FI has decided on a change in the application of banks’ capital requirements

The banking package for risk mitigation measures amends the regulatory framework for capital adequacy and the management of banks in crisis. The objective is to strengthen the banks' resilience to crises and ensure that critical functions can be maintained during a crisis.

The capital requirement regulations are laid down in both a regulation (Capital Requirements Regulation) that is directly applicable in Sweden and a directive (Capital Requirements Directive) that is implemented into Swedish law through Swedish legislation and regulations. The Swedish legislative amendments have not yet been decided, but the proposals are presented in the bill "Ändringar i regelverket om kapitaltäckning" (Bill 2020/21:36).

FI published a consultation memorandum on 25 September. FI has considered and answered the responses to the consultation memorandum in the memorandum that is being published now.

This memorandum describes how FI intends to apply the capital requirements. It also describes some of the major amendments presented in the Capital Requirements Regulation and the proposed Swedish legislation. For example, the memorandum states that:

• FI will make formal decisions regarding Pillar 2 requirements for each individual bank
• the systemic risk buffer and the O-SII buffer will be cumulative
• FI will lower the O-SII buffer at group level for the three major banks from 2 to 1 per cent and maintain the systemic risk buffer for the major banks of 3 per cent
• a Pillar 2 guidance will be introduced
• a leverage ratio requirement will be introduced.

Entry into force

The date for when FI will start to apply the amendments and changes described in the memorandum to a large degree will be dependent on when the relevant legislative amendments enter into force. However, some changes will have an impact on the banks' capital requirement after the first supervisory review and evaluation process (SREP) that applies to the bank after the amended legislation has entered into force. FI intends to provide more information about the practical introduction during this transition period.

About EU's banking package

The banking package was adopted during the spring of 2019. The amendments to the regulatory framework implement reforms that governments, central banks and supervisory authorities agreed on at an international level within the Basel Committee for Banking Supervision and the Financial Stability Board after the most recent financial crisis.

In addition, the European Commission, based on the action plan to create a capital market union, has taken the initiative for additional changes in part to reduce unnecessary administrative burden and to handle the varying application of the regulatory framework by member states. The result is more harmonised EU regulations in the application of the tools that supervisory authorities use to determine the banks' capital requirements.