognizes any retained investment at its fair value. Any
difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and
proceeds from disposal is recognized in profit or loss.
The Financial Statements include the Group's share of the total recognized income and expenses of associates from the date that
significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its carrying
value of associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that
the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports
profits, the Group resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.
On the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other
components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognized in profit or loss.
When assessing whether to consolidate investment funds, the Group reviews all facts and circumstances to determine whether the Group,
as fund manager, is acting as agent or principal. The Group is deemed to be a principal, and hence controls and consolidates a fund, when
the Group acts as fund manager and cannot be removed without cause, has variable returns through significant holdings, and is able to
influence the returns of the funds by exercising its power. The Group is defined as agent in all instances.
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional
currency at the exchange rate at that date. All differences arising on settlement or translation of monetary items are taken to the Income
Statement. Non-monetary assets and liabilities denominated in foreign currencies are reported at historic cost.
Intragroup balances, income and expenses arising from intragroup transactions, are eliminated in preparing the Consolidated Financial
Statements. This also applies to subsidiaries classified as disposal groups held for sale.
84
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
54. Interest
–
–
–
55. Fee and commission
56. Net financial income
i)
ii)
iii)
57. Insurance service results
Insurance revenues recognized in the Income Statement are insurance premium and other income from insurance contracts earned during
the operating year.
fair value through profit and loss (FVTPL); and
Net financial income comprises Dividend income, Net gain on financial assets and liabilities at fair value and Net foreign exchange gain.
Insurance service expenses are claims incurred during the year and the increase or decrease due to claims from last year, acquisition cost
and other costs from activities, such as marketing costs, salary costs, office and administration costs.
Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the
measurement of the effective interest rate.
The calculation of the effective interest rate includes all transaction costs and fees and points paid or received that are an integral part of
the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial
asset or financial liability.
Interest income and expense are recognized in the Income Statement using the effective interest method. The effective interest rate is the
rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or,
where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on
initial recognition of the financial asset and financial liability and is not revised subsequently.
Dividend income is recognized when the right to receive dividend is established. Usually this is the ex-dividend date for equity securities.
The Group provides various services to its clients and earns income therefrom, such as income from Corporate Banking, Retail Banking,
Capital Markets, Corporate Finance, Asset Management and Private Banking. Fees earned from services that are provided over a certain
period of time are recognized as the services are provided, i.e. point in time. Fees earned from transaction type services are recognized
when the service has been completed, i.e. point in time. Fees that are performance linked are recognized when the performance criteria are
fulfilled, i.e. point in time.
fair value through other comprehensive income (FVOCI).
Interest income and expense presented in the Income Statement include Income and expenses of assets and liabilities carried at:
Net foreign exchange gain comprise all foreign exchange differences arising on the settlement of foreign currency monetary assets and
liabilities and on translating foreign currency monetary assets and liabilities at rates different from those at which they were translated on
initial recognition during the year or in previous Consolidated Financial Statements.
Net foreign exchange gain also include foreign exchange differences arising on translating non-monetary assets and liabilities which are
measured at fair value in foreign currencies and whose other gain and loss are also recognized in profit or loss.
Net gain on financial assets and liabilities at fair value comprises all realized and unrealized fair value changes, except for interest
(which is included in Interest income and Interest expense) and foreign exchange gain and losses (which are included in Net foreign
exchange gains as described below).
amortized cost;
85
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
58. Income tax expense
59. Financial assets and financial liabilities
Recognition and initial measurement
Derecognition
Debt instruments
–
–
–
–
–
–
–
A financial asset or financial liability is measured initially at fair value and for an item not at fair value through profit or loss, transaction cost
that are directly attributable to its acquisition or issue.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities and the realization of
foreign exchange gain or loss, for financial reporting purposes and the amounts used for taxation purposes.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting
date, and any adjustment to tax payable in respect of previous years. Taxable profit may differ from earnings before tax as reported in the
Income Statement as it may exclude income or expense that is deductible in other years and it excludes income or expense that are never
taxable or deductible.
Current and deferred tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit or loss.
it is held within a business model whose objective is to collect contractual cash flows; and
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable
that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reviewed at each reporting date
and reduced to the extent that it is no longer probable that the related tax benefit will be realized. Such deferred tax assets and liabilities are
not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in
transaction that affects neither the taxable profit nor the accounting profit. In addition, tax liabilities are not recognized if the temporary
difference arises from the initial recognition of goodwill.
Financial liabilities are derecognized when the obligation of the Group specified in the contract is discharged or cancelled or expires.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or when the Group has
transferred substantially all risks and rewards of ownership.
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:
Tax expense comprises current and deferred tax. Income tax for the year has been calculated and recognized in the Consolidated Financial
Statements.
A debt instrument is measured at amortized cost only if it meets both of the following conditions and is not designated as at FVTPL:
its contractual cash flows are solely payments of principal and interest on the principal amount outstanding (here after SPPI).
The Group initially recognizes financial assets and financial liabilities on the date that they are originated at the fair value of consideration
paid. Regular-way purchases and sales of financial assets are recognized on the trade date at which the Group commits to purchase or sell
assets. All other financial assets and liabilities are recognized on the trade date, which is the date that the Group becomes a party to the
contractual provision of the instrument.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to
taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
it is held within a business model whose objective is to collect contractual cash flows and selling financial assets; and
fair value through profit and loss (FVTPL); or
fair value through other comprehensive income (FVOCI).
its contractual cash flows are SPPI.
Debt instruments, including loans and debt securities, are classified into one of the following measurement categories:
amortized cost;
All other debt instruments are carried at FVTPL.
86
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Business model assessment
-
-
-
-
-
Cash flow characteristics assessment
Debt instruments measured at amortized cost
Debt instruments measured at FVOCI
whether the assets are held for trading purposes, i.e. assets that the Group acquires or incurs principally for the purpose of selling or
repurchasing in the near term, or holds as part of a portfolio that is manage together for short-term profit or position taking;
The contractual cash flow characteristics assessment involves assessing the contractual features of an instrument to determine if they give
rise to cash flows that are consistent with a basic lending arrangement. Contractual cash flows that are consistent with a basic lending
arrangement are considered SPPI.
the risks that affect the performance of assets held within a business model and how those risks are managed;
how the performance of assets in a portfolio is evaluated and reported to group heads and other key decision makers within the Group's
business lines;
Business model assessment involves determining whether financial assets are managed in order to generate cash flows from collection of
contractual cash flows, selling financial assets or both. The Group assesses the business model at a portfolio level reflective of how groups
of assets are managed together to achieve a particular business objective. For the assessment of business models the Group takes into
consideration the following factors:
how compensation is determined for the Group's business lines' management that oversee the assets; and
the frequency and volume of sales in prior periods and expectations about future sales activity.
Interest is defined as consideration for the time value of money, the banks funding costs, the credit risk associated with the principal amount
outstanding and other costs (e.g liquidity risk and administrative costs), as well as a profit margin. Indexation of loans to the Consumer
Price Index (CPI) are considered part of interest as CPI guarantees the time value of money of the original outstanding balance. Principal
may change over the life of the instruments due to repayments. Indexation on principal accumulates over time.
In performing this assessment, the Group takes into consideration contractual features that could change the amount or timing of
contractual cash flows, such that the cash flows are no longer consistent with a basic lending arrangement. If the Group identifies any
contractual features that could modify the cash flows of the instruments such that they are no longer consistent with a basic lending
arrangement, the related financial assets is classified at FVTPL.
Impairment on debt instruments measured at amortized cost is calculated using the expected credit loss (ECL) approach. Loans and debt
securities measured at amortized cost are presented net of allowance for credit losses in the Consolidated Statement of Financial Position.
Debt instrument are measured at FVOCI if they are held within a business model whose objective is to hold for collection of contractual
cash flows and/or selling financial assets, where the assets' cash flows represent payments that are solely payments of principal and
interest. Subsequent to initial recognition, unrealized gains and losses on debt instruments measured at FVOCI are recorded in Other
Comprehensive Income (OCI). At realization the accumulated profit or loss recognized in OCI in previous periods is recycled to the
Consolidated Income Statement. Foreign exchange gains and losses of the debt instrument are recognized in the Consolidated Income
Statement. Interest income are recognized in the Income Statement in accordance with effective interest rate method.
Debt instrument are measured at amortized cost if they are held within a business model whose objective is to hold for collection of
contractual cash flows where those cash flows represent solely payments of principal and interest. After initial measurement, debt
instruments in this category are carried at amortized cost using the effective interest rate method. The effective interest rate is the rate that
discounts contractual cash payments or receipt through the contractual lifetime of the financial asset to the gross carrying amount of a
financial asset. Amortized cost is calculated taking into account any discount or premium on acquisition, transaction cost and fees that are
an integral part of the effective interest rate. Amortization is included in interest income in the Consolidated Income Statement.
Impairment on debt instruments measured at FVOCI is calculated using the expected credit loss approach. The ECL on debt instruments
measured at FVOCI does not reduce the carrying amount of the asset in the Statement of Financial Position, which remains at its fair value.
Instead, an amount equal to the allowance that would arise if the assets were measured at amortized cost is recognized in OCI with a
corresponding charge to net impairment in the Consolidated Statement of Comprehensive Income. The accumulated allowance recognized
in OCI is recycled to the Consolidated Statement of Comprehensive Income upon derecognition of the debt instrument.
87
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Debt instruments measured at FVTPL
Purchased loans
Equity instruments
Offsetting
Expected credit losses
Debt instrument are measured at FVTPL if they are held for short term gain, held as part of a portfolio managed on a fair value basis or the
cash flows do not represent payments that are solely payments of principal and interest. These instruments are measured at fair value in
the Consolidated Statement of Financial Position. Realized and unrealized gains and losses are recognized as part of Net financial income
in the Consolidated Income Statement.
Expected credit loss (ECL) is established for all financial assets, except for financial assets classified or designated as FVTPL and equity
instruments designated as FVOCI, which are not subject to impairment assessment. Assets subject to impairment assessment are primarily
debt instruments (including loans to customers) measured at amortized cost or FVOCI. ECL on financial assets is presented in Net
impairment. Other financial assets carried at amortized cost are presented net of ECL in the Group's Consolidated Statement of Financial
Position. Off-balance sheet items subject to impairment assessment include financial guarantees and undrawn loan commitments. ECL for
Off-balance sheet items is separately calculated and included in Other Liabilities.
Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains or losses arising from a
group of similar transactions such as in the Group's trading activity.
All purchased loans are initially measured at fair value on the date of acquisition. As a result no allowance for credit losses would be
recorded in the Consolidated Statement of Financial Positions on the date of acquisition. Purchased loans may fit into either of the two
categories: Performing loans or Purchased or Originated Credit Impaired (POCI) loans.
The Group can elect to classify non-trading equity instruments at FVOCI. This election will be used for certain equity instruments for
strategic or longer term investment purposes. The FVOCI election is made upon initial recognition, on an instrument-by-instrument basis
and once made is irrevocable. Gains and losses on these instruments including when derecognized/sold are recorded in OCI and are not
subsequently reclassified to the Consolidated Income Statement. Dividends received are recorded in Financial income in the Consolidated
Income Statement. Any transaction costs incurred upon purchase of the security are added to the cost basis of the security and are not
reclassified to the Consolidated Income Statement of the security.
For equity instruments measured at FVTPL, changes in fair value are recognized as part of Financial income in the Consolidated Income
Statement.
Purchased performing loans are reflected in Stage 1 and will follow the same accounting as other performing loans. They will be subject to a
12-month allowance for credit losses which is recorded as provision for credit losses in the Consolidated Income Statement. The fair value
adjustments set up for these loans on the date of acquisition is amortized into interest income over the life of these loans.
Financial assets and liabilities are set off and the net amount reported in the Statement of Financial Position when, and only when, the
Group has a legal right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the
liability simultaneously.
Equity instruments are measured at FVTPL.
POCI loans do not have allowance at initial recognition but subsequently the allowance will reflect the changes in the lifetime expected
losses. At recognition the discount of each POCI loan is split up into two categories, impairment discount and interest discount or premium.
Interest is calculated with a credit adjusted effective interest rate and is posted to interest income. Periodically the Group recalculates the
carrying amount by computing the present value of estimated future cash flows at the financial instrument's original credit adjusted effective
interest rate, any changes in the expected cash flows since the date of acquisition are recorded as a charge/recovery in net impairment in
the Consolidated Income Statement at the end of all reporting periods subsequent to the date of acquisition.
88
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Stage Criteria
Definition of default
–
–
Probability of default and credit risk rating
Lifetime expected credit loss is recorded. Effective interest rate
is calculated on the book value.
The ECL is an unbiased discounted probability-weighted estimate of the cash shortfalls expected to result from defaults occurring in the
next 12 months or, in cases where credit risk has significantly increased, in the expected lifetime of an exposure. For guarantees and loan
commitments, credit loss estimates consider the portion of the commitment that is expected to be paid out or expected to be drawn over the
relevant time period, contingent on significant financial difficulty.
the asset is more than 90 days past due, or
The ECL represents an unbiased estimate of expected credit losses on our financial assets as at the balance sheet date. Judgement is
required in making assumptions and estimations when calculating the ECL, including movements between the three stages and the
application of forward looking scenarios. The underlying assumptions and estimates may results in changes to the provisions from period to
period that significantly affect our results of operations.
The Group defines default in accordance with article 178 of EU Regulation No 575/2013 (CRR). The Group considers a financial asset to be
in default when:
For corporate counterparties, more than 90 days past due means that the counterparty has been past due on a material exposure each day
in the last 90 days. For individuals, more than 90 days past due means that the individual has been past due on a material exposure in the
same exposure portfolio each day in the last 90 days.
1
12 month expected credit loss is recorded. The expected credit
loss is computed using a probability of default occurring over the
next 12 months. For those instruments with a remaining maturity
of less than 12 months, a probability of default corresponding to
remaining term to maturity is used. The effective interest rate is
calculated on the gross carrying amount.
Assessment of expected credit loss, and effective interest
rates.
Increases or decreases in the required ECL attributable to purchases and new originations, derecognitions or maturities, and
remeasurements due to changes in loss expectations or state migrations are recorded in net impairment. Write-offs and recoveries of
amounts previously written off are recorded against ECL.
An asset does not return to non-defaulted status until after a probation period which is at least either three months if no forbearance
measures have been granted or one year if forbearance measures have been granted.
The Group allocates to each exposure a credit risk rating (e.g. A+, A, A-, BBB+, etc.) based on the calculated 12 month probability of
default ('the PD'). The PD is assessed through the Group's credit rating models or based on external ratings if available. The Group's credit
rating models are statistical models based on a variety of information that has been determined to be predictive of default. These include
demographic, behavioral, financial and economic data, coupled with qualitative expert judgement for large corporate exposures. Factors
vary depending on the nature of the exposure and the profile of the borrower. The PD estimates used for the purpose of calculating IFRS 9
impairments are point-in-time, i.e. dependent on the economic cycle. The Group's credit rating models are subject to annual performance
tests and are recalibrated on a regular basis if needed.
In assessing whether a borrower is unlikely to pay, the Group considers both qualitative and quantitative indicators, e.g. overdue status,
debt and equity ratios, market circumstances and other data developed internally or obtained from external sources.
Lifetime expected credit loss is recorded, based on the
probability of default over the remaining estimated life of the
financial instrument. Effective interest rate is calculated on the
gross carrying amount.
