The Finnish Financial Supervisory Authority (FFSA) has on 29 September 2015 decided not to impose countercyclical capital buffer requirements on credit institutions under its supervision. The FFSA also refrained from making use of the other macroprudential tools at its disposal. The decision was based on the prevailing economic situation in Finland.
Countercyclical capital buffers were introduced in the Capital Requirements Directive (CRD IV 2013/36/EU) and the Capital Requirements Regulation (CRR 575/2013) and implemented in Finland in the Finnish Act on Credit Institutions. The aim of countercyclical capital buffers is to protect the banking sector from the risks associated with excessive credit growth. A countercyclical capital buffer raises the cost of credit and is generally believed to constrain the lending market.
Although the Finnish credit-to-GDP ratio suggested a countercyclical buffer requirement of 0.5 per cent., the FFSA considered that the overall situation of the Finnish market, including the weak economic development, continuous decline in housing prices and the fact that the situation as a whole does not indicate an increase in the vulnerability of the financial systems, justified the decision not to impose countercyclical capital buffers in Finland. The authorities in Denmark and Germany have also chosen to keep the level of the countercyclical capital buffers at 0 per cent., while the Swedish authorities recently raised the countercyclical capital buffer from 1 to 1.5 per cent. (as from June 2016). Since the countercyclical capital buffer requirements increase lending costs, the differences in the countercyclical buffer rates may place credit institutions from EU Member States that have imposed higher countercyclical capital buffer requirements in a less favourable position to credit institutions in EU Member States with lower or no countercyclical buffer requirements.
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