The Icelandic financial sector is still “teetering on the edge” despite investor sentiment seeming to have turned a corner in the past couple of weeks as the cost of insuring bank debt against default has dropped, while equities and the króna have each rebounded.

In a new report, analysts at Canada’s RBC Capital Markets wrote that while the “short-term situation” is less bleak than it has been, some “medium-term pain clearly lies ahead” given the questionable sustainability" of Icelandic banks’ business models.