M E M O R A N D U M
Date
Author
2016-02-25
Division for Bank Analysis
FI Dnr 15-7395
Finansinspektionen
Box 7821
SE-103 97 Stockholm
[Brunnsgatan 3]
Tel +46 8 787 80 00
Fax +46 8 24 13 35
[email protected]
www.fi.se
Capital requirements of the Swedish banks, fourth quarter 2015
Finansinspektionen publishes on a quarterly basis the capital requirements of
the ten largest Swedish banks and credit institutions. This memorandum
discloses these firms’ capital requirements and capital ratios as of the end of
the fourth quarter 2015. In this memorandum FI is disclosing the actual values
for the requirements in pillar 2.
Finansinspektionen has, for all but two firms (Landshypotek and Skandiabanken), finalized the supervisory review and evalution process and thereby
adopted its’ capital requirements.
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FI Dnr 15-7395
1 Total capital requirement, four major banks (in per cent of total REA1)
35
30
Capital conservation buffer
24,8
25
Countercyclical capital buffer
23,9
2,5
2,5
Systemic risk buffer
0,7
20,1
20,2
2,5
2,5
0,4
0,5
3,0
3,0
2,0
0,1
1,1
2,0
0,6
20
15
Systemic risk in P2
2,0
Capital requirement Norwegian
mortgages
2,0
0,4
4,9
30,3
7,3
Capital requirement in P2,
excl systemic risk and risk weight
floor
Minimum additional tier 1
& tier 2 capital
2,4
20,0
2,9
2,5
1,8
25% risk weight floor Swedish
mortgages
27,2
23,8
21,6
10
3,0
3,0
17,6
1,3
Minimum CET1 requirement
13,9
12,4
3,5
3,5
3,5
3,5
4,5
4,5
4,5
4,5
Serie13
5
Capital requirement, Basel I floor
Reported capital
Nordea
1
SEB
SHB
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
0
Swedbank
Risk Exposure Amount
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FI Dnr 15-7395
2 Total capital requirement, other six firms (in per cent of total REA)
35
*
32,7
2,5
30
1,0
56,9
25
49,3
16,1
20
16,0
19,3
19,2
2,5
2,5
1,0
0,8
Capital conservation buffer
17,0
Countercyclical capital buffer
34,7
2,5
15
25% risk weight floor Swedish
mortgages
2,5
0,7
28,2
1,0
26,1
6,5
2,5
Capital requirement in P2,
excl risk weight floor
2,5
24,5
7,9
22,3
13,5
5,9
5,1
10
1,0
21,4
19,0
2,0
Minimum CET1 requirement
2,0
1,4
Minimum additional tier 1
& tier 2 capital
Serie8
3,5
3,5
3,5
3,5
3,5
3,5
Capital requirement, Basel I floor
5
8,4
Reported capital
4,5
4,5
4,5
4,5
4,5
Landshypotek
Länsförsäkringar
Kommuninvest
SEK
SBAB
Reported Capital ratio
Capital req.
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Solvency (Risk Exp Amount)
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
Reported Capital ratio
Capital req.
Capital req. Basel I floor
0
Leverage ratio calculated with
Risk Exposure Amount (Basel 3)
N/A
N/A
Capital req. Basel I floor
4,5
Skandiabanken
* In order for Kommuninvest to contain the risk of excessive leverage, it is FI’s assessment that Kommuninvest
should continue to pursue its’ action plan to strengthen the leverage ratio. This chart shows that the capital base
(green bar) of Kommunvest is equal to leverage ratio-based requirement (light grey bar).
