FI proposes update to its approach for assessing Pillar 2 guidance for Swedish banks

The Swedish financial market regulator Finansinspektionen (FI) has published a press statement to announce that it is seeking to revise its current so-called pillar 2 guidance which has been in place since 2020/2021 and which sets out recommendations for supervised institutions as regards additional capital buffer requirements based on their individual risk levels (determined by their stress test results). In a corresponding consultation paper, FI proposes the following key modifications – please note that the text is available in Swedish only:
(1) FI seeks to revise the ranges of additional capital buffers required by institutions in the risk-based guidance as follows (column 1 represents the outcome of capital requirements based on institutions‘ stress test results – the regulatory capital buffer has thereby already been deducted; column 2 represents the new additionally recommended buffer; column 3 represents an institution’s classification based on the outcome):
Figure 1 – Ranges of Additional Capital Buffers in the risk-based guidance

In this context, FI also seeks to revise its rounding approach to no longer round-up to the next 0,5% increment.
(2) FI seeks to revise the ranges of additional capital buffers required by institutions in the leverage ratio-based guidance as follows (the column specifications are identical with the exception that the first column indicates the outcome of capital requirements based on leverage-ratio stress test outcomes):
Figure 2 – Ranges of Additional Capital Buffers in the leverage ratio-based guidance

The ranges have thereby been widened and will subsequently be rounded DOWN to the next 0,5% increment.
(3) The maximum additional capital requirement would be limited for either of the two outcomes at 5% and 3%, respectively.
(4) FI proposes to no longer ONLY take into account the results of an institution’s stress test, but also to look at additional capital requirements of banks similar in size and risk.
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As these are only the most significant proposed changes, please refer to the enclosed document for more detailed, comprehensive information. It may be worth noting that FI does not expect the capital requirements of institutions to change significantly based on the proposed new guidance.