ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR). The measure entails the imposition of a minimum level (floor) of 25% for the exposure-weighted average risk-weight on retail exposures in Sweden secured by immovable property. This minimum risk-weight would applies to all domestic credit institutions using the internal ratings-based (IRB) approach. ESRB supports the intention of Swedish FSA to extend the application period for this measure for an additional year, as informed by the Swedish FSA in September 2020.
This measure has been in force since December 31, 2018 and is due to expire on December 31, 2020. The extension of this measure is intended to continue to address the risk of asset bubbles in the residential property sector, along with their potential spillover effects. This extension comes in the backdrop of the continued increase in vulnerabilities in the Swedish residential real estate market that are likely to amplify in the light of the adverse impact of the COVID-19 crisis. The ESRB assessment focuses on the net benefits of the national measure for maintaining financial stability. ESRB believes that the proposed extension of the measure does not contradict the overall aim of guaranteeing lending to the real economy throughout the aforementioned economic crisis. Clear communication in this respect is important, explaining to the public that the extension of the measure is consistent with other measures taken in response to the COVID-19 pandemic.
ESRB believes that the stricter measure is justified, proportionate, effective, and efficient, as it does not entail disproportionate adverse effects on the internal market or other national financial systems. ESRB also believes that the alternative macro-prudential instruments listed in CRR, which must be considered before any stricter national measure can be taken, would not be adequate to address the risks at hand. Such measures are considered to be inadequate, as they do not provide the intended incentives, are too broad-based, or do not address the risk to the same extent. ESRB also found that the measure. ESRB highlighted that the effectiveness of this measure will depend on the extent to which it will continue to be reciprocated by other member states with credit institutions active in the Swedish residential mortgage market. ESRB also highlighted that the measure should be reconsidered once the implications of the COVID-19 pandemic on the Swedish residential real estate market and on the indebtedness of households become clearer. Finally, ESRB believes that the issues raised in its assessment of the original measure require continued follow-up by the Swedish authorities to ensure the effectiveness of the measure and avoid unwarranted consequences.
Keywords: Europe, Sweden, Banking, COVID-10, CRR, Credit Risk, Residential Real Estate, IRB Approach, Swedish FSA, Opinion, RRE, Macro-Prudential Policy, Basel, Regulatory Capital, ESRB
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.