Proposal to change method for the application of the risk weight floor for Swedish mortgages

Finansinspektionen (FI) is proposing to change the method it currently uses to apply the current risk weight floor for Swedish mortgages through Pillar 2 by replacing it with a requirement within the framework of Article 458 of CRR. The change is proposed to enter into force on 31 December 2018.

The main reason for the proposed change is structural changes on the Swedish banking market. Nordea Bank AB decided on 15 March 2018 to re-domicile the parent company from Sweden to Finland. FI makes the assessment that this change in market structure could lead to a situation where different participants on the Swedish mortgage market will face different capital requirements for Swedish mortgage exposures. FI has therefore evaluated how it can counteract a distortion in the competition on the market and makes the assessment that the manner in which the risk weight floor is currently applied needs to change. This change is also necessary to ensure the current level of capital requirements for mortgage exposures in Sweden. Both of these goals can be achieved by replacing the current risk weight floor with a requirement under Article 458 of the CRR.

The new requirement will be included in the Pillar 1 requirements. The credit institutions that are proposed to be subject to the measure are the credit institutions that have permission to use the IRB approach and have an exposure to Swedish mortgages. Branches of foreign credit institutions that are exposed to Swedish mortgages and use the IRB approach for these exposures may also be affected.

The change is proposed to enter into force on 31 December 2018.

For questions on the proposal please contact Matilda Gjirja on tel. 08-408 983 95 or e-mail matilda.gjirja@fi.se.

Responses to this consultation can be sent to Finansinspektionen, Box 7821, 103 97 Stockholm or by e-mail till finansinspektionen@fi.se. Please note that the deadline for the submission of comments is 30 April 2018.

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