FI Issues Multiple Regulatory Updates and Financial Stability Report
The Swedish Financial Supervisory Authority (FI) decided to extend the risk-weight floor of 25% for Swedish mortgage exposures by two years, from December 31, 2021 to December 30, 2023. The decision applies to the firms that issue mortgages in Sweden and apply the internal ratings-based (IRB) approach for calculating risk-weighted exposure amounts for credit risk. FI also published the results of a survey on remuneration systems, noting that several banks and credit market companies have the scope to improve their remuneration policies and the application of certain other provisions in the remuneration regulations. In addition, it published the year's second financial stability report, which highlights that FI has removed the general possibility to receive an exemption from the amortization requirement and re-activated the countercyclical capital buffer for banks. FI has set the buffer at 1%, which goes into effect as of September next year. Additionally, FI published capital requirements for the largest Swedish banks and credit institutions that belong to supervisory categories 1 and 2 as of the end of the third quarter of 2021.
Capital Requirements for Banks
The capital requirements have been published for Handelsbanken, SEB, Swedbank, Länsförsäkringar, Klarna, Kommuninvest, Svensk Exportkredit (SEK), SBAB, Avanza, and Nordnet. However, Skandiabanken, Landshypotek, and Sparbanken Skåne have been excluded from this since they have been transferred from supervisory category 2 to 3 as of 2022. The capital requirements are based on the capital adequacy regulations, FI's application of the buffer requirements, and FI's latest review and evaluation of the firms. The most recent evaluation for SEB, SHB, Swedbank, SBAB, Nordnet, Kommuninvest, SEK, and Klarna was completed in September 2021. FI has decided on Pillar 2 requirements for these firms and communicated to them which level of Pillar 2 guidance that FI considers that these firms should keep. Länsförsäkringar and Avanza were evaluated in 2020 according to previous regulations. Consequently, the Pillar 2 requirements have not been formally decided and FI has not taken any position on Pillar 2 guidance for these companies.
Financial Stability Report
The financial stability report highlights that the economic recovery has been stronger than expected, in part as a result of powerful support measures. The support measures not only contributed to limiting bankruptcies and credit losses, but also encouraged high risk-taking and asset and housing prices. Thus, debt of households and commercial real estate firms has increased significantly, with commercial real estate firms having become more vulnerable during the pandemic. Within the commercial real estate sector, demand for both bank- and market-based financing continues to be high. Debt is increasing in relation to the commercial real estate companies' income and firms are more sensitive to interest rates. Increased vulnerabilities in the commercial real estate sector indicate that banks continue to need to hold large capital buffers. The Swedish corporate bond market continues to feature low market liquidity. In the presence of renewed stress on the financial markets, it may become difficult once again to trade securities and issue new financing. There is, therefore, a need for additional measures to create a more functional corporate bond market with higher resilience.
Related Links
- News Release on Extension of Risk Weight Floor
- Decision to Extend Risk-Weight Floor (PDF in Swedish)
- News Release on Financial Stability Report
- Financial Stability Report (PDF)
- News Release on Capital Requirements for Banks
- Capital Requirements for Banks (PDF)
- Notification on Remuneration Survey Results (in Swedish)
- Survey Results (PDF in Swedish)
Keywords: Europe, Sweden, Banking, CRR, Basel, Risk Weight Floor, Credit Risk, Financial Stability Report, CCyB, Regulatory Capital, Lending, CRE, Pillar 2 Guidance, FI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
FCA Finalizes Policy on Climate Disclosures of Regulated EntitiesRelated Articles
UK Authorities Consult on Implementation of Basel 3.1 Standards
The UK authorities have published consultations with respect to the Basel requirements for banks. The Prudential Regulation Authority (PRA) published the consultation paper CP16/22 on rules for the implementation of Basel 3.1 standards.
ESAs Issue Multiple Regulatory Updates for Financial Sector Entities
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
FSB and NGFS Publish Initial Findings from Climate Scenario Analyses
The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.
FSB Issues Reports on NBFI and Liquidity in Government Bonds
The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.
ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
EBA Finalizes Methodology for Stress Tests, Issues Other Updates
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
EU Finalizes Rules Under Crowdfunding Service Providers Regulation
The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.
OSFI Sets Out Work Priorities and Reporting Updates for Banks
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
APRA Finalizes Changes to Capital Framework, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
