To mitigate the impact of COVID-19 pandemic, FIN-FSA Board decided to remove the systemic risk buffer for Finnish credit institutions and to lower the other systemically important institutions (O-SII) buffer in the case of OP Financial Group. Furthermore, the Board decided that it will not set a countercyclical capital buffer (CCyB) requirement for banks and other credit institutions and that the loan cap for residential mortgage loans will remain at 85%. Additionally, FIN-FSA allowed an additional period of one month for certain April and May reports under the FINREP and COREP frameworks. FIN-FSA recommends that credit institutions should not pay or undertake to pay dividends or any other distribution of profit until October 01, 2020 for the financial years 2019 and 2020. FIN-FSA also notified that it will comply with the EBA guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis.
Removing Additional Capital Requirements
At its meeting of April 06, 2020, the Board of the FIN-FSA decided to remove systemic risk buffer from Nordea Group, OP Financial Group, Municipality Finance Plc, Aktia Bank Plc, Danske Mortgage Bank Plc, Evli Bank Plc, Handelsbanken Finance Plc, Oma Savings Bank Plc, POP Bank Group, S-Bank Ltd, Mortgage Society of Finland Group, Savings Banks Group, and Bank of Åland Plc. FIN-FSA will closely monitor that banks use the positive effects of these measures to mitigate the impact of the crisis and not to channel them into the payment of dividends or performance bonuses.
Changes to Reporting Schedule
FIN-FSA has allowed an additional period of one month for certain reports, including FINREP F Tables, COREP OF, COREP LR, COREP LE, COREP NSFR, Interest Rate Risk Report, and Capital Adequacy Report. However, liquidity reports, including COREP LCR and COREP ALM (monthly and quarterly), need to be reported according to their original schedule.
Recommendation on Dividend Distributions
FIN-FSA recommends that proposals already made by boards of directors of credit institutions for the distribution of dividends for the 2019 financial year to a decision-making body may be maintained, but the proposals should be amended to postpone the dividend distribution to a date after October 01, 2020. Alternatively, a proposal can be made to transfer the profit for financial year 2019 to retained earnings and a commitment made to a possible distribution of reserves subject to the reassessment of the situation once the uncertainties caused by COVID-19 pandemic have disappeared (and, in any case, not before October 01, 2020).
If the credit institution decides on a distribution of dividends in line with a proposal of the board of directors but postpones the dividend payment, the amount of dividends proposed shall be deducted from the profit for financial year 2019 and from common equity tier 1 (CET1) capital. If, on the other hand, the credit institution decides to transfer the profit for financial year 2019 to retained earnings, the profit for the financial year can be included in CET1 in financial year 2020. If the uncertainties are later estimated to have disappeared and the credit institution distributes a dividend, the dividend distribution shall be deducted from CET1.
If the board of directors of the credit institution has made a dividend distribution proposal where a dividend is distributed only after October 01, 2020 on the condition that an assessment has been made that the uncertainties caused by the pandemic have disappeared, the credit institution may disregard the dividend distribution completely and refrain from excluding it from CET1 in the above mentioned interim periods when calculating the amount of profit to be included in CET1. Credit institutions should also refrain from repurchasing or redeeming shares or units for the purpose of distributing profits.
- Press Release on Additional Capital Requirements
- Press Release on Capital Requirements
- Press Release on Changes to Reporting Schedule
- Press Release on Dividend Distribution
- Press Release on Moratoria on Loan Repayments
Keywords: Europe, Finland, Banking, COVID-19, Macro-Prudential Measures, Dividend Distribution, Deadline Extension, Reporting, COREP, FINREP, LCR, NSFR, Liquidity Risk, Regulatory Capital, FIN-FSA
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.