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FI Dnr 15-7395
3 Common equity Tier 1 (CET1) capital requirement, four major banks (in per cent of total REA)
30
25
20
19,4
Capital conservation buffer
18,6
2,5
2,5
15,5
15,7
2,5
2,5
0,4
0,5
Countercyclical capital buffer
0,7
0,6
15
2,0
Systemic risk in P2
24,1
2,0
3,0
3,0
Systemic risk buffer
3,0
3,0
0,3
10
21,2
Capital requirement Norwegian
mortgages
18,8
2,0
16,5
0,1
0,9
2,0
5,8
3,8
25% risk weight floor Swedish
mortgages
1,9
2,2
5
4,5
1,3
1,9
4,5
4,5
Capital requirement in P2,
excl systemic risk and risk weight
floor
Minimum CET1 requirement
0,9
4,5
Common Equity Tier 1 (CET1)
Capital
Common Equity
Tier 1 (CET1) Capital
Capital req. (CET1)
Common Equity
Tier 1 (CET1) Capital
Capital req. (CET1)
Common Equity
Tier 1 (CET1) Capital
Capital req. (CET1)
Common Equity
Tier 1 (CET1) Capital
Capital req. (CET1)
0
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FI Dnr 15-7395
4 Common equity Tier 1 (CET1) capital requirement, other six firms (in per cent of total REA)
35
30
25
22,6
46,2
2,5
20
1,0
Capital conservation buffer
Countercyclical buffer
15
13,4
11,1
10
23,4
13,1
2,5
1,0
2,5
11,2
11,6
2,5
21,4
2,5
0,8
25% risk weight floor
Swedish mortgages
21,6
9,3
0,7
1,0
2,5
4,5
3,9
1,3
0,9
4,5
4,5
16,9
Capital requirement in P2,
excl risk weight floor
5,3
1,8
5
28,6
4,5
1,0
3,4
4,5
4,5
1,3
Minimum CET1 requirement
4,5
Common Equity Tier 1 (CET1)
Capital
Landshypotek
Länsförsäkringar
Kommuninvest
SEK
SBAB
CET1 Capital
Capital req. (CET1)
CET1 Capital
Capital req. (CET1)
CET1 Capital
Capital req. (CET1)
CET1 Capital
Capital req. (CET1)
CET1 Capital
Capital req. (CET1)
CET1 Capital
Capital req. (CET1)
0
Skandiabanken
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FI Dnr 15-7395
5 Capital requirement in P2, four major banks, excluding systemic risk and capital
requirements for Swedish and Norwegian mortgages (in per cent of total REA)
3,5
3,0
2,9
2,5
2,5
0,3
2,0
2,1
1,8
0,1
1,1
1,5
0,6
Other
1,3
0,2
0,0
1,0
0,4
Pension risk
0,3
0,1
0,5
0,5
Interest rate risk
in the banking book,
stress 200 bp
0,3
0,8
0,8
0,5
Credit-related
concentration risk
0,3
0,0
Nordea
SEB
SHB
Swedbank
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FI Dnr 15-7395
6 Capital requirement in P2, other four firms, excluding capital requirements
for Swedish and Norwegian mortgages (in per cent of total REA)
10
9
7,9
8
7
6
5,9
5,1
5
2,7
7,3
1,9
4
Other
3
0,4
Pension risk
1,7
2
1,4
0,1
0,3
Interest rate risk
in the banking book,
stress 200 bp
2,7
1
1,5
1,0
Credit-related
concentration risk
0,5
0,1
0
Länsförsäkringar
Kommuninvest
SEK
SBAB
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FI Dnr 15-7395
Table 1 Components of the 10 largest firms' combined total capital requirement in mnSEK
Nordea
SEB
SHB
LandsSwedbank hypotek
Länsförsäkringar
Kommuninvest
SEK
SBAB
Skandiabanken
Total
Minimum requirement
pillar 1 (8 %)
105 344
45 667
37 851
31 128
1 514
4 138
525
5 917
3 060
1 599
236 742
Capital conservation
buffer (2,5 %)
32 920
14 271
11 828
9 727
473
1 293
164
1 849
956
500
73 982
Pillar 2, excl. risk weight floor
38 371
& systemic risk
10 268
12 033
4 876
378 *
712
518
4 333
1 946
400 *
73 057
Risk weight floor
mortgages Sweden (25 %)
15 064
13 714
22 965
28 573
479
3 338
-
-
6 176
-
90 307
Risk weight floor
mortgages Norway (25 %)
1 741
11
1 946
4
-
-
-
-
-
-
3 702
Countercyclical buffer Sweden
5 073
(1,0 %)
2 645
2 897
2 625
189
516
53
483
379
199
15 059
Systemic risk,
pillar 2 (2 %)
26 336
11 417
9 463
7 782
-
-
-
-
-
-
54 997
Systemic risk buffer (3 %)
