Reporting of 15% minimum risk weight on residential mortgage loans
On 26 June 2017, the Board of the Financial Supervisory Authority (FIN-FSA) made a conditional decision according to which the average risk weight on residential mortgage loans must be a minimum level of 15% for banks that have adopted the Internal Ratings Based Approach. On 21 August 2017, the European Commission decided not to raise any objection to the decision of the Board of the FIN-FSA, as a consequence of which the minimum risk weight level will enter into force on 1 January 2018.
Key aspects of the decision as well as information on the reporting of minimum risk weights
- The minimum level is institution-specific, excluding institutions belonging to an amalgamation of deposit banks. In an amalgamation of deposit banks, the minimum level is calculated on a consolidated basis for the amalgamation as a whole.
- The minimum level applies to residential mortgage loans defined in accordance with chapter 7a, section 3, subsection 2 of the Consumer Protection Act, where the housing unit acquired is located in Finland.
- State-guaranteed loans are included in the above-mentioned loan portfolio.
- The minimum level is calculated according to the average EAD-weighted risk weight.
- Reporting takes place quarterly as csv-format data collection based on the COREP C 08.02 form.
- The FIN-FSA will seek from both the Swedish Financial Supervisory Authority and the Danish Financial Supervisory Authority reciprocal recognition for the decision, which would apply to branches and cross-border loans.
- The reporting regulations will be added to the FIN-FSA Regulations and Guidelines.
- Before the reporting requirement begins, the draft Regulations and Guidelines will be sent on a public consultation round.
For further information, please contact
- Torsten Groschup, Banking Inspector, tel. +358 9 183 5333 or torsten.groschup(at)finanssivalvonta.fi
- Tomi Halme, Risk Specialist, tel. +358 10 831 5233 or tomi.halme(at)finanssivalvonta.fi
Press release 26 September 2017 – 15/2017 Macroprudential decision: No changes to macroprudential instruments. Housing loan repayment periods and interest-only periods being monitored. Rise in risk weight to take effect 1 January 2018.
Press release 25 August 2017 – 12/2017: Minimum risk weights on mortgage loans will rise to 15% on 1 January 2018, the European Commission did not object to the FIN-FSA’s decision
Press release 27 June 2017 – 10/2017 Macroprudential decision: A minimum risk weight level of 15% on mortgage loans, no changes to the loan cap, no countercyclical capital buffer requirement
Press release 28 March 2017 – 5/2017 Macroprudential decision: Preparations for setting a higher minimum level than previously intended for average risk weights on mortgage loans, no changes to maximum loan-to-collateral for mortgage loans or to countercyclical capital buffer
European Commission’s decision