For corporate counterparties it is assumed that if one exposure is in default, all other exposures to that counterparty are also in default
(cross-default). For individuals however, the Group defines six different exposure portfolios and has different statistical credit risk models for
each of them - mortgages, consumer loans, auto loans, guarantees, loans to individuals for work purposes and other loans. Each exposure
portfolio is assessed separately, meaning that if an individual is in default on a loan belonging to one portfolio, their other exposures,
belonging to other portfolios, are not automatically assumed to be in default. However, defaults in other portfolios are also considered and
cross-default applies when they are significant.
3
Exposures in default / Credit impaired
2
the borrower is considered to be unlikely to pay.
Exposures not impaired and with no significant increase
in credit risk
Exposures not impaired with significant increase in
credit risk subsequent to origination.
The Group measures the ECL on each balance sheet date according to a three-stage expected credit loss impairment model:
89
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Probability of default
In addition to calculating PD and allocating a credit risk rating to each exposure, the Group calculates the lifetime probability of default
(LPD), which is an assessment of the probability that a default event occurs over the lifetime of the exposure. The LPD incorporates
management's view of possible future macroeconomic developments and the likelihood of rating transitions over the lifetime of the
exposure. For the determination of LPD, the Bank calculates PD term structures – which effectively provides the probability of default for
any given time period, one for each rating grade, PD model and economic scenario. The annualized lifetime probability of default (ALPD) of
an exposure is the fixed 12 month PD (without transitions) that corresponds to the exposure's LPD. The credit risk rating that corresponds to
the ALPD is defined as the lifetime credit risk rating.
The assessed 12 months PDs are the basis for the determination of the term structure of PDs for exposures. The Group applies transition
models, developed on the basis of historical data, to predict the development of risk grades for periods that exceed one year. The Group
has separated transition behavior due to specific and general risk and applies its macro-economic forecasts to the latter. The analysis of
credit rating transitions due to general risk includes the identification and calibration of relationships between changes in default rates and
changes in key macro-economic factors. Unemployment rate is the predominant predictive variable. Among other indicators examined are
GDP growth, private consumption expenditure, inflation, development of housing prices and benchmark interest rates.
The Group uses external ratings for counterparties that receive such ratings from recognized rating agencies such as Moody's, Standard &
Poor's and Fitch. The Group's internal rating scale was originally calibrated to match historical default rates shown in publications of the
aforementioned rating agencies and using smoothing techniques. External ratings are primarily used to assess expected losses for
counterparties of marketable securities, money market and deposit accounts positions which fall under the Impairment requirements of
IFRS 9. The Group's ECL is broken down by investment grade and non-investment grade classes for such exposures, as per the definition
of the corresponding rating agency.
The Group's PDs and PD term structures are based on both quantitative and qualitative factors and in some cases external ratings are
used. PD's are re-assessed on a regular basis with different frequencies depending on the type of counterparty and/or exposure.
Each exposure is allocated a credit risk rating at initial recognition. The calculations are based on available information at the time of
origination. Exposures are continuously monitored and revaluated using the models described above and this may result in transitions
between risk ratings.
The Group's rating scale is shown below, including mapping of external ratings. The lower bounds are inclusive.RiskS&P /class Rating Lower PDUpper PDFitchMoody'sDescription0 AAA ............................................................................... 0.000% 0.006% AAA AaaInvestment Grade AA+ ............................................................................... 0.006% 0.018% AA+ Aa1 AA ................................................................................. 0.018% 0.029% AA Aa2AA- ................................................................................ 0.029% 0.045% AA- Aa3A+ .................................................................................. 0.045% 0.070% A+ A1A .................................................................................... 0.070% 0.110% A A2A- .................................................................................. 0.110% 0.170% A- A31 BBB+ ............................................................................. 0.170% 0.260% BBB+ Baa1Investment GradeBBB ............................................................................... 0.260% 0.410% BBB Baa2BBB- .............................................................................. 0.410% 0.640% BBB- Baa32 BB+ ............................................................................... 0.640% 0.990% BB+ Ba1Non-investment GradeBB ................................................................................. 0.990% 1.540% BB Ba2BB- ................................................................................ 1.540% 2.400% BB- Ba33 B+ .................................................................................. 2.400% 3.730% B+ B1Non-investment GradeB .................................................................................... 3.730% 5.800% B B2B- .................................................................................. 5.800% 9.010% B- B34 CCC+ ............................................................................ 9.010% 14.000%Non-investment CCC .............................................................................. 14.000% 31.000%GradeCCC- ............................................................................. 31.000% 99.990%5 DD ................................................................................. 99.99% 100.00% D CDefault / Impaired
90
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Loss given default
Exposure at default
Significant increase in credit risk
–
–
–
–
–
Apart from the low credit risk exemption, the Group considers a significant increase in credit risk to have occurred for a given exposure if
one of the following holds:
The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews to confirm that the
criteria is capable of identifying significant increases in credit risk before an exposure is in default and there is no unwarranted volatility in
loss allowance from transfers between 12-month ECL (stage 1) and lifetime ECL (stage 2).
The Group has six different exposure specific PD models for individuals: mortgages, consumer loans, auto loans, guarantees, loans to
individuals for work purposes and other loans. The Bank has a different model or rating logic for the following corporate portfolios – large
corporates, retail SMEs, holding companies, construction projects, financial institutions (external ratings), municipalities, state related
entities and cooperatives.
the exposure is on the Group's list for exposures to watch due to significant increase in credit risk.
The assessment of significant increase in credit risk requires significant judgment. In determining whether the risk of default for an exposure
has increased significantly since initial recognition, the Group considers relevant, reasonable and supportable information on an ongoing
basis. Assumptions are drawn based on the Group's historical experience and expert judgement including forward-looking expectations. If
an exposure has low credit risk at the reporting date, the Group determines that the credit risk on the exposure has not increased
significantly since initial recognition. Low credit risk means that both the 12-month and annualized lifetime probabilities of default are low.
the exposure's 12-month probability of default has increased significantly from the 12-month probability of default at origination;
the exposure's annualized lifetime probability of default has increased significantly from the annualized lifetime probability of default at
origination. As the Group does not have the benefit of hindsight, this comparison is only used for exposures that originate on or after 1
January 2018; 
Assumptions on key macro-economic indicators are on an ongoing basis estimated based on internal and external information available at
each time. The Group formulates a 'base case' view of the future direction of relevant economic variables as well as a representative range
of other possible forecast scenarios. The Group uses these forecasts to adjust its estimates of lifetime probability of default and other
factors that affect the lifetime expected credit loss.
the exposure has received forbearance measures in the past six months;
Each credit facility is assigned an LGD. The LGD is an assessment of loss conditional on a default occurrence. The Group splits LGD into
three components; the probability of cure, the expected recovery from liquidation of collateral, and the recovery rate for the unsecured part
of the exposure. The cure rate is modeled on the Group’s historical data of assets returning to performing status after being in default
without loss. The expected recovery is the outcome of the Group’s collateral allocation algorithm which takes into account the seniority of
debt and collateral type. Haircuts are applied to different types of collaterals based on expert judgment, supported by historical data, and
take into account costs and the time value of money. Different haircuts are applied for different macro-economic scenarios in the ECL
calculations. In some instances, assets are considered to be fully covered by collateral after haircut application and therefore carry no ECL.
The recovery rate for the unsecured part of the exposure is based on expert judgment, taking into account historical loss experience.
The cut-off period for cure is taken to be 18 months from default, which means that a return to non-default after that period is not considered
a cure. Furthermore, cure is defined on a portfolio level instead of on a loan level i.e. the same level as the PD models. In this version,
statistical cure rate models have been created for the largest portfolios – mortgages, consumer loans and large corporates and retail SMEs.
As the explanatory variables in the statistical cure rate models can be related to variables in PD models, this change prompts a
consideration of PD-cure correlation. The correlation effects are taken into account in the Bank’s ECL calculations. Furthermore, long-run
average cure rate models using macro-economic variables have been created. The models can be used to assess cure rate under different
economic conditions to be able to apply different cure rates for different economic scenarios given different economic conditions.
The EAD represents the expected exposure at the event of a default. For a given exposure, the Group derives the EAD from the contractual
amortization schedule and takes into account the likelihood of pre-payments, drawdowns, rollovers, extensions and use of unused
allowance in the period leading up to default. These behavioral estimates, which are based on historical observations and forward-looking
forecasts, apply differently to each type of exposure.
the number of days in arrears exceeds 30 days; or
91
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
Exposures in default
Expected credit loss measurement
–
–
–
Forward looking scenarios
Write-off of loans
The Group measures ECL considering the risk of default over the maximum contractual period (including any extension periods) over which
it is exposed to credit risk. The maximum contractual period extends to the date at which the Group has the right to require repayment of an
advance or terminate a loan commitment or guarantee. However, for overdrafts and credit card facilities that include both a loan and an
undrawn commitment component, the Group measures ECL over a period longer than the maximum contractual period if the Group’s
procedures for extensions do not limit the Group’s exposure to credit losses to the contractual period. These facilities do not have a fixed
term or repayment structure. The Group can cancel them with immediate effect but this contractual right is not enforced in the normal day-to-
day management, but only when the Group becomes aware of an increase in credit risk at the facility level. This longer period is estimated
taking into account the credit risk management actions that the Group expects to take and that serve to mitigate ECL. These include a
reduction in limits, cancellation of the facility and/or turning the outstanding balance into a loan with fixed repayment terms. The ECL
calculations involve discounting using the exposures' effective interest rates.
The amount of the loss impaired is the difference between the assets' gross carrying value and the present value of estimated future cash
flow. In some instances, the impairment of exposures is zero due to collateral coverage.
The ECL for an exposure is the weighted average of the expected credit loss for different macro-economic scenarios provided by the
Group's management. The Group currently considers three scenarios: 'base case', 'optimistic' and 'pessimistic' and assigns its best
estimate of the likelihood of occurrence to each one. The development of macro-economic variables and the corresponding weights are
based on expert judgement supported by historical data. The Group incorporates forward-looking macro-economic information into both its
assessment of whether the credit risk of an instrument has increased significantly since its initial recognition (via the lifetime credit risk
rating comparison) and its measurement of ECL as the PD term structures, LGD and EAD include macro-economic adjustments for each of
the scenarios.
Each component is derived from internally generated models, apart from external credit ratings. The models are developed with statistical
methods and/or expert judgement supported by historical data and adjusted for expected macro-economic effects.
The predominant macro-economic variable used across all portfolios is the unemployment rate in Iceland, as measured by the Directorate
of Labor. Among other variables considered are GDP growth, private consumption expenditure, inflation, development of housing prices
and benchmark interest rates. The average cure is also correlated with unemployment rate, depending on portfolio, and collateral haircuts
are adjusted for different scenarios. Exit and pre-payment rates, which affects EAD, are dependent on refinancing spreads and due to the
correlation between interest rates and unemployment rate they are adjusted for different scenarios.
Exposures in default at each reporting date, according to the Group’s definition, are considered to be credit impaired.
The expected credit loss (ECL) calculations are based on three main components:
probability of default (PD),
loss given default (LGD); and
Loans are written off, either partially or in full, when there is no realistic prospect of recovery i.e. the bankruptcy of the borrower or an
ineffective attachment or distraint. Collateralized loans are generally written of when the realization of collateral have been received. After
write-off, exposures continue to be subject to collection activities in accordance with Icelandic law.
exposure at default (EAD).
Impairment losses are recognized in net impairment, see note 44. Any decreases in impairment loss amounts are reversed through net
impairment.
92
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
59. Financial assets and financial liabilities, continued
60. Hedge accounting
61. Cash and cash equivalents
Cash and cash equivalents in the Statement of Cash Flows consist of cash, demand deposits with the Central Bank and demand deposits
with other credit institutions. Cash and cash equivalents comprise balances with less than three months' maturity from the date of
acquisition. Cash and cash equivalents are carried at amortized cost in the Statement of Financial position.
Other derivatives, not designated in a qualifying hedge relationship, are used to manage its exposure to foreign currency, interest rate,
equity market and credit risk. The financial instruments used include, but are not limited to, interest rate swaps, cross-currency swaps,
forward contracts, futures, options, credit swaps and equity swaps.
If a modification of terms results in derecognition of the original financial asset and recognition of the new financial asset, the new financial
asset will generally be recorded in Stage 1, unless it is determined to be credit-impaired at the time of renegotiation. For the purposes of
assessing for significant increase in credit risk, the date of initial recognition for the new financial asset is the date of modification.
The Group applies fair value hedge accounting with respect to designated hedging relationship of certain fixed-rate foreign currency
denominated notes issued by the Bank as the hedged items and certain foreign currency denominated interest rate swaps as the hedging
instruments. The Group recognizes the changes in fair value of the interest rate swaps together with changes in the fair value of bonds
attributable to interest rate risk immediately in profit or loss in the line item of Note 10, Net gain on fair value hedge of interest rate swap.
Calculated accrued interest on both swaps and bonds are included in the line item of Note 7, Interest expense.
If a modification of terms does not result in derecognition of the financial asset, the carrying amount of the financial asset is recalculated as
the present value of the renegotiated or modified contractual cash flows, discounted at the original effective interest rate and gain or loss is
recognized. The financial asset continues to be subject to the same assessments for significant increase in credit risk relative to initial
recognition and credit-impairment, as described above. A modified financial asset will migrate out of Stage 3 if the conditions that led to it
being identified as credit-impaired are no longer present and relate objectively to an event occurring after the original credit-impairment was
recognized. A modified financial asset will migrate out of Stage 2 when it no longer satisfies the relative thresholds set to identify significant
increase in credit risk, which are based on changes in its PD, lifetime PD, days past due and other qualitative considerations.
Modifications
The original terms of a financial asset may be renegotiated or otherwise modified, resulting in changes to the contractual terms of the
financial asset that affect the contractual cash flow. The treatment of such modifications is primarily based on the process undertaken to
execute the renegotiation and the nature and extent of changes made. Modifications which are performed for credit reasons, primarily
related to troubled debt restructurings, are generally treated as modifications of the original financial asset unless modifications are
significant. Significant modifications are generally considered to be an expiry of the original cash flows; accordingly, such renegotiations are
treated as a derecognition of the original financial asset and recognition of a new financial asset.
The Group has chosen to continue to apply the hedge accounting requirements of IAS 39 as an accounting policy choice as permitted
under IFRS 9. The Group has chosen to continue to apply the hedge accounting requirements of IAS 39 as an accounting policy choice as
permitted under IFRS 9.
On initial designation of the hedges, the Group formally documented the relationship between the hedging instruments and hedged items,
including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the
effectiveness of the hedging relationships. The Group makes an assessment, both at inception of the hedge relationships and on an
ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value of the
hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within the range of
80–125%.
If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge
accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. Any adjustments, up to the point of
discontinuation, to a hedged item for which the effective interest method is used, is amortized to profit or loss as part of the recalculated
effective interest rate of the item over its remaining life.
93
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
62. Loans
63. Derivatives
64. Intangible assets
Goodwill and infrastructure
Customer relationship and related agreements
Software
Amortization of intangible assets
65. Investment property
Subsequent expenditure on software is capitalized only when it increases the future economic benefits embodied in the specific asset to
which it relates. All other expenditure is expensed as incurred.
Derivatives are recognized at fair value. Fair value changes are recognized in the Income Statement. Changes in fair values of derivatives
are split into interest income, foreign exchange differences and net financial gain or loss. Interest income is recognized on an accrual basis.
Derivatives with positive fair values are recognized as Financial instruments and derivatives with negative fair values are recognized as
Financial liabilities at fair value.
