Recommendation of the European Systemic Risk Board of 6 July 2023 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2023/4) 2023/C 307/01

New Recommendation of the European Systemic Risk Board (ESRB) „on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2023/4)“ was published in the Official Journal of the EU. The recommendation modifies Recommendation (ESRB/2015/2) which sets out „proposals“ for national competent authorities (NCAs) as to the implementation of policy measures so as to ensure that there’s a level playing field for financial institutions across European borders in terms of capital requirements, capital buffers, or related issues (i.e. exposures) when individual NCA’s implement specific (additional) requirements upon national institutions.
In this specific new recommendation, the ESRB updates the 2015 recommendation to include a newly implemented risk weight floor of the Swedish banking regulator Finansinspektionen (FI) under Article 458 of the Capital Requirements Regulation (CRR) for loans whose collaterals are commercial and residential properties. Specifically, the ESRB recommends NCAs to apply reciprocity and require institutions using an internal rating-based approach to assess risk-weights on loans and subsequent capital requirements on such to:
– set the risk weight floors of financial institutions at 35% for Swedish corporate loans secured by commercial properties located in Sweden;
– set the risk weight floors of financial institutions at 25% for Swedish corporate loans secured by residential properties located in Sweden; and
– set the risk weight floors of financial institutions at 25% for retail loans of borrowers residing in Sweden whose loans are secured by residential properties.
The European Systemic Risk Board finds this measures to be worth to be considered on a voluntary reciprocity basis and thus modifies its 2015 recommendation accordingly – which includes modifications to Section 1, sub-recommendation C(1) and the Annex of the 2015 recommendation.