39 504
17 125
14 194
11 673
-
-
-
-
-
-
82 496
Surplus capital requirement, Basel I-floor
-
-
-
-
1 187
-
-
-
750
-
1 937
Total capital requirement
264 353
115 118
113 177
96 388
4 220
9 997
1 260
12 582
13 266
2 697
633 058
Capital requirement,
Basel I-floor
163 078
79 123
94 833
68 577
4 220
9 847
-
6 178
13 266
-
439 122
*
A standardised value of 2 per cent of the total Risk Exposure Amount is used for Landshypotek and Skandiabanken due to
the Supervisory Review and Evaluation Process (SREP) for these two firms not being completed.
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Description of the calculations
The effects have been assessed based on data primarily pertaining to the fourth
quarter of 2015. The calculations pertain to the consolidated level. The capital
requirements in Pillar 2 is based on the actual Supervisory Review and
Evaluation Process (SREP) of 2015 conducted by FI for each firm except
Landshypotek and Skandiabanken. As the actual SREP for 2015 is yet to be
finalized for the latter two firms a standardized value is used for Pillar 2.
The calculations in this memorandum are based on reported data from the ten
firms as of the fourth quarter of 2015. This data can, in certain aspects, differ
from one company to another, for example when it comes to retained earnings.
This means that the ten firms differ in their treatment of retained earnings for
the purpose of calculating the capital base.2
The effects described in this chapter comprise ten firms, eight of these shall
comply with the Basel 1 floor; the four major banks, Landshypotek,
Länsförsäkringar, SBAB and SEK. The effects of the Basel 1 floor are
accounted for below as well as in Finansinspektionen’s approach to the Basel
1 floor.3
The size of the various components of the capital requirement has been
estimated as follows.
Capital requirement in Pillar 2, excluding systemic risk and capital
requirements for Swedish and Norwegian mortgages. In this report Pillar 2
reflects FI:s assessment of the capital requirements for each firm.
The capital requirement in Pillar 2, excl. requirement for systemic risk and
capital requirements for mortgages, is illustrated as an aggregate for each firm
in Chart 1 to 4 and divided into four components in Chart 5 and 6. These
components consist of the three risk types; Credit-related concentration risk,
Interest rate risk in the banking book, Pension risk and Other Pillar 2
requirements. The latter component, Other Pillar 2 requirements, is in turn an
aggregate of capital requirements in Pillar 2 which are not presented separately.
These capital requirements are not subject to standardized and fully common
evaluation methods which is the reason why they are not disclosed at a more
granular level in this memorandum.
The Other Pillar 2 requirements consists of risk elements such as market and
credit risk which are not treated in Pillar 1 as well as, in certain cases, capital
requirements for shortcomings in governance, risk management and control.
2
3
Kommuninvest has excluded their retained earnings, for 2015, from the reported capital base.
Memorandum published on fi.se on 18 March 2014, FI ref. 13-13990.
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The share of the capital requirement which is to be covered by common equity
Tier 1 (CET 1) capital is decided in accordance with the distribution of capital
in Pillar 1 (including the combined buffer requirement except the
countercyclical capital buffer) for the four major banks and the other six firms.