Amortization of intangible assets is recognized in the Income Statement on a straight-line basis over the estimated useful life, from the date
that it is available for use. The estimated useful life of intangible assets for the current and comparative periods is three to ten years.
An investment property is a property which is held either to earn rental income or for capital appreciation or for both.
Investment property is initially measured at cost and subsequently at fair value. Gains or losses arising from changes in the fair values of
investment properties are included in the Income Statement.
Loans are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortized cost
using the effective interest method.
Loans are financial instruments with fixed or determinable payments that are not quoted in an active market and that the Group does not
intend to sell immediately or in the near term. Loans include loans provided by the Group to credit institutions and to its customers,
participation in loans from other lenders and purchased loans.
When the Group purchases an asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a
fixed price on a future date reverse repo or stock borrowing, the arrangement is accounted for as a loan, and the underlying asset is not
recognized in the Group's Consolidated Financial Statements.
Goodwill and infrastructure that arises on the acquisition of subsidiaries is presented with intangible assets. Subsequent to initial recognition
goodwill and infrastructure is measured at cost less accumulated impairment losses.
Customer relationship and related agreements are measured at cost less any accumulated impairment losses.
A derivative is a financial instrument or other contract, the value of which changes in response to a change in an underlying variable, such
as share, commodity or bond prices, an index value or an exchange or interest rate, which requires no initial net investment or initial net
investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes
in market factors and which is settled at a future date.
Software acquired by the Group is measured at cost less accumulated amortization and any accumulated impairment losses.
When the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of the
asset to the lessee, the arrangement is classified as a capital lease and a receivable equal to the net investment in the lease is recognized
and presented within loans.
94
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
66. Impairment of non-financial assets
67. Deposits
68. Borrowings
69. Subordinated liabilities
70. Assets and disposal groups held for sale
Borrowings are measured at amortized cost with any difference between cost and redemption amount being recognized in the Income
Statement over the period of the borrowings on an effective interest basis. Accrued interest is included in the carrying amount of the
borrowings.
The carrying amounts of the Group's non-financial assets, other than assets held for sale, investment property and deferred tax assets, are
reviewed at each reporting date to determine, whether there is any indication of impairment. If any such indication exists then the asset's
recoverable amount is estimated. The recoverable amount of intangible assets is assessed annually.
An impairment loss is recognized if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in
profit or loss.
The recoverable amount of an asset is the greater of its value in use and its fair value less cost to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
The Group classifies a Asset or disposal group as held for sale if its carrying amount will be recovered principally through a sale transaction
rather than through continuing use. For this to be the case the asset or disposal group must be available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such asset or disposal group and the sale must be highly probable.
Immediately before classification as held for sale, the measurement of the qualifying assets and all assets and liabilities in a disposal group
is brought up-to-date in accordance with applicable IFRS. Then, on initial classification as held for sale, Assets and disposal groups are
recognized at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale are
included in the Income Statement, even when there is a revaluation. The same applies to gains and losses on subsequent remeasurement.
Revaluation through the reversal of impairment in subsequent periods is limited so that the carrying amount of the held for sale, Assets or
disposal groups does not exceed the carrying amount that would have been determined had no impairment loss been recognized in prior
years.
An impairment loss in respect of other assets, where impairment losses have been recognized in prior periods, are assessed at each
reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized.
Deposits are initially measured at fair value plus transaction costs, and subsequently measured at their amortized cost using the effective
interest method.
Subordinated liabilities are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, subordinated
liabilities are stated at principal amount due plus accrued interest, which is recognized in the Income Statement based on the contractual
terms of the borrowing.
Subordinated liabilities are financial liabilities in the form of subordinated capital which, in case of the Group's voluntary or compulsory
winding-up, will not be repaid until after the claims of ordinary creditors have been met. In the calculation of the capital ratio, they are
included within both Tier 1 and Tier 2, based on terms of each instrument. The Group may only retire subordinated liabilities with the
permission of the FSA.
95
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
71. Other assets and other liabilities
Property and equipment
Right-of-use asset and lease liability
Other assets and other liabilities
Insurance contract liabilities
72. Equity
Share capital and share premium
Treasury shares
Dividends
Option reserve
Warrants reserve
Other assets and other liabilities are stated at cost less impairment.
Equipment .......................................................................................................................................................................
33 years
3-15 years
Subsequent expenditure is capitalized only when it is probable that the future economic benefits of the expenditure will flow to the Group.
Ongoing repairs and maintenance are expensed as incurred.
Dividends on shares are recognized in equity in the period in which they are approved by Arion Bank's shareholders.
The depreciation methods, useful lives and residual values are reassessed annually.
Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. When parts of an item of
property and equipment have different useful lives, they are accounted for as separate items of property and equipment.
The consideration paid for the purchase of own shares is deducted from the shareholders equity as treasury shares. No gain or loss is
recognised in the Income Statement on purchase or sale of treasury stock.
The option reserve represents the cumulative charge to the Income Statement for options for employees of the Group to purchase shares in
Arion Bank. The stock option plan is set up in accordance with article 10 in the Icelandic Act on income tax No. 90/2003.
Par value of issued share capital is ISK 1 per share. The holders of ordinary shares are entitled to receive dividends as approved by the
AGM and are entitled to one vote per share at shareholders' meetings. Share capital has been fully paid.
The warrants reserve represents the consideration received for outstanding warrants.
The depreciable amount of property and equipment is determined after deducting its residual value. Depreciation is charged to the Income
Statement on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. The estimated useful
lives are as follows:
Insurance contract liabilities comprise liabilities for remaining coverage and liabilities from incurred claims. Liabilities for remaining coverage
is estimated using a simplified method which is based on paid premiums minus premiums from insurance services recognized as income. A
loss factor is added in the case of onerous contracts. Liabilities from incurred claims are estimated as the best estimate of discounted cash
flows plus a risk adjustment due to non-financial risk and other expected cost of claims. Liabilities for remaining coverage are estimated in
the same way as the best estimate for claims reserve pursuant to the Insurance Activities Act No. 100/2016. These calculation methods are
in accordance with the rules of IFRS 17 Insurance Contracts.
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases and leases of low
value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of
the lease. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the Group's incremental borrowing rate. The right-of-use assets comprise the initial measurement of the corresponding
lease liability. They are subsequently measured at cost less accumulated depreciation.
Real estates .....................................................................................................................................................................
96
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
72. Equity, continued
Reserve for investments in subsidiaries and associates
Reserve for investments in securities
Reserve due to capitalized development cost
Financial assets at fair value through OCI
Statutory reserve
Foreign currency translation reserve
73. Earnings per share
74. Financial guarantees
75. Fiduciary activities
In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances.
Financial guarantees are initially recognized in the Consolidated Financial Statements at fair value, being the premium received.
Subsequent to initial recognition, the Group's liability under each guarantee is measured at the higher of the amount initially recognized
less, when appropriate, cumulative amortization recognized in the Income Statement, and the best estimate of expenditure required to settle
any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is recorded in the
Income Statement. The premium received is recognized in the Income Statement in Net fees and commission income on a straight line
basis over the life of the guarantee.
A reserve for unrealized fair value changes, net of tax, for assets held at fair value through other comprehensive income. The fair value
reserve is released in correlation with realization of gains or losses of financial assets at derecognition.
According to the Financial Statements Act No. 3/2006 the difference between share of profit of subsidiary or associate in excess of dividend
payment or dividend payment pending, shall be transferred to a restricted shareholding equity reserve, net of tax, which is not subject to
dividend payments. When shareholding in subsidiary or associate is sold or written off the shareholding equity reserve shall be released
and the amount transferred to retained earnings.
According to the Financial Statements Act No. 3/2006 fair value changes of financial assets from the initial reporting, shall be transferred
from retained earnings to a fair value equity reserve, net of tax. The fair value equity reserve is not subject to dividend payments. The fair
value equity reserve shall be released in accordance with fair value changes recognized when financial asset is sold or redeemed or the
assumptions for the fair value change is no longer in force.
According to the Financial Statements Act No. 3/2006 entities that capitalize development costs shall transfer a corresponding amount from
retained earnings to a separate reserve. The reserve is not subject to dividend payments. The reserve shall be eliminated in an amount
corresponding to the annual depreciation of the capitalized development cost. The reserve shall be released if the asset is sold or fully
depreciated.
The Group provides asset custody, asset management, investment management and advisory services to its clients. These services
require the Group to make decisions on the treatment, acquisition or disposal of financial instruments. Assets in the Group's custody are not
reported in its Statement of Financial Position.
According to the Icelandic Companies Act No. 2/1995 at least 10% of the profit of the Group which is not devoted to meeting losses from
previous years and is not contributed to other legal reserves must be contributed to the statutory reserve until it amounts to 10% of the
share capital. When that limit has been reached the contribution must be at least 5% of the profit until the statutory reserve amounts to 25%
of the share capital of the Bank.
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the Consolidated
Financial Statements of foreign operations.
The Group presents basic and diluted earnings per share (EPS). Basic earnings per share is calculated by dividing the net earnings
attributable to the shareholders of Arion Bank hf. by the weighted average number of ordinary shares outstanding during the year. Diluted
earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding during the year to assume
conversion of all dilutive potential ordinary shares, which comprise share options granted to employees and issued warrants.
97
Arion Bank Consolidated Financial Statements 2025
Notes to the Consolidated Financial Statements
76. Employee benefits
Share-based payment expense
77. Standards issued but not yet effective
IFRS 18 Presentation and disclosures in financial statements
New standards, amendments to standards and interpretations have been issued but are not yet effective for the year ended 31 December
2025, and have not been applied in preparing these Consolidated Financial Statements. Relevant to the Group's reporting is IFRS 18
Presentation and disclosures in financial statements.
IFRS 18 Presentation and disclosures in financial statements replaces IAS 1, carrying forward many of the requirements in IAS 1
unchanged and complementing them with new requirements. IFRS 18 introduces new requirements for presentation within the statement of
profit or loss, including specified totals and subtotals. Furthermore, entities are required to classify all income and expenses within the
statement of profit or loss into one of five categories: operating, investing, financing, income taxes and discontinued operations, whereof the
first three are new. The standard requires disclosure of newly defined management-defined performance measures, subtotals of income
and expenses, and it also includes new requirements for aggregation and disaggregation of financial information based on the identified
‘roles’ of the primary financial statements (PFS) and the notes. The Group is currently working to identify all impacts the amendments will
have on the primary Consolidated Financial Statements and Notes to the Consolidated Financial Statements. The initial expected impacts
on Group’s Consolidated Financial Statements are not expected to be material. A new disclosure will be added for management-defined
performance measures as required by the standard. In addition to the adoption of IFRS 18, there are consequential amendments to several
other standards that are not expected to have material impacts on the Consolidated Financial Statements. IFRS 18, and the amendments to
the other standards, are effective for reporting periods beginning on or after 1 January 2027. IFRS 18 will apply retrospectively.
All entities with employees within the Group have defined contribution plans. The entities pay fixed contributions to publicly or privately
administered pension plans on a mandatory and contractual basis. The Group has no further payment obligations once these contributions
have been paid. The contributions are recognized as an expense in the Income Statement when they become due. The Group does not
operate any pension fund which confers pension rights.
Equity-settled share‐based payments to employees are measured at the fair value of the equity instruments at grant date. The grant date
fair value of equity-settled share‐based payments granted to employees is recognized as an salary expense, with a corresponding increase
in equity, over the contratual period. The amount recognized as an expense is adjusted to reflect the number of shares that are expected to
be exercised at the vesting date.
98
Arion Bank Consolidated Financial Statements 2025 Amounts are in ISK millions
Income Statement
2025 2024 2023 2022* 2021
52,542 46,302 44,685 40,201 32,063
17,147 15,360 16,389 16,449 14,673
2,111 2,166 152 615 3,442
1,075 2,845 1,366 (3,286) 6,220
5,516 (222) 1,589 1,314 1,827
78,391 66,451 64,181 55,293 58,225
(28,248) (28,328) (25,701) (24,329) (25,875)
(2,106) (1,924) (1,796) (1,749) (1,516)
(3,053) (1,131) (1,348) 144 3,169
44,984 35,068 35,336 29,359 34,003
(12,458) (8,919) (9,595) (9,944) (6,782)
32,526 26,149 25,741 19,415 27,221
(19) (37) (4) 6,543 1,394
32,507 26,112 25,737 25,958 28,615
Statement of Financial Position
31.12.2025 31.12.2024 31.12.2023 31.12.2022 31.12.2021
Assets
150,111 124,094 114,118 69,057 42,136
22,567 25,690 45,501 30,272 28,235
1,329,056 1,230,058 1,084,757 936,237 822,941
215,816 206,417 193,329 225,657 227,251
7,305 9,387 7,862 6,560 6,132
760 814 787 668 891
7,533 7,688 8,783 9,463 9,689
2 2 135 2 2
98 111 61 16,047 16,811
22,517 14,006 10,276 19,901 18,618
1,755,765 1,618,267 1,465,609 1,313,864 1,172,706
Liabilities and Equity
12,003 6,618 11,697 5,000 13,031
921,182 857,443 755,361 655,476 568,424
3,129 8,394 20,997 5,877 5,240
12,983 11,060 10,303 7,102 4,262
50,736 49,950 39,401 54,086 48,897
494,823 433,178 392,563 356,637 298,947
43,518 44,538 47,331 35,088 36,060
1,538,374 1,411,181 1,277,653 1,119,266 974,861
217,327 206,582 187,307 193,925 197,672
64 504 649 673 173
217,391 207,086 187,956 194,598 197,845
1,755,765 1,618,267 1,465,609 1,313,864 1,172,706
Net impairment .............................................................................
Net financial income ......................................................................
Investments in associates .............................................................
Income tax expense ......................................................................
Net interest income .......................................................................
Bank levy ......................................................................................
Other operating income .................................................................
Net fee and commission income ...................................................
Operating expenses ......................................................................
Insurance service results ..............................................................
5-year overview
Discontinued operations, net of tax ...............................................
* Comparative figures have been restated in accordance with IFRS 17
Financial instruments ....................................................................
Tax liabilities .................................................................................
Total liabilities .............................................................................
Assets and disposal groups held for sale ......................................
Non-controlling interest .................................................................
Other liabilities ..............................................................................
Borrowings ....................................................................................
Subordinated liabilities ..................................................................
Shareholders' equity .....................................................................
Due to credit institutions and Central Bank ....................................
Deposits ........................................................................................
Financial liabilities at fair value ......................................................
Other assets .................................................................................
Total equity ..................................................................................
Total Liabilities and Equity .........................................................
Operating income ........................................................................
Earnings before income tax .......................................................
Net earnings from continuing operations ..................................
Net earnings ................................................................................
Cash and balances with Central Bank ...........................................
Loans to credit institutions ............................................................
Loans to customers ......................................................................
Intangible assets ...........................................................................
Tax assets ....................................................................................
Investment property ......................................................................
Total Assets ................................................................................
99
Appendices
Unaudited
Fundamentals to corporate governance at Arion Bank
are the Articles of Association which are approved
by shareholders, and policies and other documents
adopted by the Board of Directors. These include the
Board’s Rules of Procedure, and the Rules of Procedure
of the Board’s Sub-Committees, and policies regarding
the Bank’s operations and enterprise risk management
architecture. These policies are revised every year, and
whenever deemed necessary. Even more important is
the Bank’s corporate culture, strategy, and operational
procedures. Good corporate governance and corporate
culture help to foster open and honest relations between
the Board of Directors, shareholders, customers, and
other stakeholders, such as the Bank’s employees and
the public. Corporate governance also provides the
foundations for responsible management and decision-
making, with the objective of generating sustainable
long-term value creation. The Board of Directors places
great importance on good corporate governance and re-
evaluates its governance practices regularly on the basis
of recognized guidelines on corporate governance.
