Clarification on the impact for Swedish banks from revised Basel standards

In relation to the report published by the European Banking Authority (EBA) in August Finansinspektionen would like to make the following clarification on the impact for Swedish banks of the revised Basel standards. According to Finansinspektionen’s calculation, the increase in tier 1 minimum required capital would be about 30 per cent instead of 53 per cent as shown in the report from the EBA (keeping the assumptions and methodology set by EBA, but taking into account the current Swedish mortgage floor for the current risk-weighted assets).

The European Banking Authority (EBA) published on 5 August its advice on the implementation of the final Basel III framework in the EU. The revised Basel standards, with 1 January 2022 as the main implementation deadline, include e.g. changes in standard methods for different types of risk and the implementation of a so-called output floor. The EBA advice includes a quantitative analysis of the estimated impact and a set of policy recommendations. The quantitative impact is built on input data from 189 banks, including 11 Swedish banks, and is calculated based on assumptions and methodology set by the EBA.

Finansinspektionen would like to note that the impact of the reform, including the output floor, for Swedish banks, as it is shown in the EBA report, overestimates the impact in light of recent measures. Concretely, the impact could appear larger since the current Swedish mortgage floor is not included in the baseline. The increase in tier 1 minimum required capital of 53 per cent as shown in figure 4 in the document "Basel III reforms: impact study and key recommendations" would, according to Finansinspektionen's calculation, instead be about 30 per cent (keeping the assumptions and methodology set by EBA, but taking into account the current Swedish mortgage floor for the current risk-weighted assets).

This clarification has also been discussed with the EBA staff, who notes that the methodology used in the report is based on the measures taken at the cut-off of 30 June 2018. Given the implementation of the mortgage floor as a Pillar 1 measure was made after that date, the impact is not included in the EBA report. In the case that the measure would have been in place, EBA staff confirms that the impact would be significantly lower.

Finansinspektionen believes that in the ongoing process of developing revised capital requirements regulation in the EU based on the revised Basel standards, it may be important that the assessed impact for Swedish banks is not overestimated, which is why this clarification is made.

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