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Finnish regulator eyes higher risk weights for mortgage loans

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Finnish regulator eyes higher risk weights for mortgage loans

The Finnish Financial Supervisory Authority board is preparing to set a minimum risk weight level of 15% for banks using the internal ratings-based approach to calculate capital requirements for residential mortgage loans.

This is an increase from the 10% level that was proposed in June 2016; the aim is to put the 15% level in place as from Jan. 1, 2018. The risk weighting determines the amount of capital a credit institution needs to hold to account for potential credit losses from mortgages.

No changes will be made to the current countercyclical capital buffer requirement on banks or the maximum loan-to-collateral for residential mortgage loans.