A central part of governance for financial institutions
involves managing risks which will invariably arise in
operations. Risk management is described in more detail
later in this statement, in the Bank’s Annual Report.
Establishing and maintaining effective risk management
and controls constitutes a key challenge in the Bank’s
activity and to the Bank’s overall soundness.
This Corporate Governance Statement is based on the
legislation, regulations and recognized guidelines which
are in force at the time the Bank’s financial statement is
adopted by the Board of Directors.
Excellence in corporate governance
Arion Bank has been recognized as a company which has
achieved excellence in corporate governance, following a
formal assessment based on the Icelandic Guidelines on
Corporate Governance issued by the Icelandic Chamber
of Commerce, SA – Business Iceland and Nasdaq Iceland,
initially in December 2015, April 2019, August 2022,
August 2023, August 2024 and again in August 2025. This
recognition was granted following an in-depth assessment
by an independent party of corporate governance at the
Bank, including governance by the Board of Directors,
sub-committees and management.
Compliance with guidelines on good
corporate governance
In respect to corporate governance arrangements, Arion
Bank applies the European Banking Authority (EBA)
Guidelines on Internal Governance (EBA/GL/2021/05), in
line with requirements found in Regulation (EU) 1093/2010
and Act 24/2017, on European Financial Supervision. The
Guidelines on Internal Governance are available on the
website of the Financial Supervisory Authority of the
Central Bank of Iceland.
Furthermore, according to the Financial Undertakings
Act No. 161/2002 Arion Bank is obliged to comply with
recognized guidelines on corporate governance. The Bank
complies with the sixth edition of the Icelandic Guidelines
on Corporate Governance issued by Iceland Chamber of
Commerce, SA – Business Iceland and Nasdaq Iceland,
published in February 2021 and in force as of 1 July 2021.
According to the guidelines a company shall state whether
it has deviated from the guidelines, if so, which parts and
also explain why it has done so.
The Bank complies with the guidelines with two variations:
Article 5.1.2. states that the rules of procedure of sub-
committees of the Board shall be posted on the Bank’s
website. The rules of the Board Credit Committee have
not been published on the Bank’s website with respect
to their nature.
The final sub-paragraph of article 5.4.5 states that the
role of a remuneration committee shall include taking
an independent stance on the effect of wages on the
Company’s risk exposure and risk management, in
cooperation with the Company’s Audit Committee. In line
Arion Bank (Arion Bank or the Bank) is an Icelandic public limited company whose
shares are listed on Nasdaq Iceland and Nasdaq Stockholm. Here the Board submits
its Corporate Governance Statement for 2025. Corporate governance is focused on
how responsibilities are allocated among the various bodies of the Bank and how
systems for decision making are constructed, in accordance with prevailing laws and
regulations. Arion Bank’s shareholders exercise governance principally by electing
the Board of Directors, which in turn appoint the CEO and monitor the Bank’s conduct
of business. The CEO is responsible for the day-to-day operations of the Bank and
represents the Bank in all matters concerning normal operations. The CEO must in this
respect comply with the relevant legislation, the Bank’s Articles of Association and
the policies and instructions laid down by the Board. The CEO is responsible for the
implementation of the Bank’s policies.
with, inter alia, the EBA Guidelines on Internal Governance
and article 78(3) of the Act on Financial Undertakings,
this role falls to the Board’s Remuneration Committee in
cooperation with the Board’s Risk Committee.
Nomination Committee
The role of the Nomination Committee at Arion Bank is
to promote good corporate governance and to facilitate
informed decision-making by shareholders when
selecting Board members to ensure that Board members
have wide and versatile qualifications and experience. The
Committee has an advisory role regarding the election
of Board members and makes a proposal on their
remuneration.
The Committee relies on the Bank’s Suitability Policy when
making nominations. At the Bank’s annual general meeting
on 12 March 2025, two members of the Nomination
Committee were appointed, Júlíus Thorfinnsson and
Audur Bjarnadóttir. According to the Rules of Procedure
for the Nomination Committee, the third member of the
Committee shall be the Chairman of the Board of Directors
or another Board Member appointed by the Board.
Legal framework for the Bank’s operation
Arion Bank is a financial institution which operates in
accordance with the Financial Undertakings Act No.
161/2002.
Acts of law which also apply to the Bank’s operations
include e.g., the Act on Markets for Financial Instruments
No. 115/2021, to Act on Undertakings for Collective
Investment in Transferable Securities (UCITS) No. 116/2021
and Act on Alternative Investment Fund Managers No.
45/2020, Act on Payment Services No. 114/2021, Act No.
5/2023 on Payment Accounts, Act on Measures Against
Money Laundering and Terrorist Financing No. 140/2018,
Act on Consumer Mortgages No. 118/2016, Consumer
Loans Act No. 33/2013, Competition Act No. 44/2005 and
Public Limited Companies Act No. 2/1995.
Arion Bank is a strongly capitalized bank whose goal is
to excel by helping those who want to achieve success
in Iceland and elsewhere in the Arctic through smart
and reliable financial solutions which enhance financial
health and create sustainable value as well as aiming to
be the best at meeting the needs of our target groups –
a leader which is a driver of success for our customers
and society as a whole. As noted, the Bank is listed on
Nasdaq Iceland and Nasdaq Stockholm. The Bank
has also issued financial instruments which have been
admitted for trading on regulated securities markets in
Iceland and Luxembourg. The Bank is, therefore, subject
to the disclosure requirements of issuers pursuant to the
Act on Markets for Financial Instruments and the rules of
the relevant stock exchanges.
The Financial Supervisory Authority of the Central Bank
of Iceland (FSA) supervises the operations of Arion Bank
in accordance with the provisions of Act No. 87/1998
on the Official Supervision of Financial Operations.
Further information on the FSA and an overview of the
legal and regulatory framework applicable to the Bank,
as well as FSA guidelines and guidelines issued by
European Financial Supervisory institutions, can be seen
on the FSA’s website, www.cb.is/financial-supervision/.
Numerous other legislations apply to the operations of
financial undertakings.
Internal controls, auditing and accounting
Internal control
The Bank is committed to the highest standards of
corporate governance and regards internal control as an
integral part of its operation. An effective internal control
system is built to mitigate risk to acceptable levels by
facilitating enlightened decision-making, thus supporting
the Bank in achieving its objectives and enabling the
creation and preservation of value.
The objective of the Bank’s system of internal controls
is to ensure:
◆
The Bank’s policies, objectives and business plans
are achieved within set risk appetite and threshold.
◆
The actions of the Board of Directors, management
and employees comply with the Bank’s policies,
standards, processes and all relevant laws and
regulations.
◆
The Bank’s assets and resources, including its data,
people and systems are adequately protected.
◆
Data and information published either internally or
externally is accurate, reliable, and timely.
◆
The risks that are inherent in the Bank’s operations
are managed.
◆
Practical controls and processes have been
established that require and encourage the Board,
management, and employees to carry out their
duties and responsibilities in an efficient and
effective manner.
◆
The key components of the internal control
framework are Control Environment, Risk
Assessments, Control Activities, Information and
Communication, and Monitoring Activities. These
components are interrelated with all operations of
the Bank.
Control Environment includes the governance and
manage ment function of the Bank, as well as the attitude
of senior manage ment towards internal control and its
impor tance.
The key principles relating to control en vironment include:
◆
Integrity and ethical values.
◆
The attitude of senior management and tone from the top.
◆
Organizational structure.
◆
Assignment of authority and responsibility.
◆
Employee skills, human resources policy and its
implementation.
Risk Assessment is a process of identifying internal and
external factors that can affect the objectives of the Bank
and assess their impact and importance. It forms a basis
for determining how risk should be managed so that risk-
taking is in accordance with risk appetite.
Control Activities are the actions performed at all levels
within the Bank and are intended to mitigate risks to
acceptable levels while achieving objectives. Information
is necessary for the Bank to carry out its internal control
responsibilities. Communication occurs both internally
and externally, and provides the Bank with relevant,
quality information needed to carry out day-to-day
controls. Monitoring Activities are the ongoing or separate
evaluations that are used to ascertain whether each of
the five components of internal controls is present and
functioning.
Arion Bank looks to the Three Lines Model for organizing
internal controls. All lines work together to contribute to
the creation and protection of value. Alignment of activities
is achieved through communication, cooperation, and
collaboration. This ensures the reliability, coherence,
and transparency of information needed for risk-based
decision making.
The first line is made up of employees who supervise
the operations and organization of the Bank on a day-
to-day basis. They are responsible for establishing and
maintaining effective internal controls and managing
risk in day-to-day operations. This involves identifying
and evaluating risk and putting in place appropriate
countermeasures to reduce risk. The first line is responsible
for supervising the implementation of internal rules and
processes in compliance with the law, regulations and
the Bank’s strategy and it must ensure that all actions
are in compliance with established procedures and that
corrective action is taken if any deficiencies are detected.
Board of Directors
Accountability to stakeholders
for orginizational oversight
Internal audit
Independent assurace
Third line
Independent and objective assurace and
advice on all matters related to the
achievement of objectives
Second line
Expertise, support, monitoring and
challenge on risk-related matters
First line
Provision of products and
services, managing risk
Management
Actions to achive organizational objective
(including risk management)
KEY
Integrity, leadership
and transparency
Accountability,
reporting
Delegation, direction
resources, oversight
Alignment, communication,
coordination, collaboration
The second line is set up to ensure that the first line has
established adequate internal controls which work as
intended. The second line supports the first line’s risk
management with expert advice, monitoring and restraint
in decision-making. Risk Management and Compliance
are the main participants in the second line, although other
units may also be assigned specific monitoring roles.
The third line is Internal Audit, which provides independent
and objective assurance and advice on the adequacy and
effectiveness of governance, risk management and controls,
through systematic and disciplined processes, expertise
and assessment. It reports its findings to management and
the Board of Directors to promote and facilitate continuous
improvement.
Internal audit is accountable to the Board of Directors, as
independence from management is critical to its objectivity,
authority, and credibility.
Risk Management
A central feature of the activities of all financial institutions
is well informed risk-taking according to a predetermined
strategy. Arion Bank thus takes on risks compatible with
its defined risk appetite, which is regularly reviewed
and approved by the Board of Directors. The Bank’s risk
appetite is translated into exposure and risk limits which are
monitored by Risk Management. The Board is responsible
for Arion Bank’s internal capital adequacy assessment
process, the main objective of which is to ensure awareness
of the Bank’s risk profile and ensure that it has systems in
place to assess, quantify and monitor its total risk exposure.
As defined in the Bank’s enterprise risk policy, the Bank is
exposed to seven significant risk factors and has set up
risk policies for each one. These are credit risk, market risk,
liquidity risk, operational risk, conduct and compliance risk,
sustainability risk and business risk.
The Bank’s Risk Management division is headed by the
Chief Risk Officer. It is independent and centralized and
reports directly to the CEO and operates in accordance
with a special charter from the Board. Risk Management
comprises four departments whose role is to analyse,
monitor and regularly report to the management body and
Board of Directors on the risks faced by the Bank.
Further information on risk management is contained in the
Bank’s annual report and the Bank’s risk report.
Compliance
Compliance is an independent control function which
reports directly to the CEO and works in accordance with a
special charter from the Board.
The main role of Compliance is to ensure that the Bank has
in place proactive measures to reduce the risk of rules being
breached in the course of its activities. Compliance is also
responsible for coordinating the Bank’s measures against
money laundering and terrorist financing to reduce the
risk of the Bank’s services being used for illegal purposes.
Furthermore, the Compliance Officer has the role of the
Bank’s Data Protection Officer. The Bank has adopted a
data protection statement which can be seen on the Bank’s
website.
The duties of Compliance are carried out under a risk-
based compliance plan approved by the Board of Directors,
including a monitoring and training schedule for employees
which addresses the laws and rules under which the Bank
operates. Compliance provides the Board of Directors with
a quarterly report on its activities.
Further information can be found on the Bank’s website.
Internal Audit
The Internal Auditor is appointed by the Board of Directors
and reports directly to the Board. The Board sets the
Internal Auditor a charter which sets out the responsibilities
associated with the position and the scope of the work. The
role of the Internal Auditor is to provide independent and
objective assurance and advice designed to add value and
improve the Bank’s operations. The scope of the audit is
the Bank, its subsidiaries and pension funds serviced by
Arion Bank.
The internal audit department will govern itself and, with
independent and disciplined methods, confirms the
adequacy and effectiveness of the first and the second line.
The internal audit department advises with independent and
objective assurance on the adequacy and effectiveness of
Corporate Governance, Risk management, and internal
controls. This is done with independent audits. The internal
audit department reports its findings to the management,
the Board Audit Committee, and the Board of Directors.
Accounting and auditing
The Bank’s Finance division is responsible for preparing
the accounts and this is done in accordance with the
International Financial Reporting Standards (IFRS) and
Icelandic laws. The Bank publishes its financial statement on
a quarterly basis and management statements are generally
submitted to the Board ten times a year. The Board Audit
Committee examines the annual financial statement and
interim financial statements, while the external auditors
review and audit the accounts twice a year. The Board Audit
Committee gives its opinion on the accounts to the Board of
Directors, which then approves and endorses the accounts.
Arion’s values and code of ethics
The Bank’s values are designed to provide guidance when
making decisions and in everything else employees say and
do. They refer to the Bank’s role, attitude, and conduct. Arion
Bank’s values are: Find solutions, work together, and say
what we mean.
The management and employees of Arion Bank are
conscious of the fact that the Bank’s activities affect
different stakeholders and society at large. The Bank’s
code of ethics is designed to serve as a key to responsible
decision-making at Arion Bank. The code of ethics is
approved by the Board of Directors.
Sustainability
Arion Bank has a sustainability committee and the
management of risk in connection with ESG factors has
been defined as part of the Bank’s risk management system.
The CEO is the chairman of the committee, whose role is to
monitor the Bank’s performance in connection with its policy
and commitment on sustainability and to ensure that ESG
factors are considered in decisions and plans made by the
Bank. The sustainable financing committee and the equality
committee are sub-committees of this committee.
The Bank has adopted a risk policy on sustainability
which is approved by the Board of Directors and reviewed
annually. This policy states that the Bank seeks to ensure
that its operations and services do not have a negative
impact on people or the environment. It also highlights the
critical importance of understanding the potential impact
of sustainability risks on the Bank’s operations and overall
performance. It further states that the Bank supports
Iceland’s climate action plan whose goal is to meet the
obligations of the Paris Climate Agreement and to achieve
the ambitious goal of carbon neutrality in Iceland by 2040.
Key performance indicators relating to ESG issues are
part of monthly risk report to the Board and the Bank’s risk
appetite connected to these issues have been defined.
Further information on sustainability at Arion Bank can be
found in the Bank’s 2025 Annual and Sustainability Report.
