A stable, well-functioning financial market for allA stable, well-functioning financial market for allFI’s view on more flexible rules for calculating capital requirements for credit risk
Finansinspektionen has published a memorandum clarifying its expectations on banks’ application of internal models to calculate capital requirements for credit risk. FI’s position is based on its experiences from previously performed model assessments and considering the greater flexibility that was introduced on 1 January of this year through amendments to the Capital Requirements Regulation (CRR3).
The implementation of CRR3 entails in part that banks currently applying internal credit risk models are given more flexibility to apply different methods for calculating risk-weighted exposure amounts for credit risk.
Over time, it has become apparent that the quality of the model applications FI has received has not been sufficient under current regulations. This can be a result of some types of exposures being particularly difficult to model. Given these challenges, FI views positively that the implementation of CRR3 allows banks greater possibilities for adapting their model creation to the conditions of each portfolio. At the same time, the regulatory framework is clear that a return to less advanced methods is not driven by regulatory arbitrage. The increased flexibility aims instead to allow for a more proportionate and risk-adapted application of internal models. In this way, resources and focus can target the portfolios where models are judged to reliably reflect risk. In this context, FI would like to underline that there will still be strict demands on quality and robust risk management, regardless of the method chosen.
