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SEB temporarily subject to higher capital requirements due to model deficiencies
Finansinspektionen (FI) has decided to impose a temporary add-on to SEB’s capital requirements. This follows FI’s identification of more extensive deficiencies related to SEB’s internal credit risk models than previously known. The add-on aims to mitigate the consequences of the model deficiencies until they are remedied.
Capital requirements specify a minimum amount of financial loss-absorbing capacity that a bank must hold to be able to withstand, among other things, unexpected credit losses. Capital requirements are calculated by multiplying a percentage requirement by the bank’s exposures, adjusted for the risk of those exposures.
Under EU-wide rules, the starting point is a standardised approach for determining banks’ capital requirements. Banks may also apply for approval to use their own models for these calculations, known as internal models. It is FI that decides whether a bank may use internal models.
FI has reviewed SEB’s internal models
Since 2007, SEB has been authorized to use internal models to calculate the capital requirements for its credit risk. FI reviewed SEB’s internal models in 2023 and found at that time that these models had deficiencies. FI therefore decided in September 2023 to impose a temporary add-on to the capital requirements of the bank. Other banks were also subject to add-ons for model deficiencies.
During 2026, FI conducted a broader review of SEB’s internal models for corporate exposures and loans that are not exposures to households or the public sector. The review shows that the deficiencies in SEB’s internal models are more extensive than previously identified. As a result, the calculations underlying the determination of capital requirements do not meet the regulatory requirements, and it is expected to take time before the bank has remedied them.
Temporary higher capital requirements and action programme
According to the regulation, FI must act to mitigate the consequences of such model deficiencies until they are remedied. FI has therefore decided to impose an additional temporary add-on to SEB’s capital requirements. The measure reduces the risk that capital requirements do not fully reflect what they should. It also counters the risk that, while the deficiencies persist, the bank enjoys an advantage to which it is not entitled, which could distort competition.
The existing add-on that SEB has had since 2023 means that SEB’s core Tier 1 capital requirement is approximately SEK 10 billion higher than it would otherwise have been. As a result of the measure now decided, the core Tier 1 capital requirement increases by a further approximately SEK 10 billion. As of 30 June 2026, SEB’s core Tier 1 capital requirement amounted to SEK 154 billion.
The new add-on is structured as a floor to the risk exposure amounts of the affected models. In total, including the previous add-on, the bank’s total risk exposure amount increases by approximately 15 percent. The add-on in force since 2023 constitutes around half of that. SEB shall apply the new floors with effect from 31 December 2026.
SEB has an action programme to remedy all deficiencies. FI will closely monitor the bank’s work on delivering on the action programme. The capital requirement add-on shall remain in place until SEB implements model changes approved by FI that remedy the deficiencies.
