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Credit rating agency Moody's Investors Service has cut the outlook on Iceland's rating to negative from stable. The diminution was a response to a recent Supreme Court ruling on the illegality of foreign-exchange-linked loans and concerns surrounding Internet bank Icesave.

"The magnitude of the banking system losses that will result from the recent court ruling is not known at this time but it is clear that Iceland still faces significant risks to its economic and financial recovery," said Kathrin Muehlbronner, a Moody's vice president and lead analyst for Iceland.