Liquidity coverage ratio requirements and diversification of the liquidity buffer

FI presents its view on the specific requirements for liquidity coverage ratios in individual currencies. The authority also provides its interpretation of the diversification requirement on the liquidity buffer’s composition for Swedish covered bonds. FI will apply this approach to its supervision of banks belonging to Supervision Categories 1 and 2 on 1 October 2019.

Since 1 January 2018, the European Commission's Delegated regulation on the LCR rate (the LCR Regulation) applies at an aggregate currency level of 100 per cent within the entire EU. The same regulation sets out general requirements concerning the liquidity buffer's composition of currencies and operational requirements regarding diversification of liquid assets in the liquidity buffer.

FI will also continue to apply the previously communicated requirement that banks in Supervision Categories 1 and 2 comply with a liquidity coverage ratio in EUR and USD that each amount to at least 100 per cent, provided that these currencies are significant for the bank in question. FI will also be applying a liquidity coverage ratio requirement of at least 75 per cent for every other individual currency, including SEK, provided that the currency is significant for the bank in question.

According to the diversification requirement in the LCR Regulation, holdings of liquid assets that constitute a bank's liquidity buffer must always be appropriately diversified. FI interprets this diversification requirement to mean, among other things, that the share of covered bonds issued by Swedish issuers that may be included in the liquidity buffer may amount to a maximum of 50 per cent of the total liquidity buffer when calculating the liquidity coverage ratio.

A proposal in the form of a consultation memorandum was remitted on 5 March 2019. FI has now considered the consultation feedback and presents its positions and their grounds in this decision memorandum. This decisions memorandum replaces the memorandum "FI:s pelare 2-krav på likviditetstäckningskvot i enskilda valuator" (FI Ref. 17-12809) that was published on 19 April 2018 (in Swedish only).

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