The Standing Committee of the EFTA States has authorised the Norwegian Ministry of Finance to implement O-SII buffer rates. Other Systemically Important Institutions (O-SIIs) are institutions that, due to their systemic importance, are more likely to create risks to financial stability. To address the potential negative effects that their failure might have on the international or domestic financial system, these institutions must fulfil supplementary requirements concerning the amount of Common Equity Tier 1 (CET1) capital that they hold as a buffer.
On 30 September 2022, the Norwegian Ministry of Finance notified the European Systemic Risk Board (ESRB) of its intention to require certain institutions to maintain an O-SII buffer in CET1 capital.
The ESRB is responsible for the macroprudential oversight of the EU financial system and the prevention and mitigation of systemic risk. The notification followed a procedure set out in the fifth Capital Requirements Directive as incorporated into the EEA Agreement by Joint Committee Decision No 383/2021.
The ESRB forwarded the notification to the EFTA Standing Committee, along with an opinion on the proposed measure, for a decision on the matter.
As a forum in which the EEA EFTA States consult one another and arrive at a common position before meeting with the EU in the EEA Joint Committee, the EFTA Standing Committee examined the Norwegian Ministry of Finance’s notification, along with the ESRB’s opinion. Based on these, it assessed that the proposed measure would not lead to any disproportionate adverse effects on the whole or parts of the financial system of other EEA Contracting Parties, or of the EEA as a whole, forming or creating an obstacle to the proper functioning of the Internal Market.
Combined with the existing systemic risk buffer, the O-SII buffer rates are in excess of 5% of the relevant risk exposure amount for certain credit institutions, for a period of up to one year from the date of the decision.
The Standing Committee Decision, including its reasoning, can be found here.
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