A stable, well-functioning financial market for allA stable, well-functioning financial market for allFI reiterates its statement from the June 22 on Nordea
FI hereby clarifies that its public statement made on June 22, regarding the internal analysis which was unintendedly published in the media last week, is still valid:
- The memorandum's assertion that the potential need for additional capital would be in the range of SEK 50-80 billion is based on two central assumptions – one regarding the relationship between actual defaults and estimated probabilities of default (PD) and one regarding the size of the security margin. It was noted in the memorandum that the percentage of actual defaults was higher than what was predicted by the model's PD estimates over a period of several years. According to the current regulations, the PD estimates should be based on long-term averages, but the memorandum made the assessment that the current period did not appear to have been obviously stressed for any of the Nordic countries. The analysis then conducted a sensitivity analysis of how the capital need would change if the PD estimate were raised to the actual frequency of defaults and a certain security margin were added. In other words, the analysis highlights what could be a deficiency in how Nordea estimated its risk of default for exposures to corporates, which needs to be investigated in more detail.
- However, it is not possible to draw a conclusion solely from this analysis about the existence or size of any deficiencies in the model. FI would need to investigate whether all of the assumptions that serve as the basis for the PD estimates still apply before it could draw such a conclusion. This type of analysis is complex and time-consuming. For example, it would require the analysis of business cycle and default trends in each of the Nordic countries during the time period in question.
- Given the information that FI has gathered to date in its investigation, and given the uncertainty about several of the assumptions that were made in the original analysis, FI makes the assessment that any additional capital requirements will be significantly lower than what was stated in the memorandum.
