Decision of the Standing Committee of the EFTA States No 2/2022/SC of 16 December 2022 regarding the existing systemic risk buffer pursuant to Article 133 and the Norwegian notification of the setting or resetting of an O-SII buffer pursuant to Article 131 of Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and the prudential supervision of credit institutions, as incorporated into the EEA Agreement by Joint Committee Decision No 79/2019 and later amendments (This Decision was corrected before publication by corrigendum of 2 February 2023 by the Standing Committee of the EFTA States.) [2023/1655]

THE STANDING COMMITTEE OF THE EFTA STATES,

Having regard to the Agreement on the European Economic Area (‘the EEA Agreement’), and in particular point 14 to Annex IX thereof,

Having regard to the Opinion of the European Systemic Risk Board⁽²⁾,

Whereas:

1. According to Article 131(6), point (b), of Directive 2013/36/EU (CRD), competent or designated authorities must review at least annually the other systemically important institutions’ (‘O-SIIs’) buffer rates they require to be maintained. According to paragraph 12, second subparagraph of that Article, competent or designated authorities must also review annually the identification of the O-SIIs to which such buffer rate is imposed. According to Article 131(7) of that Directive, as incorporated into the EEA Agreement, competent or designated authorities must notify the European Systemic Risk Board (‘ESRB’) before setting or resetting a buffer rate for O-SIIs, and the ESRB is to forward such notifications to the Standing Committee of the EFTA States, the European Banking Authority and the competent and designated authorities of the EEA Contracting Parties concerned without delay.

2. According to Article 131(15) of the CRD, in combination with paragraph 5a, third subparagraph of that Article, the Standing Committee of the EFTA States needs to authorise macroprudential measures in an EEA EFTA State that lead to a combined systemic risk buffer (SyRB) rate and OSII buffer rate that exceeds 5 % of the relevant risk exposure amount for a given credit institution and set or subset of exposures. According to the same Articles of the CRD, the ESRB is to provide the Standing Committee of the EFTA States, within six weeks of receipt of a notification as referred to in Article 131(7) of the CRD, with an opinion on whether the combined SyRB rate and O-SII buffer rate is appropriate.

3. On 5 November 2020, the Norwegian Ministry of Finance notified the ESRB, under Article 133(11) of Directive 2013/36/EU as applicable to and in Norway on 1 January 2020⁽³⁾, of its intention to set a SyRB rate of 4,5 % applicable to credit institutions. On 4 December 2020, the ESRB adopted Recommendation of the European Systemic Risk Board of 4 December 2020 regarding Norwegian notification of its intention to set a SyRB rate in accordance with Article 133 of Directive (EU) 2013/36/EU (ESRB/2020/14), in which it recommended that the proposed SyRB rate to be applied in Norway should be considered justified, suitable, proportionate, effective and efficient in relation to the risk targeted by the Norwegian Ministry of Finance. On 4 December 2020, the Standing Committee of the EFTA States, taking into account the above-mentioned recommendation of the ESRB, adopted Recommendation by the Standing Committee of the EFTA States No 1/2020/SC in which it did not recommend any changes to the notified measure.

4. On 30 September 2022 the Norwegian Ministry of Finance sent a formal notification to the ESRB concerning its intention to require certain institutions to maintain an O-SII buffer of Common Equity Tier 1 capital, in accordance with Article 131 of the CRD. The Secretariat of the ESRB acknowledged receipt of the notification on 4 October 2022 and forwarded it, according to Article 131(5a) CRD, to the Standing Committee of the EFTA States on 27 October 2022.

5. The notified O-SII buffer will apply to three domestic credit institutions, one of which is a subsidiary whose parent entity is established in another European Economic Area country. Two of the credit institutions will be subject to an O-SII buffer of 1 % and one will be subject to a buffer of 2 %.

6. The Norwegian Ministry of Finance has identified these credit institutions as O-SIIs pursuant to the following criteria: (i) total assets as share of Norway’s gross domestic product (GDP); and/or (ii) loans to the private non-financial sector as share of total loans to the private non-financial sector in Norway. These criteria are listed as optional indicators in Annex 2 to the European Banking Authority’s guidelines on the criteria to determine the conditions of application of Article 131(3) CRD in relation to the assessment of O-SIIs⁽⁴⁾.

7. As the combined 4,5 % SyrB and the proposed O-SII buffers will result in a buffer rate above 5 % the ESRB provided the Standing Committee of the EFTA States with an opinion on the proposed measure on 15 November 2022.

8. In its opinion, and accompanying Assessment Note, the ESRB reviews the risks addressed through the proposed measure and finds that the risks leading to the resetting of the O-SII buffers stem from the particularly important role played by systemically important institutions in the Norwegian economy.

9. The ESRB finds that the O-SII buffers, taking into account that they are cumulative with the SyRB are effective and proportional. In that regard the ESRB takes into account that the O-SII buffers are cumulative with the SyRB. It notes that the aim of the O-SII buffers is to increase the loss-absorbing capacity of the most systemically important institutions in Norway, and thereby reduce financial stability risks stemming from such institutions running into difficulties. Considering the importance of systemically important institutions in the Norwegian financial system due to their size relative to the size of the Norwegian economy and their shares of the market in loans to the private non-financial sector, the ESRB finds that the measure is proportionate.

10. While the ESRB notes that some of the risks addressed by the SyRB seem to overlap with the justification for setting the O-SII buffer, it concludes that the proposed measure is appropriate to address the identified risks, does not entail disproportionate adverse effects on financial stability in Norway or the EEA and is not expected to form or create an obstacle to the proper functioning of the internal market. However, the ESRB notes that the EBA’s guidelines on the subject contain indicators other than those related to size – as used by Norwegian authorities – which could have implications for the reciprocation of the SyRB. Indeed, the Standing Committee of the EFTA States notes that the EBA guidelines on identifying O-SIIs also include indicators related to importance for the economy, significance of cross-border activities, and interconnectedness with the financial system. These indicators have a partial overlap with the indicators used by the Norwegian Ministry of Finance for justifying the SyRB. The ESRB further points out that Norwegian authorities stressed that the calibration of the SyRB took into account the O-SII requirements.

11. The Standing Committee of the EFTA States, after having examined the notification by the Norwegian Ministry of Finance of 30 September 2022 and taking into account the ESRB opinion, assess that the combination of the notified O-SII buffer rate for the credit institutions concerned and the SyRB in place for the exposures and credit institutions concerned does not entail 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,

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