Forthcoming capital requirements for Swedish banks

Today, FI describes how capital requirements for Swedish banks will be devised. The information pertains two capital requirements for systemic risks for the four major banks, considerations regarding the countercyclical capital buffer and the increase to the risk weight floor for Swedish mortgages.

On the whole, the information provided today describes a clear tightening of capital requirements for Swedish banks. The purpose is to create a more stable financial system which, in turn, generates positive effects on the economy.

The latest financial crisis led to a global agreement to strengthen banking systems. As part of the implementation of the agreement, the Government recently presented a bill regarding strengthened capital adequacy rules, in which it is proposed that FI decides on how several key capital requirements are to be devised. FI is now providing information about the forthcoming capital requirements.

At the end of 2011, FI, the Swedish Ministry of Finance and the Riksbank agreed to introduce higher capital requirements for systemically important banks – the so-called November Accord. In line with the agreement, FI has thus decided that the four major Swedish banks shall hold a systemic risk buffer of 3 per cent in common equity Tier 1 capital as of 1 January 2015 and a further 2 per cent in a common equity Tier 1 capital requirement within the framework of Pillar 2.

FI intends to activate the countercyclical capital buffer. The buffer is a capital requirement that varies over time and is to be used to support credit supply in down-turns. The level of the countercyclical capital buffer will be circulated for review after FI has consulted with the authorities of the Stability Council. A decision about the level is expected to be made in the autumn of 2014.

Household debt consists mainly of mortgages and is high both in a historical and an international perspective. In order to strengthen the resilience of the banks, FI will increase the risk weight floor for Swedish mortgages to 25 per cent from 15 per cent, as FI has already announced. The increase will start to apply as soon as FI's Board of Directors has come to a decision on the final version of this memorandum, which will take place in the autumn of 2014.

At 10 a.m. today, FI will hold a press conference at its offices, at which Deputy Director General Martin Noréus and senior advisor Karin Lundberg will present FI's positions. The press conference is only for representatives from the media, but will be broadcast live on FI's website.

Viewpoints and considerations on FI's positions may be submitted no later than 30 June by e-mail to finansinspektionen@fi.se.

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