Board of Directors and Sub-committees
The main duty of the Board of Directors of Arion Bank is
to manage the Bank between shareholders’ meetings
according to applicable laws, regulations, and articles
of association. The Board tends to those operations of
the Bank which are not considered part of the day-to-
day business, i.e. it makes decisions on issues which are
unusual or of a significant nature. One of the Board’s main
duties is to supervise the Bank’s activities. The Board’s work,
duties and role are defined in detail in the rules of procedure
of the Board of Directors, which have been established on
the basis of the EBA Guidelines on Internal Governance,
Article 54 of the Financial Undertakings Act No. 161/2002,
Article 70 of the Public Limited Companies Act No. 2/1995,
FSA Guidelines No. 1/2010, and the articles of association of
the Bank. The rules of procedure of the Board of Directors
can be found on the Bank’s website.
The Board of Directors appoints a Chief Executive Officer
who is responsible for the day-to-day operations in
accordance with a strategy set out by the Board.
The Board of Directors and the Chief Executive Officer shall
carry out their duties with integrity and ensure that the Bank
is run in a sound and reasonable manner in the interests
of the customers, the community, the shareholders and
the Bank itself, cf. Article 1 (1) of the Financial Undertakings
Act. The Chief Executive Officer shall ensure that the Board
receives sufficient support to carry out its duties.
The Board of Directors is generally elected for a term of one
year at the Bank’s annual general meeting. At Arion Bank’s
annual general meeting on 12 March 2025, five Directors
and two Alternates were elected to the Board of Directors.
The elected Board Directors have diverse backgrounds
and extensive skills, experience, and expertise. When
electing the Board care is taken to ensure at least 40%
representation of each gender among directors and
alternates. Currently the Board consists of two men and
three women.
Information on the independence of Directors is published
on the Bank’s website before the annual general meeting
or a shareholders’ meeting where a Board member is to be
elected. The minutes of the annual general meeting and
shareholders’ meetings are also published on the Bank’s
website.
The Board of Directors meet at least ten times a year.
In 2025 the Board met on twenty-one occasions. The
Chairman of the Board is responsible for ensuring that
the Board performs its role in an efficient and organized
manner. The Chairman chairs Board meetings and ensures
that there is enough time allocated to the discussion of
important issues and that strategy issues are discussed
thoroughly. The Chairman is not permitted to undertake any
other work for the Bank unless part of the normal duties of
the Chairman.
According to the Board’s Rules of Procedure the Board is
permitted to establish committees to discuss particular
areas of the Bank’s operations. No later than one month
following the annual general meeting the Board appoints
members to each of its sub-committees and assesses
whether it is necessary to appoint external members
to certain committees in order to bring in a greater level
of expertise. One of the committee members in the
Board Audit Committee, Heimir Thorsteinsson, is not a
Board member and is independent of the Bank and its
shareholders.
The Board sub-committees are as follows:
◆
Board Audit Committee (BAC): The BAC’s main role
is to contribute to the high-quality statutory auditing
of the Bank and monitor the effectiveness of the
Bank’s internal quality control, risk management
systems and internal audit function, with regard to
the Bank’s financial reporting. The Committee met
five times in 2025.
◆
Board Risk Committee (BRIC): The Committee’s
main role is, inter alia, to evaluate the Bank’s risk
policy and risk appetite, monitor all the Bank’s
defined risks and to have a thorough knowledge of
the risk assessments and methods used to manage
risk employed by the Bank. Committee members
should have the qualifications and experience
necessary to be able to discharge their duties
including forming the Bank’s risk policy and risk
appetite. The Committee met eight times in 2025.
◆
Board Credit Committee (BCC): Its main task is to
attend to credit issues which exceed the credit limits
of its sub-committees. The Committee met four
times in 2025.
◆
Board Remuneration Committee (BRC): The
Committee’s main role is to prepare a remuneration
policy for the Bank on an annual basis. It also
advises the Board on remuneration to the CEO,
Managing Directors, the Compliance Officer and the
Chief Internal Auditor, and on the Bank’s incentive
scheme and other work-related payments. The
Bank’s remuneration policy shall be examined and
approved by a shareholders’ meeting annually. The
Committee met five times in 2025.
Period
Board
BCC
BRIC
BRC
BTC
Director
1 Jan - 31 Dec
1 Jan - 31 Dec
1 Jan - 31 Dec
1 Jan - 12 March
1 Jan - 31 Dec
12 March - 31 Dec
1 Jan - 12 March
1 Jan - 31 Dec
1 Jan - 31 Dec
12 March - 31 Dec
(21)
20
21
21
7
21
14
-
-
-
-
(5)
5
5
5
2
13
-
-
-
5
-
(8)
8
3
8
-
8
5
-
-
-
-
(4)
4
4
4
-
4
-
-
-
-
-
(5)
5
3
5
2
5
-
-
-
-
-
(4)
4
-
0
0
4
3
-
-
-
-
Paul Horner1
Kristín Pétursdóttir
Liv Fiksdahl2
Steinunn Kr.
Thórdardóttir
Marianne G.
Ebbesen4
Sigurbjörg Á.
Jónsdóttir5
Einar Hugi
Bjarnason
Heimir
Thorsteinsson7
Sigurbjörg
Ólafsdóttir6
Below is an overview of the attendance of individual Directors and committee members.
◆
Board Tech Committee (BTC): The purpose of the
BTC is to assist the Board of Directors in fulfilling its
oversight responsibilities with respect to the role of
technology in executing the business strategy of the
Bank, including, but not limited to, major technology
investments, technology strategy, technological
operation efficiency and technology trends that
may affect the Bank. The BTC shall furthermore
have a surveillance role pertaining to the Bank’s
compliance with rules and regulation applicable to
Information Technology. The Committee met four
times in 2025.
Sub-committees regularly inform the Board of their
activities. Furthermore, the Board has access to all material
used by the sub-committees and their minutes.
Below is an overview of the attendance of individual
Directors and committee members.
BAC
Gunnar Sturluson
 Paul Horner was elected Chairman of the Board at the Annual General Meeting 12 March 2025.
 Liv Fiksdahl left the Board of Arion Bank at the Annual General Meeting 12 March 2025.
 Steinunn Kr. Thórðardóttir attended one meeting in relation to the Banks annual financial statement.
 Marianne Gjertsen Ebbesen was elected as a Director of the Board of Arion Bank at the Annual General Meeting 12 March 2025.
 Sigurbjörg Á. Jónsdóttir left as an Alternate Director of the Board of Arion Bank at the Annual General Meeting 12 March 2025.
 Sigurbjörg Ólafsdóttir was elected as an Alternate Director of the Board of Arion Bank at the Annual General Meeting 12 March 2025.
 Heimir Thorsteinsson is certified public accountant and appointed as an external member of the BAC.
Annual General Meeting External Auditor
Internal AuditorBoard of DirectorsNomination Committee
Board Credit Committee Board Audit Committee
Board Tech Committee Board Risk Committee
Board Remuneration
Committee
Chief Executive Officer
Executive Management
Committee
Asset and Liability
Committee
Arion Credit Committee
Executive Risk Committee
Compliance
Elected by / Appointed by
Reports to / Informs
Risk Management
Operational Risk Committee
Sustainability Committee
Arion Composition and
Debt Cancellation Committee
The Board carries out an annual performance appraisal,
at which it assesses its work, the Board composition with
respect to experience and skills, working procedures and
methods, the performance of the CEO, their achievements,
and the work of the sub-committees with respect to the
aforementioned. This appraisal was last performed by the
Board during the period October to December 2025.
The Board of Directors of Arion Bank
◆
Paul Horner
◆
Gunnar Sturluson
◆
Kristín Pétursdóttir
◆
Marianne Gjertsen Ebbesen
◆
Steinunn Kristín Þórðardóttir
Paul graduated with M.A. Honours in music from the
University of Oxford in 1983 and is an associate of the
UK Chartered Institute of Bankers. Paul has extensive
experience of retail, commercial, investment and private
banking, gained across various international markets.
Paul held various executive and risk management roles at
Barclays PLC between 1988 and 2003. In 2003 Paul joined
The National Westminster Bank (formerly the Royal Bank of
Scotland Group) Group, where he served as an executive
and general manager in various senior roles. From 2012
to 2016, Paul was chief risk officer of Coutts & Co Ltd, the
International Private Banking arm of National Westminster
Group. and became CEO of that bank from in 2016-2017.
In 2018 Paul became chief risk officer of Ulster Bank in
Dublin, and from 2018 to 2021 served as a non-executive
director of Coutts & Co Ltd.
Today Paul serves on the board of AIB (UK) P.L.C., chairs
its risk committee and is a member of its audit committee.
He also serves on the Board of LHV (UK) Ltd. and chairs its
risk committee, as well as sitting as a member of its audit,
remuneration and nomination committees. In addition,
he serves on the Board of the National Bank of Kuwait
International, chairs its Risk Committee and sits on its
Audit Committee.
Paul was born in 1962. He was first elected as a
Director at a shareholders’ meeting on 8 August
2019 and is a non-executive director. He is not a
shareholder in Arion Bank and is an independent
candidate. Paul is Chairman of the Board and
member of the Board Risk Committee, the Board
Audit Committee, the Board Credit Committee, the
Board Remuneration Committee and the Board
Technology Committee.
Paul Horner
Chairman
Gunnar graduated as Cand. Jur from the University of
Iceland in 1992, gained an LL.M. degree in Law from the
University in Amsterdam in 1995 and received a license to
practice before the District Court in Iceland in 1993 and
before the Supreme Court in 1999.
Gunnar has practiced law at LOGOS legal services since
1992 and is currently a partner. He served as managing
partner of LOGOS from 2001-2013. Gunnar has previously
held various directorships, including the board of directors
at the Performing of the Arts Center in Iceland, Harpan
Conference Center, Gamma hf. and the Nordic Arbitration
Center. In addition, Gunnar served as Chairman of the
Board of the Icelandic National Broadcasting Service
(RÚV) 2016-2017, and as Chairman of the Icelandic Dance
Company 2013-2016 and was voted by ALTHINGI the
Icelandic parliament to serve on the National Electoral
Commission in 2013-2017.
Gunnar was born in 1967. He was first elected
as a Director at a shareholders’ meeting on 8
August 2019 and is a non- executive director.
He is not a shareholder of Arion Bank and is an
independent Director. Gunnar is a Chairman of the
Board Remuneration Committee, a Chairman of
the Board Audit Committee and a member of the
Board Credit Committee.
Gunnar Sturluson
Marianne graduated with a master’s degree from BI
Norwegian School of Business in 1996 and later completed
management studies from Turku School of Economics in
2008 and from The International Institute for Management
Development (IMD) in 2014.
Since 2019 Marianne has held four different roles in the
group management at OBOS BBL in Norway and currently
holds the position of CEO for the group. She has held
various senior roles within the Norwegian financial market
such as chief operating officer for group functions at
Nordea, executive vice president DNB IT and Operations
at DNB and head of customer service and head of
business development at If P&C Insurance.
Today Marianne is a member of the boards of AF Gruppen
ASA, Thrane-Steen Gruppen AS and in several companies
owned 100% by OBOS BBL. She has previously held
directorships in the boards of Odevo AB, Gjensidige
Pensjonsforsikring AS and Sveriges Bostadsrettcentrum
and chaired the board of directors at OBOS Banken AS,
OBOS Eiendomsmeglere AS and DNB Meglerservice.
Marianne was born in 1972. She was elected as a
Director at Arion Bank’s Annual General Meeting
on 12 March 2025 and is a non-executive director.
She is not a shareholder in Arion Bank and is an
independent Director. Marianne is the Chairman of
the Board Technology Committee and a member
of the Board Risk Committee.
Marianne Gjertsen Ebbesen
Kristín graduated as an economist from the University of
Iceland in 1991 and with an MBA from Handelshöyskole in
Norway in 1993.
Kristín was a co-founder of Audur Capital and served as
chief executive officer of the company from 2007 to 2013
and as Chairman of the Board of Directors from 2013 to
2017 (later Virding hf.). Kristín was also a Chairman of the
Board of Directors at Kvika hf. from 2018 to 2020, CEO
at Mentor hf. from 2015 to 2017, Managing Director of
Treasury at Kaupthing Bank from 1997 to 2005, and Deputy
CEO at Singer & Friedlander from 2005-2007. Kristín has
also served as a board member at Olgerdin, Tal, Yggdrasil,
Singer & Freidlander, Vidskiptarád, Eyrir Invest, Samtok
atvinnulífsins and Samtok fjármálafyrirtækja. Kristín has
also served as a member of investment committees of
Edda, Freyja, and Audur I initiative funds.
Today Kristín is a self-employed Leadership Consultant
and Coach and serves as a member of the Board of
Directors of Grid ehf. and Mideind ehf.
Kristín was born in 1965. She was first elected as
a Director at Arion bank’s Annual General Meeting
on 15 March 2023 and is a non-executive director.
She is not a shareholder in Arion bank and is an
independent Director. Kristín is Vice Chairman of
the Board, Chairman of the Board Risk Committee
and a member of the Board Remuneration
Committee and the Board Audit Committee.
Kristín Pétursdóttir
Vice Chairman
Steinunn was born in 1972. She was first elected
as a Director at a shareholders’ meeting on
30th November 2017 and is a non-executive
Director. She is a shareholder in Arion Bank
(her shareholding is 12000 shares) and is an
independent Director. Steinunn is the chairman of
the Board Credit Committee and is a member of
the Board Remuneration Committee, the Board
Risk Committee and the Board Tech Committee.
Steinunn is a Board member of Vordur.
Steinunn holds a master’s degree in international
manage
ment from Thunderbird, Arizona, and a BA in
international
business and politics from University of
South Carolina.
Steinunn
has
previously
held
several
directorships
in
Europe and was a board member at
the Icelandic State
Financial Investment (ISFI) in 2011.
Steinunn was previously
a
CEO
of
Beringer
Finance
Norway
in
2015-2017
and
interim CEO of Beringer
Finance in Iceland. She was also
the global head of food
and seafood. She founded Acton
Capital AS, a
management consulting and investment
company
in
Norway,
where
she
has
worked
with
investments
and consulting. Steinunn previously worked
at
Íslandsbanki (later Glitnir) as the managing director and
head of the bank’s UK operation and prior to that she was
an executive director heading the international corporate
credit and syndications.
Today Steinunn works actively with tech companies in
Norway both as an investor and a strategy. The software
companies
she
works
with
are
international
scale-up
companies.
She
is
also
the
chairman
of
the
board
of
Acton Capital AS, and the chairman of the board for the
Norwegian Icelandic Chamber of Commerce. Steinunn
is a member of the nomination committee of Síminn and
serves as a board member at Alda hf a software company
in
Iceland.
Further,
she
is
a
mentor
to
young
talented
women and founded Women Empower Women and is
the chairman of Ólafíusjóður a charitable organization
in
Norway.
Steinunn Kristín Thórdardóttir
Benedikt joined FBA (later Íslandsbanki) in 1998, held a
variety of managerial positions at Straumur-Burdarás, was
managing director of capital markets at FL Group and was
managing director of the investment banking division of
MP Bank. Benedikt worked as a senior advisor for Iceland’s
Ministry of Finance and Economic Affairs and was vice-
chairman of a government task force on the liberalization
of the capital controls between 2013 and 2016. He served
on the board of directors of Kaupthing from 2016 to 2018
and was an advisor to Kaupthing on matters relating to
Arion Bank. Benedikt was elected to the Board of Directors
of Arion Bank in September 2018 and served on the Board
until his appointment as CEO.
Benedikt gained a C.Sc. in mechanical and industrial
engineering from the University of Iceland in 1998.
Benedikt was born in 1974. Benedikt was
appointed CEO on 1 July 2019.
