Opinion of the European Systemic Risk Board of 3 August 2023 regarding the existing systemic risk buffer pursuant to Article 133 and the Norwegian notification of the setting or resetting of an O-SII buffer pursuant to Article 131 of Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and the prudential supervision of credit institutions (ESRB/2023/6)

In June 2023, the European Systemic Risk Board (ESRB) received notice from the Norwegian Ministry of Finance about a proposed measure regarding the imposition of Other Systemically Important Institution (O-SII) buffers on certain banks in accordance with Article 131 of the Capital Requirements Directive (CRD). The proposal aims to set a 2% O-SII buffer for one bank and a 1% buffer for three other banks. The Board had previously already approved such buffer rates for certain O-SIIs in Norway, namely DNB Bank ASA (2%), Kommunalbanken AS (1%), and Nordea Eiendomskreditt AS (1%), considering their significance in terms of total assets and loans provided to the Norwegian market. The change to the previous approval is that one institution, namely SpareBank 1 SR-Bank ASA, would be added to the list of banks requiring a 1% O-SII buffer. According to the Norwegian Ministry of Finance, SpareBank 1 SR-Bank ASA is close to meeting the 10% of GDP requirement for setting an additional O-SII buffer – currently the institution is at 9.7%. Additionally, the institution has scored 414 on the O-SIIs test which – according to the corresponding EBA guidelines – qualifies for being considered a systemically important institution.
As the O-SII buffer combined with the Systemic Risk Buffer (SyRB) – which is currently set at 4.5% – would exceed 5% in total, the ESRB is required to provide an opinion on this matter to ensure that the proposed buffer rates do not disproportionately affect the financial stability of other EEA contracting parties or hinder the internal market’s proper functioning.
In this opinion now, the ESRB notes that – given the factual data provided to the Board and the fact that the SyRB does not take into account all identified risks of the named institutions – the proposed measure seems appropriate and would not cause disproportionate adverse effects on financial stability or hinder the internal market. However, the ESRB also suggests improvements in the granularity of the O-SII methodology which currently identifies O-SIIs as follows:
– an institution has total assets worth more than 10% of the annual Norwegian GDP;
– an institution has private loans of at least 5% (10% large O-SIIs) of all bank loans in Norway;
– for large O-SIIs, an institution’s total assets and proportion of loans is at least twice as high as those of institutions to which a 1% O-SII buffer rate applies.