Featured Product

    FI Proposes Approach to Assess Pillar 2 Guidance for Swedish Banks

    February 15, 2021

    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. 

     

    Related Links

    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

    Featured Experts
    Related Articles
    News

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News
    News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News
    News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News
    News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News
    News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News
    News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News
    News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    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.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    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.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    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.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938