June 29, 2018

The Board of the Finnish Financial Supervisory Authority (FIN-FSA) has decided to impose, on credit institutions, a structural additional capital requirement in the form of the systemic risk buffer. The buffer will strengthen the risk absorbency of credit institutions for structural systemic risks. It will be imposed on Nordea at a level of 3.0%, on Op Group at 2.0%, on Municipality Finance Plc at 1.5%, and on other Finnish credit institutions at 1.0%.

For Nordea, OP Group, and Municipality Finance Plc, the systemic risk buffer has been set higher than the others because their contribution to systemic risks is particularly large and their notional impact on the indicators examined as justification for a systemic risk buffer is substantial. Marja Nykänen, Chair of the Board of the FIN-FSA, says that the structural systemic risks are so high in the financial system in Finland that it is justified to impose a systemic risk buffer on all credit institutions.  In addition to the systemic risk buffer, the additional capital requirements for global (G-SII/B) and national (O-SII) systemically important credit institutions were reviewed.

The decision was made to identify Nordea as a global systemically important credit institution (G-SII/B) and to impose on Nordea an additional capital requirement of 1.0%. The decision complies with the recommendation of FSB. FIN-FSA has identified the systemically significant credit institution for Finland (O-SIIs) and has imposed on them additional capital requirements as follows: Nordea 2.0%, OP Group 2.0%, and Municipality Finance Plc 0.5%. Of the additional capital requirements imposed, only the highest (in this case the systemic risk buffer) are obligatory. Within the banking union, the level of the tsystemic risk buffer has currently been set at 3% at most, even though a number of credit institutions operating in the banking union are, overall, larger and, from the perspective of the financial stability of the whole banking union, more significant than Nordea.

 

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Keywords: Europe, Finland, Banking, Systemic Risk Buffer, G-SIB, O-SII, ESAs, FIN-FSA

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