The Ministry of Finance has today forwarded a memorandum containing its proposals for adjustments to Swedish rules as a result of introduction of EU Banking Package.
The proposals relate to the calculation of the total risk-weighted exposure amount.
Follows SWE GVT Feb. 2021 issued draft handling companies crises rules, see #98014.
Proposals Summary
EU's capital adequacy rules set requirements for how much capital banks must have to protect the resilience of financial system, which have been subject of re-negotiations.
Through the EU Banking Package measures, the last step in the Basel III standard is implemented, covering the globally agreed standards for capital adequacy in banks.
Part of the EU Banking Package is the so-called floor for risk-weighted assets, which, among other things, should reduce the risk of excessively low capital requirements.
The memorandum containing proposals for adjustments to Swedish rules as a result of the EU Banking Package includes a so-called floor is introduced for the calculation of the total risk-weighted exposure amount, which is to be calculated at a group level.
The memorandum provides the constitutional proposals required for the national choice regarding exemptions from the requirement to calculate the floor for the total risk-weighted exposure amount in the EU supervisory regulation to be able to be used.
Member States may also stipulate that various credit institutions must be able to apply a transitional regulation for low-risk housing loans, so as to not affect these lenders.
Transitional regulation follows from fact the floor for the total risk-weighted exposure amount can possibly lead to a rapid increase in capital base needed for housing loans.
For Swedish housing credits, this is not expected, which is why national choice on the transitional regulation for low-risk housing credits in EU regulation should not be used.
Proposals Timing
The new constitutional amendments are proposed to enter into force on Jan. 1, 2025.
Jul. 2024 Consultation Process
On Jul. 3, 2024, SWE GVT published details of the various bodies to which it had sent requests for comments on its memorandum on EU Banking Package, on Apr. 30, 2024.
It also confirmed the last day for responses to be made on referral is Aug. 19, 2024.
Aug. 2024 SWE FI Response
On Aug. 19, 2024, SWE FI stated it approves of the memorandum's proposal for adjustments to Swedish rules as a result of introduction of EU Banking Package.
The proposed application of the national elections in the EU supervisory regulation is not judged to affect the credit institutions' capital requirements to any great extent.
SWE FI took a positive view of the proposal that credit institutions at institution level should calculate the total risk-weighted exposure amount without a standard floor.
Specifically, in cases where the parent institution calculates the amount at group level.
SWE FI also agrees with the proposal not to use the national option in art 465.5 of the supervisory regulation on transitional rules for Swedish mortgage exposures.
Sep. 2024 Regulation Adopted
On Sep. 26, 2024, SWE GVT adopted a regulation that aligns SWE banking rules with the EU banking package, enhancing clarity for banks and ensuring financial stability.
EU member states have the option of choosing whether the floor for risk-weighted assets should be calculated at institution or group level.
Decided on a regulation which means that Swedish rules are adapted with the aim of this floor being calculated at group level for Swedish banks with a Swedish parent company, which creates a more predictable framework for Swedish banks.
Furthermore, the government has chosen not to make use of the national option on transitional regulation for housing credits that is part of the EU's banking package.
Transitional regulation could temporarily lead to lowered capital requirements, which would then be raised again when the floor is phased in, this is considered not to be appropriate, nor is it in line with the purpose of the transitional regulation.
