The Swedish Financial Supervisory Authority (Finansinspektionen or FI) proposed an approach to assess the Pillar 2 guidance for Swedish banks. As part of the proposed two-step approach, FI will first conduct a sensitivity-based stress test that estimates the potential fall in capital levels at the bank, given a number of assumptions and methodology choices. The outcome of the stress test will be rounded off into intervals. Then, FI will consider other quantitative and qualitative grounds of assessment. The final Pillar 2 guidance will be determined after an overall assessment of both steps. Comments on the proposal may be submitted to FI no later than March 12, 2021.
As part of the implementation of the EU's new capital adequacy regulations in Sweden, FI may establish Pillar 2 guidance for each bank that is subject to the Capital Requirements Regulation (CRR). FI must assess an appropriate level for each bank's own funds to, for example, cover risks and manage future stress situations, in addition to the existing coverage from the minimum requirements, the additional own funds requirements, and the combined buffer requirement, or the requirement on a leverage ratio buffer. If FI determines that more capital is needed, this will be communicated to bank via the Pillar 2 guidance. In line with its previous communication, the authority makes the assessment that for most banks the guidance will amount to 1.0% to 1.5% of the risk-weighted assets and 0.2% to 0.5% of the exposure amount for the leverage ratio. FI intends to apply the new approach, starting with the Supervisory Review and Evaluation Process in 2021. The firms that are affected are those subject to the Credit Institutions and Securities Companies (Special Supervision) Act.
In addition, FI informed EBA that it intends to apply EBA guidelines on the appropriate subsets of sectoral exposures to which competent or designated authorities may apply a systemic risk buffer in accordance with Article 133(5)(f) of the Capital Requirements Directive IV (2013/36/EU). The guidelines suggest a common framework of dimensions and sub-dimensions from which the relevant authority can define a subset of exposures. EBA published the guidelines on September 30, 2020 and they became applicable from December 29, 2020. FI believes that EBA guidelines addressed to competent authorities or financial market players are to be equated with the Swedish general guidelines. Regulation 1093/2010 establishes that EBA requires competent authorities or financial market participants to seek to comply with these guidelines by all available means. As the ordinance has direct effect, FI will not issue its own general advice, but when FI deems it necessary, guidelines may be reworked into binding rules in the form of regulations.
Comment Due Date: March 12, 2021
Keywords: Europe, Sweden, Banking, Pillar 2, CRR, Basel, Stress Testing, Regulatory Capital, Systemic Risk Buffer, Sectoral Exposure, Systemic Risk, CRD, EBA, FI
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.