The Swedish Financial Supervisory Authority (FI) has decided not to extend the recommendation on restrictions on dividend payments and share repurchases by banks, as the Swedish economy is in a clear recovery phase. The recommendation expires on September 30, 2021. This means that FI returns to the normal supervisory process for assessing the risks and capital requirements of banks. Additionally, FI has decided to increase the countercyclical capital buffer, or CCyB, value from 0% to 1% from September 29, 2022.
FI had reduced the countercyclical buffer value from 2.5% to 0% in March 2020, due to the economic uncertainty associated with the outbreak of the COVID-19 pandemic. FI has decided to increase the CCyB buffer since the situation continues to improve and the risks of large credit losses at banks have decreased. In addition, the rise in asset prices and housing prices, together with rising household debt, point to increased risks in the financial system, thus indicating a need for capital buffers. An implementation period of 12 months means that the new value will begin to be applied on September 29, 2022. FI aims to gradually increase the buffer value to 2% in 2022 if the economic recovery continues, credit losses are low, and banks can meet the demand for credit. If the risks associated with asset markets and indebtedness remain, FI may subsequently increase the buffer value even further. Additionally, a new decision-making procedure will be introduced from now on for the CCyB, resulting in the repeal of the regulations on countercyclical buffer value and replacing them with special decisions.
Keywords: Europe, Finland, Banking, CCyB, Regulatory Capital, Dividend Distribution, Basel, COVID-19, Macro-Prudential Policy, FI
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