Benedikt Gíslason
Chief Executive Officer
Alternate directors:
Sigurbjörg Ólafsdóttir, Engineer, and Einar Hugi Bjarnason,
Supreme Court Attorney.
More information on the Board of Directors can be found
on the Bank’s website.
Communication between the shareholders
and the Board of Directors
The main venue at which the Board and the Bank report
information to the shareholders and propose decisions
to be made is at legally convened shareholders’
meetings. The Bank provides an effective and accessible
arrangement for communications between shareholders
and the Board of Directors between those meetings.
Any information sensitive to the market will be released
through a MAR press release. As part of the investor
relations program, Arion Bank has also arranged quarterly
meetings where the CEO, CFO, Chief Economist and
Investor Relations present the interim financial results.
Executive Committee
The Bank’s Executive Committee consists of the following
people and the CEO:
◆
Ida Brá Benediktsdóttir, Deputy CEO and
Managing Director of Retail Banking
◆
Birna Hlín Káradóttir, COO
◆
Hákon Hrafn Gröndal, Managing Director of
Corporate and Investment Banking
◆
Jóhann Möller, Managing Director of Markets
◆
Ólafur Hrafn Höskuldsson, Chief Financial Officer
◆
Björn Björnsson, Managing Director of Information
Technology & CTO
◆
Úlfar Freyr Stefánsson, Chief Risk Officer
Other Senior Managers::
◆
Anna Sif Jónsdóttir, Chief Internal Accountant
◆
Andrés Fjeldsted, Chief Compliance Officer
More information on the Executive Committee and other
Senior Managers can be found on the Bank’s website.
Information on violations of laws and
regulations and legal cases
Arion Bank has not been denied registration, authorization,
membership or permission to conduct certain business,
activity or operations. The Bank has not been subject
to withdrawal, revocation or dismissal of registration,
authorization, membership or permission. Information on
the main legal cases relating to Arion Bank can be found
in the notes to the annual financial statement.
The Board of Directors annually reviews and approves
the Corporate Governance Statement. This Corporate
Governance Statement was examined and approved at
a meeting of the Board of Directors on 11 February 2026.
EU Taxonomy
1
EU Taxonomy
Arion Bank publishes information for the third time regarding the EU Taxonomy in an
annex to the 2025 Consolidated Financial Statement. Few of the Bank’s counterparties
have disclosed information according to the taxonomy, and therefore the Bank’s KPI for
the ratio of green assets is 0,00003% based on turnover. However, the Bank is still
challenged with lack of data to be able to meet the stringent technical screening criteria
required for loans to households to be considered environmentally sustainable, and
therefore it is clear that the GAR will remain low if such data continues to be inaccessible.
Eligible and environmentally sustainable activities
An activity is considered to be eligible if it is defined in delegated EU regulations, established in
the basis of the Taxonomy Regulation, on the technical screening criteria which the activity needs
to fulfil in order to be considered environmentally sustainable according to the taxonomy. If the
taxonomy applies to the activity, it is considered eligible. Eligibility does not, however, determine
whether a particular activity is sustainable, but just states that there are technical screening
criteria for the activity which enable it to be analyzed in accordance with the taxonomy.
The Taxonomy Regulation covers six environmental objectives:
• Climate change mitigation
• Climate change adaptation
• The sustainable use and protection of water and marine resources
• The transition to a circular economy
• Pollution prevention and control
• Protection and restoration of biodiversity and ecosystems
In order for an economic activity to be considered environmentally sustainable it must be aligned
with one of the six environmental objectives of the regulation but at the same time must do no
significant harm to other objectives. This is to prevent an economic activity from being considered
environmentally sustainable if it then does such harm to the environment that it outweighs the
activity’s contribution to the environmental objective. The activity also needed to be carried out in
accordance with minimum safeguards which, among other things, address human rights, meet
the DNSH criteria (do no significant harm) and meet technical screening criteria.
Assets under the scope of KPIs
The Green Asset Ratio (GAR) is a key performance indicator for credit institutions. The indicator
shows the ratio of a financial institution’s assets which finance an economic activity aligned to the
taxonomy, i.e. assets considered environmentally sustainable, as a ratio of total covered assets
under Delegated Regulation (EU) 2023/2486 supplementing Regulation (EU) 2020/852 which
was implemented into Icelandic law by act no. 25/2023 on sustainability disclosure in the financial
service sector and a classification system for sustainable investments. Financial institutions need
data from their counterparties in order to publish their own key performance indicators on both
eligible and environmentally sustainable activities. Icelandic companies published information in
accordance with the taxonomy for the first time in 2024 (for the financial year 2023), unlike other
companies in the EU which have been doing it in their annual financial statements since the 2021
financial year. Arion’s calculation for 2025 is based on counterparty data for 2024.
2
In the Taxonomy Regulation loans to households are divided into loans with a mortgage in
residential housing, loans to renovate housing and car loans. These loan categories cover
approximately 45% of the total covered assets as defined in the regulation. Loans to households
therefore represent the majority of assets considered eligible under the Taxonomy Regulation
today. Loans need to meet stringent technical screening criteria to be considered environmentally
sustainable. In order to assess whether the criteria have been met, certain data is required, i.e.
information on the energy efficiency of housing and the external rolling noise and the rolling
resistance coefficient of tires, but in reality the lack of data, prevents this from being possible in
Iceland. It is therefore not possible to determine whether loans to households are considered
environmentally sustainable.
Non-financial corporations subject to NFRD (Non-Financial Reporting Directive) disclosure
obligations
1
, hereafter NFRD companies, are required to implement the EU taxonomy and
disclose information with respect to the taxonomy in their annual statements. Loans to such
corporations are eligible if they finance activities which are defined by the taxonomy but are
considered environmentally sustainable if they finance activities which are aligned with the
taxonomy. About 300 companies in Iceland fall within the scope, and information about their
eligible and environmentally sustainable activities was collected. Only a small portion of these
companies, which have identified eligible or environmentally sustainable activities, have taken
loans with the Bank, and thus the corresponding KPIs cover only a limited portion of the overall
amount lent to NFRD companies. This loan category therefore only accounts for about 3% of
the total coverage of eligible assets (based on turnover). An analysis indicated that the
information disclosed by these companies is still in the development stages, and that they
encounter similar data challenges as the Bank in accessing the necessary information to fulfill
the technical screening criteria required by the Taxonomy.
While the GAR has its merits it falls short in giving insights into the state of sustainable financial
services in Iceland. The indicator is mostly affected by the distribution of the loan portfolio, with
loans to household as the largest group of assets included in the denominator. In the light of the
above, no emphasis has been placed on increased the share of environmentally sustainable
loans in the Bank’s loan book, as this could prove difficult for the Bank to implement due to a
lack of data for household loans, and limited number of corporates that disclose information on
their environmentally sustainable activities. However, the Bank has published a Sustainable
Financing Framework which applies to the Bank’s financing, deposits and loans which are
classed as environmentally and/or socially sustainable. The framework received a second-party
opinion from ISS corporate, which evaluated the quality of the framework in terms of its
contribution to the UN Sustainable Development Goals and the eligibility of projects according to
the technical screening criteria of EU Taxonomy. The Bank has set a goal to increase the share
of loans aligned with the framework on a quarterly basis, and additional aims for sustainable
loans to represent 20% of the Bank’s total lending by 2030.
The Bank publishes for the first time the status of green assets in flow this year, as last year it
was not feasible since compressed templates were published in 2023. However, flow is only
1
Often referred to as NFRD companies, i.e. major companies, parent companies of major groups and
public-interest entities.
3
provided for the first two environmental objectives, i.e. climate change mitigation and
adaptation, as the latter four objectives are included in the templates for the first time this year.
Off-balance sheet exposures
Concerning financial guarantees, the same methodology shall be used for loans and advances to
corporates, i.e. information shall be based on counterparty disclosures. Similarly, as for loans to
corporates, disclosure was lacking and therefore only a small proportion of companies had
assessed environmentally sustainable activities.
Icelandic companies which come under the scope of the Taxonomy Regulation, regarding assets
under management, published for the first second figures on the proportion of environmentally
sustainable turnover and capital expenditure in 2025 in the annual financial statement for 2024.
The number of domestic companies that have disclosed figures on eligible or environmentally
sustainable turnover and capital expenditure is still very low. Since the implementation of the
Taxonomy Regulation commenced earlier for companies in the EU, more foreign companies have
reported their mitigation and adaptation to climate change. Therefore, there was a higher
proportion of foreign assets for which eligibility and environmental sustainability could be
assessed based on turnover and capital expenditure
Many companies do not disclose how their revenues or capital expenditure fall under the
regulation, i.e. under which environmental objective they cover. Data on eligible and
environmentally sustainable assets was obtained from Bloomberg. Government bonds are not
covered by the regulation so there is no disclosure requirement for them.
Template
number
Name
0 Summary of KPIs
1 Assets for the calculation of GAR
2 GAR sector information
3 GAR KPI stock
4 GAR KPI flow
5 KPI off-balance sheet exposures
Annex VI - Template for the KPIs of credit institutions
0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation
Total environmentally
sustainable assets,
based on the turnover
KPI
Total environmentally
sustainable assets,
based on the capex
KPI
KPI based on
turnover %
KPI
based on
capex %
% coverage (over total
assets)*
% of assets excluded
from the numerator of
the GAR (Article 7(2) and
(3) and Section 1.1.2. of
Annex V)
% of assets excluded
from the denominator of
the GAR (Article 7(1) and
Section 1.2.4 of Annex V)
Main KPI Green asset ratio (GAR) stock 0.4 282 0.00003 0.02 81.6 30.5 18.4
Total environmentally
sustainable assets, based
on the turnover KPI
Total environmentally
sustainable assets,
based on the capex KPI
KPI based on
turnover %
KPI
based on
capex %
% coverage (over total
assets)
% of assets excluded from
the numerator of the GAR
(Article 7(2) and (3) and
Section 1.1.2. of Annex V)
% of assets excluded from
the denominator of the GAR
(Article 7(1) and Section
1.2.4 of Annex V)
Additional KPIs
GAR (flow) 0.4 43.6 -0.003 -0.3 76.8 53.1 23.2
Trading book
Financial guarantees 0 0 0 0
Assets under management 23,390 36,728 1.5 2.4
Fees and commissions income
Note:
* % of assets covered by the KPI over banks' total assets.
KPIs for Fees and commissions and Trading book will be disclosed starting 2028.
1.Assets for the cal culation of GAR based on turnover
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af ag ah ai aj ak al am an ao ap aq ar as at au av aw ax ay az ba bb bc bd be bf bg bh bi bj bk
Of which Use of
Proceeds
Of which
transitional
Of which enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and denominator
1
Loans and advances, debt securities and equity instruments
not HfT eligible for GAR calculation
888,229 609,517 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 609,517 0.4 0 0 0 855,023 610,232 4 0 0 0 0 0 0 0 610,232 4 0 0 0
2 Financial undertakings 80,590 364 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 364 0 0 0 0 72,250 0 0 0 0 0 0 0 0 0 0 0 0 0 0
3 Credit institutions 1,435 364 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 364 0 0 0 0 977 0 0 0 0 0 0 0 0 0 0 0 0 0 0
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5
Debt securities,
including UoP
1,434 364 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 364 0.4 0 0 0 975 0 0 0 0 0 0 0 0 0 0 0 0 0 0
6 Equity instruments 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0
7 Other financial corporations 79,154 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 71,274 0 0 0 0 0 0 0 0 0 0 0 0 0 0
8
of which investm ent
firms
3,321 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 66 0 0 0 0 0 0 0 0 0 0 0 0 0 0
9
Loans and
advances
3,321 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 66 0 0 0 0 0 0 0 0 0 0 0 0 0 0
10
Debt
securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
11
Equity
instruments
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12
of which managem ent
companies
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
13
Loans and
advances
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
14
Debt
securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15
Equity
instruments
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
16
of which insurance
undertakings
16,337 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 16,666 0 0 0 0 0 0 0 0 0 0 0 0 0 0
17
Loans and
advances
75 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 0 0 0 0 0 0 0 0 0 0
18
Debt
securities,
1,355 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,306 0 0 0 0 0 0 0 0 0 0 0 0 0 0
19
Equity
instruments
14,908 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15,348 0 0 0 0 0 0 0 0 0
20 Non-financial undertakings 160,101 19,359 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 19,359 0 0 0 0 137,592 23,407 4 0 0 0 0 0 0 0 23,407 4 0 0 0
21 Loans and advances 158,936 19,021 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 19,021 0 0 0 0 137,072 23,407 4 0 0 0 0 0 0 0 23,407 4 0 0 0
22
Debt securities,
including UoP
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
23 Equity instruments 1,165 338 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 338 0 0 0 520 0 0 0 0 0 0 0 0 0
24 Households 640,394 589,793 0 0 0 0 0 0 0 0 0 0 0 0 589,793 0 0 0 0 639,404 586,825 0 0 0 0 0 0 0 0 586,825 0 0 0 0
25
of which loans
collateralis ed by
residential imm ovable
578,566 578,566 0 0 0 0 0 0 0 0 0 0 0 0
578566
0 0 0 0 578,567 578,567 0 0 0 0 0 0 0 0 578,567 0 0 0 0
26
of which building
renovation loans
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
27
of which motor vehicle
loans
11,227 11,227 0 0 0 0 11,227 0 0 0 0 8,257 8,257 0 0 0 0 8,257 0 0 0 0
28 Local governments financing 7,144 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,776 0 0 0 0 0 0 0 0 0 0 0 0 0 0
29 Housing financ ing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
30
Other local government
financing
7,144 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,776 0 0 0 0 0 0 0 0 0 0 0 0 0 0
31
Collateral obtained by taking
possession: re sidential and commercial
25 25 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 25 0 0 0 0 79 79 0 0 0 0 0 0 0 0 79 0 0 0 0
32
Assets excluded from the numerator for GAR calculation (covered
in the denominator)
529,350 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 455,162 0 0 0 0 0 0 0 0 0 0 0 0 0 0
33
Financial and Non-financial undertakings
468,033
34
SMEs and NFCs (other than
SMEs) not subject to NFRD
disclosure obligations
432,143
35 Loans and advances 428,926
36
of which loans
collateralis ed
by
187,861
37
of which
building
0
38 Debt securities 0
39 Equity instruments 3,217
40
Non-EU c ountry counterparties
not subject to NFRD disclosure
obligations
35,890
41 Loans and advances 35,874
42 Debt securities 0
43 Equity instruments 15
44 Derivativ es 3,210
45 On demand interbank loans 22,040
46 Cash and cash-related assets 2,022
47
Other categories of assets (e.g.
Goodwill, commodities etc.)
