EBA Issues Opinion on Extension of Swedish Macro-Prudential Measure
The European Banking Authority (EBA) published an opinion in response to a notification of the Swedish Financial Supervisory Authority (Finansinspektionen or FI) on its intention to extend a regulatory measure. This measure, which was originally introduced in 2018 and extended in 2020, entails a credit institution-specific minimum level of 25% for the average risk-weight on Swedish housing loans applicable to Swedish credit institutions that have adopted the internal ratings-based (IRB) approach. In its Opinion—which is addressed to the European Council, the European Commission, and the Swedish Authorities and is based on the evidence submitted—EBA does not object to the two-year extension of the application period for this measure.
This risk-weight floor is intended to capture the credit loss risk of Swedish mortgages in a severe downturn scenario and to account for the broader systemic risks that could arise from the Swedish mortgages of individual credit institutions. EBA emphasized that such a measure has been in place since 2014 in different forms. FI's concern on indebtedness and dynamics built up in the market has been articulated over many years and tends to be permanent and not cyclical. EBA invites FI to reassess the rationale for the measure in light of the currently available and forthcoming instruments, which could be more targeted to, or compensate for, the risk as it appears to be a structural feature of the Swedish housing market. EBA also expressed a concern that the design of the risk-weight floor includes all retail exposures secured by real estate, for both small and medium enterprises (SMEs) and non-SMEs. The inclusion of SME exposures secured by real estate can be inferred from the reference to COREP and the rationale for this requires more explanation. EBA opines that it is important to monitor the impact of this measure on lending to SMEs and to intervene in the event that there are unintended consequences. EBA strongly encourages FI to undertake a comprehensive and thorough assessment in respect of the underlying causes and drivers. In its Opinion, EBA takes note of the FI concerns regarding systemic risk for the housing market and welcomes the ongoing review of IRB models through bottom-up repair measures and acknowledges the time horizon for carrying out such work.
Related Links
Keywords: Europe, EU, Sweden, Banking, Regulatory Capital, Systemic Risk, Pillar 2, Macro-Prudential Policy, IRB Approach, Credit Risk, Basel, Lending, SMEs, EBA
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 Reviews Data on Mortgage PrisonersNext Article
EBA Proposes to Amend Open Standards Under PSD2Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
BIS Bulletins Discuss DeFi Lending and Aspects of Crypto-Assets
The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.