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    FI on Capital Rules for Banks and Reporting Rules for Investment Firms

    August 25, 2021

    The Swedish Financial Supervisory Authority (FI) issued new regulations on reporting requirements for investment firms, in accordance with the Investment Firms Regulation and Directive (IFR and IFD). FI will inform when test reporting in the new reporting portal Fidac will be possible. In addition, FI published the capital requirements of the largest Swedish banks and credit institutions that belong to the supervisory categories 1 and 2 as of the end of the second quarter of 2021. The capital requirements have been published for Handelsbanken, SEB, Swedbank, Landshypotek, Länsförsäkringar, Kommuninvest, Svensk Exportkredit (SEK), SBAB, Skandiabanken, Avanza, Nordnet, and Sparbanken Skåne.

    At the end of 2020, new rules were introduced, which change the application of capital requirements going forward. The risk assessments and the accompanying capital requirements and liquidity requirements determined during the Supervisory Review and Evaluation Process (SREP) of FI apply until the new SREP decisions are made under the new regulation. The following capital requirements apply in the second quarter of 2021:

    • The capital allocation for Pillar 2 additional own funds requirements for concentration risk, interest rate risk, and additional market risk and pension risk shall comply with the main rule introduced in Chapter 2, section 1a of the Supervision Act.
    • For other Pillar 2 additional own fund requirements, the capital allocation in the SREP decisions applies until further notice.
    • For three major banks (Handelsbanken, SEB, and Swedbank), the 2% additional requirement for systemic risk in pillar 2 has been removed, other systemically important institutions (O-SII) buffer has been changed to 1%, and systemic risk buffer is 3%.
    • As of March 16, 2020, Sweden applies a countercyclical buffer of 0%.

    FI also announced that the recommendation regarding restrictions on dividend distribution will not be further extended and will expire on September 30, 2021. Since the uncertainty regarding the Swedish economy due to the pandemic has decreased, it is reasonable to now remove the recommendation. This means that FI will return to the normal supervision procedure for assessing the risks and capital needs of banks. The banks' boards of directors bear responsibility for assessing the capital buffers banks should hold over and above the capital requirements set by FI and propose dividends to their annual general meetings given these capital requirements. Considering a combination of the remaining systemic risks and the economic recovery, FI will raise the countercyclical capital buffer in 2021; this was communicated in the stability report at the beginning of June and is something that the banks must take into account.

     

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    Keywords: Europe, Sweden, Banking, Investment Firms, IFR, IFD, Reporting, Test Environment, FIDAC, Regulatory Capital, Basel, Pillar 2, SREP, Systemic Risk Buffer, O-SII Buffer, CCyB, Dividend Distribution, FI

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