34,045
48 Total GAR assets 1,417,644 609,542 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 609,542 0.4 0 0 0 1,310,185 610,311 4 0 0 0 0 0 0 0 610,311 4 0 0 0
49 Assets not cov ered for GAR calculation 318,988
50
Central governments and Supranational
issuers
136,868
51 Central banks exposure 148,089
52 Trading book 34,031
53 Total assets 1,736,633 609,542 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 609,542 0.4 0 0 0 1,596,723 610,311 4 0 0 0 0 0 0 0 610,311 4 0 0 0
54 Financial guarantees 11,247 214 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 214 0 0 0 0 7,881 146 0 0 0 0 0 0 0 0 146 0 0 0 0
55 Assets under management 1,516,400 109,641 20,984 0 179 3,259 4,017 2,383 0 471 0 0 0 0 247 23 0 11 666 0 0 0 0 0 0 0 114,571 23,390 0 179 3,741 1,366,980 196,813 19,512 0 0 0 633 0 0 0 197,446 19,512 0 0 0
56 Of which debt securities 856,170 79,617 20,808 0 169 2,577 2,383 2,383 0 471 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 82,000 23,191 0 169 3,048 758,962 134,322 17,085 0 0 0 0 0 0 0 134,322 17,085 0 0 0
57 O f which equity instruments 660,229 30,024 176 0 10 211 1,634 0 0 0 0 0 0 0 247 23 0 11 666 0 0 0 0 0 0 0 32,572 199 0 10 221 608,018 62,491 2,427 0 0 0 633 0 0 0 63,124 2,427 0 0 0
Climate Change Adaptation (CCA)
Water and marine resources (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosystems (BIO)
Pollution (PPC)
Biodiversity and Ecosystems (BIO)
TOTAL (CCM + CCA + WT R + CE + PPC + BIO)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
TOTAL (CCM + CCA + WT R + CE + PPC + BIO)
Total gross
carrying
amount
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resources (WTR)
Circular economy (CE)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which environmentally s us tainable (Taxonom y-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable (Taxonom y-aligned)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which environmentally s us tainable (Taxonom y-aligned)
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
Of which environmentally s us tainable (Taxonom y-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Of which environmentally s us tainable
(Taxonomy-aligned)
Million ISK
Disclosure reference date 31.12.2025
Disclosure reference date 31.12.2024
Total gross
carrying amount
Climate Change Mitigation (CCM)
1.Assets for the calculation of GAR based on capex
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af ag ah ai aj ak al bg bh bi bj bk
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
Of which Use
of Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and denominator
1
Loans and advances, debt securities and equity instruments not
HfT eligible for GAR calculation
888,229 623,029 282 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 623,631 282 0 0 0 855,023 628,064 652 0 0 0 855,023 628,064 0 0 0
2
Financial undertakings
80,590 342 0.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 342 1 0 0 0 72,250 0 0 0 0 0 72,250 0 0 0 0
3 Credit institutions 1,435 342 0.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 342 1 0 0 0 977 0 0 0 0 0 977 0 0 0 0
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 Debt securities, including UoP 1,434 342 0.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 342 0.9 0 0 0 975 0 0 0 0 0 975 0 0 0 0
6 Equity instruments 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0
7 Other financial corporations 79,154 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 71,274 0 0 0 0 0 71,274 0 0 0 0
8 of which investment firms 3,321 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 66 0 0 0 0 0 66 0 0 0 0
9 Loans and advances 3,321 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 66 0 0 0 0 0 66 0 0 0 0
10 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
11 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12 of which management companies 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
13 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
14 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
16 of which insurance undertakings 16,337 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 16,666 0 0 0 0 0 16,666 0 0 0 0
17 Loans and advances 75 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 0 12 0 0 0 0
18 Debt securities, including UoP 1,355 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,306 0 0 0 0 0 1,306 0 0 0 0
19 Equity instruments 14,908 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15,348 0 0 0 0 15,348 0 0 0
20
Non-financial undertakings
160,101 33,496 281 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 33,496 281 0 0 0 137,592 41,239 652 0 0 0 137,592 41,239 0 0 0
21 Loans and advances 158,936 32,331 281 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 32,331 281 0 0 0 137,072 41,239 652 0 0 0 137,072 41,239 0 0 0
22 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
23 Equity instruments 1,165 1,165 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,165 0 0 0 520 0 0 0 0 0 520 0 0 0 0
24
Households
640,394 589,793 0 0 0 0 0 0 0 0 0 0 0 0 589,793 0 0 0 0 639,404 586,825 0 0 0 639,404 586,825 0 0
25
of which loans collateralised by
residential immovable property
578,566 578,566 0 0 0 0 0 0 0 0 0 0 0 0 578,566 0 0 0 0 578,567 578,567 0 0 0 0 578,567 578,567 0 0 0
26 of which building renovation loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
27 of which motor vehicle lo ans 11,227 11,227 0 0 0 0 11,227 0 0 0 0 8,257 8,257 0 0 0 0 8,257 8,257 0 0 0
28
Local governments financing
7,144 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,776 0 0 0 0 0 5,776 0 0 0 0
29 Housing financing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
30 Other local government financing 7,144 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,776 0 0 0 0 0 5,776 0 0 0 0
31
Collateral obtained by taking possession:
residential and commercial immovable
25 25 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 25 0 0 0 0 79 79 0 0 0 0 79 79 0 0 0
32
Assets excluded from the numerator for GAR calculation
(covered in the denominator)
529,350 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 455,162 0 0 0 0 0 455,162 0 0 0 0
33
Financial and Non-financial undertakings
468,033
34
SMEs and NFCs (other than SMEs) not
subject to NFRD disclosure obligations
432,143
35 Loans and advances 428,926
36
of which loans collateralised
by commercial immovable
property
187,861
37
of which building renovation
loans
0
38 Debt securities 0
39 Equity instruments 3,217
40
Non-EU country counterparties not subject
to NFRD disclosure obligations
35,890
41 Loans and advances 35,874
42 Debt securities 0
43 Equity instruments 15
44
Derivatives
3,210
45
On demand interbank loans
22,040
46
Cash and cash-related assets
2,022
47
Other categories of assets (e.g. Goodw ill,
commodities etc.)
34,045
48
Total GAR assets
1,417,644 623,656 282 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 623,656 282 0 0 0 1,310,185 628,143 652 0 0 0 628,064 652 0 0 0
49
Assets not covered for GAR calculation
318,988
50
Central governments and Supranational
136,868
51
Central banks exposure
148,089
52
Trading book
34,031
53
Total assets
1,736,633 623,656 282 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 623,656 282 0 0 0 1,596,723 628,143 652 0 0 0 628,064 652 0 0 0
54 Financial guarantees 11,247 334 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 334 0 0 0 0 7,881 146 0 0 0 0 146 0 0 0 0
55 Assets under management 1,516,400 119,113 21,264 0 311 2,921 17,268 15,462 0 2,290 0 0 0 0 97 2 0 0 301 0 0 0 0 0 0 0 136,780 36,728 0 311 5,211 1,366,980 152,973 16,419 0 0 0 152,340 16,419 0 0 0
56 Of which debt securities 856,170 84,486 21,009 0 169 2,762 15,606 15,462 0 2,290 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100,092 36,472 0 169 5,052 758,962 106,821 13,445 0 0 0 106,821 13,445 0 0 0
57 Of which equity instruments 660,229 34,628 254 0 141 159 1,662 0 0 0 0 0 0 0 97 2 0 0 301 0 0 0 0 0 0 0 36,689 256 0 141 159 608,018 46,152 2,974 0 0 0 45,519 2,974 0 0 0
TOT AL (CCM + CCA + WTR + CE + PPC + BIO)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
Of which towards taxonomy relevant sectors
(Taxonomy-eligible)
TOT AL (CCM + CCA + WTR + CE + PPC + BIO)
Total [gross]
carrying
amount
Climate Change Mitigation (CCM)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which environmentally sustainable (Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally sustainable
(Taxonomy-aligned)
Of which environmentally sustainable (Taxonomy-
aligned)
Of which towards taxonomy relevant sectors (Taxonomy-eligible)
Of which environmentally sustainable (Taxonomy-aligned)
Million ISK
Disclosure reference date 31.12.2025
Disclosure reference date 31.12.2024
Total [gross]
carrying
amount
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resources (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosystems (BIO)
Of which environmentally sustainable (Taxonomy-aligned)
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
2. GAR sector information
a b c
d e f g h i j k l m n o p q r s t u v w x y z aa ab
Mn ISK
Of which
environmentally
sustainable (CCM)
Mn ISK
Of which
environmentally
sustainable
(CCM)
Mn ISK
Of which
environmentally
sustainable
(CCA)
Mn ISK
Of which
environmentally
sustainable
(CCA)
Mn ISK
Of which
environmentally
sustainable
(WTR)
Mn ISK
Of which
environmentally
sustainable
(WTR)
Mn ISK
Of which
environmentally
sustainable (CE)
Mn ISK
Of which
environmentally
sustainable (CE)
Mn ISK
Of which
environmentally
sustainable (PPC)
Mn ISK
Of which
environmentally
sustainable (PPC)
Mn EUR
Of which
environmentally
sustainable (BIO)
Mn EUR
Of which
environmentally
sustainable (BIO)
Mn ISK
Of which
environmentally
sustainable
(CCM + CCA +
WTR + CE +
PPC + BIO)
Mn ISK
Of which
environmentally
sustainable
(CCM + CCA +
WTR + CE +
PPC + BIO)
1
2
3
4
…
Water and marine resources (WTR)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Gross carrying amount
Gross carrying amount
Gross carrying amount
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not subject
to NFRD
Climate Change Mitigation (CCM)
Gross carrying amount
Gross carrying amount
Gross carrying amount
Gross carrying amount
Climate Change Adaptation (CCA)
Biodiversity and Ecosystems (BIO)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Gross carrying amount
Note:
Since only a small proportion of companies have disclosed information on environmentally sustainable activities and a small
proportion of them have taken loans with he Bank, it is not considered adviseable to disclose a breakdown by sector at the
NACE 4 digit level classification. It is the Bank's view that such a breakdown is inappropriate at this stage. The Bank will
review this disclosure if the number of entitites that have disclosed their environmentally sustainable activities increases.
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Breakdown by sector - NACE 4 digits level
(code and label)
Gross carrying amount
Gross carrying amount
Pollution (PPC)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Gross carrying amount
Gross carrying amount
Circular economy (CE)
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
Gross carrying amount
Gross carrying amount
3. GAR KPI stock based on turnover
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af ag ah ai aj ak al am an ao ap aq ar as at au av aw ax ay az ba bb bc bd be bf bg bh bi bj bk
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
specialised
lending
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
GAR - Covere d assets in both numerator and denom inator
1
Loans and advances, debt securities and equity
instruments not HfT eligible for GAR calculation
68.6 0.00004 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 68.6 0.00004 0 0 0 51.1 71.4 0.0004 0 0 0 0 0 0 0 71.4 0.0004 0 0 0 53.5
2
Financial undertakings
0.5 0.0005 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.5 0.0005 0 0 0 4.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5
3 Credit institutions 25.4 0.03 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 25.4 0.03 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.06
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5
Debt securities, including
25.4 0.03 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 25.4 0.03 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.06
6 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0001 0 0 0 0 0 0 0 0 0 0 0 0.0001
7 Other financial corporations 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5
8 of which investment firms 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004
9
Loans and
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004
10
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
11 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12
of which management
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
13
Loans and
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
14
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
16
of which insurance
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.04
17
Loans and
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.001
18
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.08
19 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.9 0 0 0 0 0 0 0 0 0 0 0 1.0
20
Non-financial undertakings
12.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12.1 0 0 0 0 9.2 17.0 0.003 0 0 0 0 0 0 0 17.0 0.003 0 0 0 8.6
21 Loans and advances 12.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12.0 0 0 0 0 9.2 17.1 0.003 0 0 0 0 0 0 0 17.1 0.003 0 0 0 8.6
22
Debt securities, including
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
23 Equity instruments 29.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 29.0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0.03
24
Households
92.0 0 0 0 0 0 0 0 0 0 0 0 0 92.0 0 0 0 0 36.9 91.8 0 0 0 0 0 0 0 0 91.8 0 0 0 0 40.0
25
of which loans
collateralised by
100 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 33.3 100 0 0 0 0 0 0 0 0 100 0 0 0 0 36.2
26
of which building
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
27
of which motor vehicle
100 0 0 0 0 100 0 0 0 0 0.6 100 0 0 0 0 100 0 0 0 0 0.5
28
Local governm ents financing
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4
29 Housing financing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 0 0 0 0 100 0 0 0 0 0.0
30
Other local government
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4
31
Collateral obtained by taking
possession: re sidential and
100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 0.004 100 0 0 0 0 0 0 0 0 100 0 0 0 0 0.00005
32 Total GAR assets 43.0 0.00003 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 43.0 0.00003 0 0 0 81.6 46.6 0.0003 0 0 0 0 0 0 0 46.6 0.0003 0 0 0 82.1
Disclosure reference date 31.12.2025
Water and marine resource s (WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Circular economy (CE)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Climate Change Adaptation (CCA)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered
assets funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy relevant
sectors (Taxonomy-aligned)
Circular economy (CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered
assets funding taxonomy relevant
sectors (Taxonomy-aligned)
Water and marine resource s (WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered
assets funding taxonomy relevant
sectors (Taxonomy-aligned)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Pollution (PPC)
Biodiversity and Ecosyste ms (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Climate Change Mitigation (CCM)
Biodiversity and Ecosyste ms (BIO)
Pollution (PPC)
% (compared to total covered assets in the denominator)
Disclosure reference date 31.12.2024
Proportio
n of total
assets
covered
Proportion
of total
assets
covered
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
3. GAR KPI stock based on capex
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af ag ah ai aj ak al am an ao ap aq ar as at au av aw ax ay az ba bb bc bd be bf bg bh bi bj bk
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
Of which
specialised
lending
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of
which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of
which
enabling
GAR - Covere d assets in both numerator and denom inator
1
Loans and advances, debt securities and equity instruments
not HfT eligible for GAR calculation
70.1 0.03 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 70.1 0.03 0 0 0 51.1 73.5 0.1 0 0 0 0 0 0 0 73.5 0.1 0 0 0 53.5
2
Financial undertakings
0.4 0.001 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0.001 0 0 0 4.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5
3 Credit institutions 23.8 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 23.8 0.1 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 Debt securities, including UoP 23.8 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 23.8 0.1 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1
6 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0001 0 0 0 0 0 0 0 0 0 0 0 0.0001
7 Other financial corporations 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5
8 of which investment firms 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004
9 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004
10
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
11 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
12
of which management
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 d 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
13 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
14
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
15 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
16
of which insurance
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.0
17 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.004 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.001
18
Debt securities,
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.1
19 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.9 0 0 0 0 0 0 0 0 0 0 0 1.0
20
Non-financial undertakings
20.9 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20.9 0.2 0 0 0 9.2 30.0 0.5 0 0 0 0 0 0 0 30.0 0.5 0 0 0 8.6
21 Loans and advances 20.3 0.2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20.3 0.2 0 0 0 9.2 30.1 0.5 0 0 0 0 0 0 0 30.1 0.5 0 0 0 8.6
22 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
23 Equity instruments 100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0.1 0 0 0 0 0 0 0 0 0 0 0 0.03
24
Households
92.0 0 0 0 0 0 0 0 0 0 0 0 0 92.0 0 0 0 0 36.9 91.8 0 0 0 0 0 0 0 0 91.8 0 0 0 0 40.0
25
of which loans collateralised
by residential immovable
property
100 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 33.3 100.0 0 0 0 0 0 0 0 0 100 0 0 0 0 36.2
26
of which building renovation
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
27 of which motor vehicle loans 100 0 0 0 0 100 0 0 0 0 0.6 100.0 0 0 0 0 100 0 0 0 0 0.5
28
Local governm ents financing
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4
29 Housing financing 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0 0 0 0 0 0 0 0 0 0.0 0 0 0 0 0.0
30
Other local government
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4
31
Collateral obtained by taking possession:
residential and com me rcial imm ovable
100 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 0 0 0 0 0.004 100.0 0 0 0 0 0 0 0 0 100 0 0 0 0 0.005
32 Total GAR asse ts 44.0 0.02 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 44.0 0.02 0 0 0 81.6 47.9 0.05 0 0 0 0 0 0 0 47.9 0.05 0 0 0 82.1
% (compared to total covered assets in the denominator)
