FI on liquidity coverage ratios (LCR) for Swedish banks

Given the current circumstances, FI would like to clarify that it will temporarily allow banks to fall below the liquidity coverage ratio (LCR) for individual currencies and total currencies.

The spread of the coronavirus disease (COVID-19) is having a financial impact on firms and households around the world, which thus affects the financial system.

In order to uphold lending to firms and households with the aim of maintaining production, investments and consumption despite the weakened economic circumstances, FI has lowered the countercyclical capital buffer requirement and the Riksbank has implemented a new loan facility for banks.

The EU's banking regulations require that the banks hold capital and liquidity buffers. The motivation for these buffers is that the banks must be able to draw on them as needed uphold banking operations during economic downturns and in the presence of financial shocks.

Given the current circumstances, FI would like to clarify that it will temporarily allow banks to fall below the liquidity coverage ratio (LCR) for individual currencies and total currencies. The objective of this measure is to ensure that limitations in the liquidity requirement's design do not make it difficult for banks to maintain sound financing operations given the current conditions. The measure should be viewed in a broader context with the other measures that FI and the Riksbank have recently taken to promote the supply of credit in the economy. The European Banking Authority (EBA) has also stated that the national supervisory authority shall strive to avoid fragmentation on the financing markets.

Any banks that fall below or expect to fall below the liquidity coverage ratio (LCR) requirement for total currencies or for an individual currency are normally obligated to report this to FI.

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