Pillar 2 capital requirements for maturity assumptions

It is FI's view that the Pillar 1 rules for maturity assumptions under the IRB approach – which are based on contracted maturities – underestimate actual credit risk. FI has made the assessment that a method is needed to ensure that the capital requirements cover the full credit risk and also take into account stability risks.

In this memorandum FI presents its position on this matter, which can be summarised as follows:

• FI intends to introduce a floor for maturity assumptions of 2.5 years in the internal models for credit risk.
• FI intends to apply the maturity floor to banks that have received authorisation to use the advanced IRB approach. The intention is to use the floor for exposures to corporates, which will result in additional Pillar 2 capital requirements.
• FI intends to use the maturity floor in its supervisory capital assessment starting in 2016.

The banks that will be affected by FI's method are the four major banks, and FI estimates that the maturity floor will increase the CET 1 capital requirements of these banks by between 0.2 and 0.6 percentage points.

FI may exempt some exposures that have genuinely short maturities and where there is no reasonable expectation of an extension, and will take into consideration responses to this memorandum on this matter.

Any viewpoints regarding the positions presented in this memorandum and any proposed exemptions shall be submitted to FI no later than 15 April 2016.