Finnish CRD IV/CRR legislation tabled, banks ‘well prepared’

The Finnish Ministry of Finance presented proposals for the implementation of the CRD IV and CRR framework to parliament last Thursday (17 April), with the proposals in line with expectations, according to an official from the Federation of Finnish Financial Services.

Under the proposals, banks would be required to hold: a minimum CET1 ratio of 7%, up from the current level of 4%; a global SIFI buffer maximum of 3%, and a domestic SIFI buffer of 2%; a counter-cyclical buffer of 2.5%.

Also included in the legislative package is a loan-to-value cap of 90%, and of 95% for first-time buyers, and an option for the Finnish Financial Supervisory Authority (Finanssivalvonta) to tighten the loan ceiling by 10 percentage points.

According to Reima Letto, director and head of prudential regulation in banking and finance house issues at the Federation of Finnish Financial Services (FFI), the proposals are in line with what banks were expecting.

“I think the banks have already put the bulk of preparations in place,” said Letto. “So I think they are well prepared and, as a result, any impact will be limited.”

He added that the FFI is mostly happy with the approach that the government has proposed, highlighting the transitional rules for Liquidity Coverage Ratio and the decision to leave out the systemic risk buffer requirement from the proposal. However, he noted that the Ministry of Finance had been “strict” in its approach to the conservation and counter-cyclical buffers, which will be fully implemented in 2015, ahead of CRV IV transitional proposals.

“The legislative purpose of the reform is to eliminate the disadvantages in current EU legislation, which is considered to have contributed to the 2008 global financial crisis escalated,” the Ministry of Finance said.

If the law is adopted by the Finnish parliament, it is expected to come into force on 1 July, with a transitional period that would see the loan ceiling increase take effect on 1 July 2016.