Risk weight floor of 25 per cent for Swedish mortgages. The increased riskweighted exposure amount brought about by the risk weight floor, of 25 per
cent, has been multiplied by the relevant capital requirement. When
calculating the capital requirement resulting from the risk weight floor, all
capital requirements relating to Pillar 1 are to be included, counting the
countercyclical capital buffer value for Sweden. For the four major banks this
includes the total capital buffer requirement associated with systemic risk
which amounts to 5 per cent.
Capital requirement for Norwegian mortgages. The Finanstilsynet in Norway
has introduced measures under Pillar 1 for exposures to mortgages which are
contributing to higher capital requirements for Norwegian banks. Swedish
firms with exposures to Norwegian mortgages will, instead of implementing
the measures, hold capital under pillar 2 to match the increase in capital
requirements from the pillar 1 measures. The size of the capital requirement is
set on an individual basis and is to be calculated by each firm in their internal
capital evaluation process (ICAAP) and, in turn, added to the other pillar 2
requirements. The Finanstilsynet has calculated the effect of these measures for
the Norwegian domestic firms which has resulted in risk weights of between 20
and 25 per cent.
For the firms which are subject to these measures but are yet to calculate the
actual size of the capital requirement, FI is using an indicative risk weight of
25 per cent. This risk weight could be adjusted depending on the outcome and
certainty of the firms individual calculations based on the measures introduced
by the Finanstilsynet.
When calculating the capital requirement for Norwegian mortgages all capital
requirements relating to Pillar 1 are to be included, counting the
countercyclical capital buffer value for Norway. For the four major banks this
includes the total capital buffer requirement associated with systemic risk
which amounts to 5 per cents.
Systemic risk in Pillar 2. 2 per cent of the total risk-weighted amount for the
major banks. Covered in its entirety by common equity Tier 1 (CET 1) capital.
Systemic risk buffer. 3 per cent of the total risk-weighted amount for the major
banks. Covered in its entirety by common equity Tier 1 (CET 1) capital.
Countercyclical capital buffer. The Swedish and Norwegian countercyclical
buffer rate of 1 per cent separately has been used in the calculation. The firmspecific buffer value has been estimated on the basis of reported data according
to the European common instructions for reporting (COREP). In order to
calculate the firm-specific buffer value the relevant credit exposure in each
country is multiplied with the countercyclical buffer rate of each country.
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The forthcoming increase in the Swedish and Norwegian countercyclical buffer
rate, from 1 to 1.5 per cent, will be taken into account as they come into effect
as of the 27th of June 2016 and the 30th of June 2016 respectively.
Amongst foreign countercyclical buffer rates it is only the Norwegian rate that
is taken into account. Currently, no member of the European union has as of
yet implemented a countercyclical buffer rate other than zero percent.4
Capital conservation buffer. 2.5 per cent of the total risk-weighted exposure
amount. Covered in its entirety by common equity Tier 1 (CET 1) capital.
Capital planning buffer. The capital planning buffer is not being considered in
this memorandum.
Basel I-floor. According to Swedish law, the Basel I-floor represents a
minimum capital requirement calculated in Swedish kronor. The capital
requirement is 8 per cent of the total risk weighted assets calculated in
accordance with the Basel I rules. The minimum own funds requirement is 80
per cent of the capital requirement calculated according to the Basel 1 rules.
The definition of own funds has changed in CRR and CRD 4 compared to the
Basel Directives. Own funds, to be compared with the Basel 1 floor, shall be
adjusted in accordance with Article 500(4) of CRR. The adjustment aims to
neutralise the impact that the expected loss amount, calculated with the internal
model for credit risk, has on the size of the own funds. In this memorandum,
own funds are illustrated without the adjustment in accordance with Article
500(4) which results in less comparability between capital requirements based
on risk exposure amount and the requirements based on Basel 1 floor.
4
For an overview of the current countercyclical buffer rates, see ESRB’s web-page:
https://www.esrb.europa.eu/mppa/html/index.en.html
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