FI’s approach to setting the countercyclical capital buffer

In a new memorandum, Finansinspektionen describes the general principles for the application of the countercyclical capital buffer.

The countercyclical capital buffer is a buffer requirement that is intended to vary over time. The buffer should be built up when circumstances allow so that it can be lowered – for example in financial crises – to create a larger margin to other decided capital requirements.

One of the lessons learned from the Covid19 crisis is the importance of usable capital buffers that can be lowered to lighten the requirements on the banks. As a rule, crises are difficult to predict, and the developments during 2020 are a good example of this. To ensure greater possibility of freeing up capital for Swedish banks during a crisis, FI will apply a positive neutral rate of 2 per cent going forward. This means that we will aim to hold the buffer rate at 2 per cent during normal periods, i.e. even when we make the assessment that the credit supply is not associated with elevated systemic risks.