Disclosure reference date 31.12.2025
Disclosure reference date 31.12.2024
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resource s (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosyste ms (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-eligible)
Proportion
of total
assets
covered
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resource s (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosyste ms (BIO)
Proportion
of total
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered
assets funding taxonomy
relevant sectors (Taxonomy-
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
4. GAR KPI flow based on turnover
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and denominator
1
Loans and advances, debt securities and equity instruments not
HfT eligible for GAR calculation
-2.2 -0.009 0 0 0 0 0 0 0 -2.2 -0.009 0 0 0 23.7
2
Financial undertakings
4.4 0.005 0 0 0 0 0 0 0 4.4 0.005 0 0 0 6.0
3 Credit institutions 79.5 0.08 0 0 0 0 0 0 0 79.5 0.08 0 0 0 0.3
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 Debt securities, including UoP 79.4 0.08 0 0 0 0 0 0 0 79.4 0.08
0
0 0 0.3
6 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
7 Other financial corporations 0 0 0 0 0 0 0 0 0 0 0
0
0 0 5.6
8 of which investment firms 0 0 0 0 0 0 0 0 0 0 0
0
0 0 2.3
9 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 2.3
10 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
11 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
12 of which management companies 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
13 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
14 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
15 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
16 of which insurance undertakings 0 0 0 0 0 0 0 0 0 0 0
0
0 0 -0.2
17 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0.05
18 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0.03
19 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 -0.3
20
Non-financial undertakings
-18.0 -0.02 0 0 0 0 0 0 0 -18.0 -0.02
0
0 0 16.1
21 Loans and advances -20.1 -0.02 0 0 0 0 0 0 0 -20.1 -0.02
0
0 0 15.6
22 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0.0 0
0
0 0 0
23 Equity instruments 52.4 0 0 0 0 0 0 52.4 0 0 0 0.5
24
Households
299.8 0 0 0 0 0 0 0 0 299.8 0
0
0 0 0.7
25
of which loans collateralised by residential
immovable property
100 0 0 0 0 0 0 0 0 100 0
0
0 0 -0.4
26 of which building renovation loans 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
27 of which motor vehicle loans 100 0 0 0 0 100 0
0
0 0 2.1
28
Local governments financing
0 0 0 0 0 0 0 0 0 0 0
0
0 0 1.0
29 Housing financing 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
30 Other local government financing 0 0 0 0 0 0 0 0 0 0 0
0
0 0 1.0
31
Collateral obtained by taking possession:
residential and commercial immovable properties
100 0 0 0 0 0 0 0 0 100 0 0 0 0 -0.04
32 Total GAR assets -0.7 -0.003 0 0 0 0 0 0 0 -0.7 -0.003
0
0 0 76.8
Climate Change Adaptation (CCA)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Water and marine resources (WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
% (compared to flow of total eligible assets)
Disclosure reference date 31.12.2025
Climate Change Mitigation (CCM)
Biodiversity and Ecosystems (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion
of total
new
assets
covered
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Pollution (PPC)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-
eligible)
Proportion of total covered assets
funding taxonomy relevant
sectors (Taxonomy-aligned)
Circular economy (CE)
4. GAR KPI flow based on capex
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae af
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
GAR - Covered assets in both numerator and denominator
1
Loans and advances, debt securities and equity instruments not
HfT eligible for GAR calculation
-13.4 -1.1 0 0 0 0 0 0 0 -13.4 -1.1 0 0 0 23.7
2
Financial undertakings
4.1 0.01 0 0 0 0 0 0 0 4.1 0.010 0 0 0 6.0
3 Credit institutions 74.6 0.2 0 0 0 0 0 0 0 74.6 0.2 0 0 0 0.3
4 Loans and advances 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
5 Debt securities, including UoP 74.5 0.2 0 0 0 0 0 0 0 74.5 0.2
0
0 0 0.3
6 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
7 Other financial corporations 0 0 0 0 0 0 0 0 0 0 0
0
0 0 5.6
8 of which investment firms 0 0 0 0 0 0 0 0 0 0 0
0
0 0 2.3
9 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 2.3
10 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
11 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
12 of which management companies 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
13 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
14 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
15 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 0
16 of which insurance undertakings 0 0 0 0 0 0 0 0 0 0 0
0
0 0 -0.2
17 Loans and advances 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0.05
18 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0.03
19 Equity instruments 0 0 0 0 0 0 0 0 0 0 0 -0.3
20
Non-financial undertakings
-34.4 -1.6 0 0 0 0 0 0 0 -34.4 -1.6
0
0 0 16.1
21 Loans and advances -40.7 -1.7 0 0 0 0 0 0 0 -40.7 -1.7
0
0 0 15.6
22 Debt securities, including UoP 0 0 0 0 0 0 0 0 0 0.0 0
0
0 0 0
23 Equity instruments 180.6 0 0 0 0 0 0 180.6 0 0 0 0.5
24
Households
299.8 0 0 0 0 0 0 0 0 299.8 0
0
0 0 0.7
25
of which loans collateralised by residential
immovable property
100 0 0 0 0 0 0 0 0 100 0
0
0 0 -0.4
26 of which building renovation loans 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
27 of which motor vehicle loans 100 0 0 0 0 100 0
0
0 0 2.1
28
Local governments financing
0 0 0 0 0 0 0 0 0 0 0
0
0 0 1.0
29 Housing financing 0 0 0 0 0 0 0 0 0 0 0
0
0 0 0
30 Other local government financing 0 0 0 0 0 0 0 0 0 0 0
0
0 0 1.0
31
Collateral obtained by taking possession:
residential and commercial immovable properties
100 0 0 0 0 0 0 0 0 100 0
0
0 0 -0.01
32 Total GAR assets -4.2 -0.3 0 0 0 0 0 0 0 -4.2 -0.3
0
0 0 76.8
% (compared to flow of total eligible assets)
Disclosure reference date 31.12.2025
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resources (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosystems (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion
of total
new
assets
covered
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-aligned)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
5. KPI off-balance sheet exposures based on turnover
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 1.9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.9 0 0 0 0
2 Assets under management (AuM KPI) 7.2 1.4 0 0.01 0.2 0.3 0.2 0 0.03 0.00002 0 0 0 0.02 0.002 0 0 0.04 0 0 0 0 0 0 0 7.6 1.5 0 0.01 0.2
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Water and marine resources (WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Climate Change Adaptation (CCA)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
% (compared to total eligible off-balance sheet assets)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Climate Change Mitigation (CCM)
Biodiversity and Ecosystems (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Disclosure reference date 31.12.2025
Pollution (PPC)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Circular economy (CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
5. KPI off-balance sheet exposures based on capex
a b c d e f g h i j k l m n o p q r s t u v w x z aa ab ac ad ae
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
enabling
Of which
Use of
Proceeds
Of which
transitional
Of which
enabling
1 Financial guarantees (FinGuar KPI) 3.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3.0 0 0 0 0
2 Assets under management (AuM KPI) 7.9 1.4 0 0.02 0.2 1.1 1.0 0 0.2 0.0 0 0 0 0.01 0.0001 0 0 0.02 0 0 0 0 0 0 0 9.0 2.4 0 0.02 0.3
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
% (compared to total eligible off-balance sheet assets)
Disclosure reference date 31.12.2025
Climate Change Mitigation (CCM)
Climate Change Adaptation (CCA)
Water and marine resources (WTR)
Circular economy (CE)
Pollution (PPC)
Biodiversity and Ecosystems (BIO)
TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Proportion of total covered assets funding taxonomy relevant
sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomy-eligible)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets funding taxonomy
relevant sectors (Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Proportion of total covered assets
funding taxonomy relevant sectors
(Taxonomy-aligned)
Row
1.
The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity
generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.
NO
2.
The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity
or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety
upgrades, using best available technologies.
NO
3.
The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process
heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as
their safety upgrades.
NO
4.
The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity
using fossil gaseous fuels.
NO
4.
The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power
generation facilities using fossil gaseous fuels.
NO
6.
The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce
heat/cool using fossil gaseous fuels.
NO
Template 1 Nuclear and fossil gas related activities
Nuclear energy related activities
Fossil gas related activities
Template 2 Taxonomy-aligned economic activities (denominator) - based on turnover
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the
applicable KPI
0.4 0.00003 0.4 0.00003
8.
Total applicable KPI
0.4 0.00003 0.4 0.00003
Row
Economic activities Million ISK
Amount and proportion (the information is to be presented
in monetary amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Template 2 Taxonomy-aligned economic activities (denominator) - based on capex
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the denominator of the
applicable KPI
282 0.02 282 0.02
8.
Total applicable KPI
282 0.02 282 0.02
Row
Economic activities Million ISK
Amount and proportion (the information is to be presented
in monetary amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Template 3 Taxonomy-aligned economic activities (numerator) - based on turnover
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
2.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
3.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
4.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
5.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
6.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
7.
Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the numerator of the applicable
KPI
0.4 100 0.4 100
8.
Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI
0.4 100 0.4 100
Row
Economic activities Million ISK
Amount and proportion (the information is to be presented in
monetary amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Template 3 Taxonomy-aligned economic activities (numerator) - based on capex
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
2.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
3.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
4.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
5.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
6.
Amount and proportion of taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to Delegated Regulation
2021/2139 in the numerator of the applicable KPI
7.
Amount and proportion of other taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the numerator of the
applicable KPI
282 100 282 100
8.
Total amount and proportion of taxonomy-aligned economic activities in the numerator of the applicable KPI
282 100 282 100
Row
Economic activities Million ISK
Amount and proportion (the information is to be presented
in monetary amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Template 4 Taxonomy-eligible but not taxonomy-aligned economic activities - based on turnover
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the
denominator of the applicable KPI
609,542 100 609,542 100
8.
Total amount and proportion of taxonomy eligible but not taxonomy-aligned economic activities in the denominator of the applicable KPI
609,542 100 609,542 100
Row
Economic activities Million ISK
Proportion (the information is to be presented in monetary
amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adapation (CCA)
Template 4 Taxonomy-eligible but not taxonomy-aligned economic activities - based on capex
Amount % Amount % Amount %
1.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I and II to
Delegated Regulation 2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6 above in the
denominator of the applicable KPI
609,542 100 609,542 100
8.
Total amount and proportion of taxonomy eligible but not taxonomy-aligned economic activities in the denominator of the applicable KPI
609,542 100 609,542 100
Row
Economic activities Million ISK
Proportion (the information is to be presented in monetary
amounts and as percentages)
CCM + CCA
Climate change
mitigation (CCM)
Climate change
adaptation (CCA)
Template 5 Taxonomy non-eligible economic activities - based on turnover
Row Economic activities Million ISK Amount %
1.
Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of economic activity referred to in row 2 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.27
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of economic activity referred to in row 3 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.28
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of economic activity referred to in row 4 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.29
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of economic activity referred to in row 5 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.30
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of economic activity referred to in row 6 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.31
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the
applicable KPI
808,102 57.0
8.
Total amount and proportion of taxonomy eligible but not taxonomy-aligned economic activities in the denominator of the applicable KPI
808,102 57.0
Template 5 Taxonomy non-eligible economic activities - based on CAPEX
Row Economic activities Million ISK Amount %
1.
Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
2.
Amount and proportion of economic activity referred to in row 2 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.27
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
3.
Amount and proportion of economic activity referred to in row 3 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.28
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
4.
Amount and proportion of economic activity referred to in row 4 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.29
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
5.
Amount and proportion of economic activity referred to in row 5 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.30
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
6.
Amount and proportion of economic activity referred to in row 6 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.31
of Annexes I and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
7.
Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the
applicable KPI
793,988 56.0
8.
Total amount and proportion of taxonomy eligible but not taxonomy-aligned economic activities in the denominator of the applicable KPI
793,988 56.0
Arion Bank
Borgartun 19
105 Reykjavik
Iceland
Id.: 581008-0150
RIL4VBPDB0M7Z3KXSF192025-01-012025-12-31RIL4VBPDB0M7Z3KXSF192024-01-012024-12-31RIL4VBPDB0M7Z3KXSF192025-12-31RIL4VBPDB0M7Z3KXSF192024-12-31RIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:IssuedCapitalMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:IssuedCapitalMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:IssuedCapitalMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:SharePremiumMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:SharePremiumMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:SharePremiumMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:ReserveOfSharebasedPaymentsMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:ReserveOfSharebasedPaymentsMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:ReserveOfSharebasedPaymentsMemberRIL4VBPDB0M7Z3KXSF192024-12-31ARI:ReserveOfUnrealisedProfitLossFromSubsidiariesAndAssociatesMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ARI:ReserveOfUnrealisedProfitLossFromSubsidiariesAndAssociatesMemberRIL4VBPDB0M7Z3KXSF192025-12-31ARI:ReserveOfUnrealisedProfitLossFromSubsidiariesAndAssociatesMemberRIL4VBPDB0M7Z3KXSF192024-12-31ARI:ReserveOfUnrealisedProfitLossFromSecuritiesMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ARI:ReserveOfUnrealisedProfitLossFromSecuritiesMemberRIL4VBPDB0M7Z3KXSF192025-12-31ARI:ReserveOfUnrealisedProfitLossFromSecuritiesMemberRIL4VBPDB0M7Z3KXSF192024-12-31ARI:ReserveOfDevelopmentExpenseMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ARI:ReserveOfDevelopmentExpenseMemberRIL4VBPDB0M7Z3KXSF192025-12-31ARI:ReserveOfDevelopmentExpenseMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:StatutoryReserveMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:StatutoryReserveMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:StatutoryReserveMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:RetainedEarningsMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:RetainedEarningsMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:RetainedEarningsMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:NoncontrollingInterestsMemberRIL4VBPDB0M7Z3KXSF192025-01-012025-12-31ifrs-full:NoncontrollingInterestsMemberRIL4VBPDB0M7Z3KXSF192025-12-31ifrs-full:NoncontrollingInterestsMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:IssuedCapitalMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:IssuedCapitalMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:SharePremiumMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:SharePremiumMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:ReserveOfSharebasedPaymentsMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:ReserveOfSharebasedPaymentsMemberRIL4VBPDB0M7Z3KXSF192023-12-31ARI:ReserveOfUnrealisedProfitLossFromSubsidiariesAndAssociatesMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ARI:ReserveOfUnrealisedProfitLossFromSubsidiariesAndAssociatesMemberRIL4VBPDB0M7Z3KXSF192023-12-31ARI:ReserveOfUnrealisedProfitLossFromSecuritiesMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ARI:ReserveOfUnrealisedProfitLossFromSecuritiesMemberRIL4VBPDB0M7Z3KXSF192023-12-31ARI:ReserveOfDevelopmentExpenseMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ARI:ReserveOfDevelopmentExpenseMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:WarrantReserveMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:WarrantReserveMemberRIL4VBPDB0M7Z3KXSF192024-12-31ifrs-full:WarrantReserveMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:StatutoryReserveMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:StatutoryReserveMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:RetainedEarningsMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:RetainedEarningsMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberRIL4VBPDB0M7Z3KXSF192023-12-31ifrs-full:NoncontrollingInterestsMemberRIL4VBPDB0M7Z3KXSF192024-01-012024-12-31ifrs-full:NoncontrollingInterestsMemberRIL4VBPDB0M7Z3KXSF192023-12-31iso4217:ISKiso4217:ISKxbrli:shares