The business operations of Savings Banks Group are based on low-risk retail banking. The strategic goals are profitable growth, better capital adequacy than the industry as a whole, and a financial standing that is healthy with respect to its capital buffers.
Our risk-bearing capacity is good and our risk-taking policy is conservative. The member organisations of the Savings Banks Amalgamation form a financial entity as defined in the Act on the Amalgamation of Deposit Banks, in which the Savings Banks’ Union Coop and its member credit institutions are jointly liable for each other’s liabilities and commitments.
At the end of 2020, the Savings Banks Amalgamation had a strong capital structure, consisting primarily of CET1 capital. Total own funds were EUR 1,075.7 (1,044.0) million, of which CET1 capital accounted for EUR 1,069.6 (1 028.6) million. The growth in CET1 capital was mainly due to the profit for the financial year. Savings Banks Amalgamation does not have additional Tier 1 capital. Tier 2 (T2) capital accounted for EUR 6.1 (15.4) million, which consisted of debentures in the financial year. Risk-weighted assets amounted to EUR 5,638.8 (5,476.0) million, i.e., they were 3.0 % higher than at the end of the previous year. The most significant change related to the increase in risk-weighted assets was the growth in the mortgage portfolio. The capital ratio of the Savings Banks Amalgamation was 19.1 (19.1) % and the CET1 capital ratio was 19.0 (18.8) %.
The capital requirement of Savings Banks Amalgamation was EUR 663.0 (605.1) million. The composition of the capital requirement is shown in the table below. The capital requirement of the Savings Banks Amalgamation consists of the 8% minimum capital requirement laid down in the Capital Requirements Regulation, a discretionary additional capital requirement imposed by the Financial Supervisory Authority, a fixed additional capital requirement pursuant to the Act on Credit Institutions and the country-specific countercyclical capital requirements of foreign exposures.
Combined capital requirement, %
|31 December 2020||Minimum requirement
||Pillar 2 (SREP)-requirement
||Capital conservation buffer||Countercyclical capital buffer||Combined capital requirement|
Finnish Financial Supervisory Authority made decision on pillar 2 requirement for the Savings Bank Amalgamation on 4 July 2019 and it came into force on 31 March 2020. As a result, pillar 2 requirement for the Savings Bank Amalgamation increased from 0.5% to 1.25% of total risk amount. The requirement percentage is based on the methodology of SREP (Supervisory Review and Evaluation Process) for LSI banks from ECB, where the percentage of additional capital requirement is determined from the overall rating of FSA’s assessment. The requirement shall be met at the amalgamation level with CET1 capital. The requirement is valid maximum 3 years until 31 March 2023.
At its meeting on 6 April 2020, the Board of the Financial Supervisory Authority decided to remove the systemic risk buffer, which lowered the Saving Bank Amalgamation’s capital requirement by one percentage point. The aim of the decision is to mitigate the negative effects of the coronavirus pandemic on the stability of financial markets and on credit institutions’ ability to finance the economy.
At its meeting on 29 June 2020, the Board of the Financial Supervision Authority decided that the maximum LTC ratio for residential mortgage loans will be adjusted and brought back to the statutory standard level of 90%. The Board of the Financial Supervision Authority also decided that countercyclical capital buffer (CCyB) requirement will remain at 0%. Countercyclical buffer requirement can vary from 0-2.5% of risk weighted assets. FIN-FSA has not imposed additional O-SII capital requirement for Savings Banks Amalgamation.
The Finnish Financial Supervisory Authority is responsible for domestic macro prudential decision making after hearing the Bank of Finland, Ministry of Finance and Ministry of Social Affairs and Health. Decisions on the activation of macro prudential instruments are taken on a quarterly basis expect for decisions on O-SII buffers, risk weights for loans secured by mortgages on immovable property (CRR Article 124 and 164) and systematic risk Buffer. Decisions on the activation of these instruments have taken at least once a year.
The Financial Supervisory Authority has granted a permission not to deduct internal holdings of credit institutions included in the Amalgamation from own funds instruments when calculating own funds at the individual institution level and sub-consolidation group level. In addition, the Financial Supervisory Authority has granted a permission to apply a 0 per cent risk weight to internal credit institution liabilities included within the scope of the Amalgamation’s joint and several liability. These permissions are based on the European Union Capital Requirements Regulation (EU 575/2013) and the Act on the Amalgamation of Deposit Banks (599/2010).
The Financial Supervisory Authority has granted permission to the Central Institution of the Amalgamation to waive fully the application of the requirements regarding liquidity set out in part six of Regulation (EU) No 575/2013 and its amending and supplementing acts to the Amalgamation’s member credit institutions.
The standard method is used to calculate the capital requirement to the credit risk of the Savings Banks Amalgamation. The capital requirement to the operational risk is calculated by the basic method. The capital requirement relating to the market risk is calculated by the basic method on the foreign exchange position.
The main components of solvency calculation of the Savings Banks Amalgamation
|Own funds (1,000 euros)||13.12.2020||31.12.2019|
Common Equity Tier 1 (CET1) capital before regulatory adjustments
|1 113 328||1 066 603|
|Total regulatory adjustments to Common Equity Tier 1 (CET1)||-43 750||-37 970|
|Common Equity Tier 1 (CET1) capital||1 069 578||1 028 632|
|Additional Tier 1 (AT1) capital before regulatory adjustments||0||0|
|Tolat regulatory adjustments to Additional Tier 1 (AT1) capital||0||0|
|Additional Tier 1 (AT1) capital||0||0|
|Tier 1 capital (T1 = CET1 + AT1)||1 069 578||1 028 632|
|Tier 2 (T2) capital before regulatory adjustments||6 089||15 352|
|Total regulatory adjustments to Tier 2 (T2) capital||0||0|
|Tier 2 capital (T2)||6 089||15 352|
|Total capital (TC = T1 + T2)||1 075 667||1 043 985|
|Risk weighted assets||5 638 817||5 475 985|
|of which: credit and counterparty||4 980 108||4 845 471|
|of which: credit valuation adjustment (CVA)||111 723||101 758|
|of which: market risk||29 883||28 824|
of which: operational risk
|517 102||499 932|
|Common Equity Tier 1 (as a percentage of total risk exposure amount)||19,0 %||18,8 %|
|Tier 1 (as a percentage of total risk exposure amount)||19,0 %||18,8 %|
|Total capital (as a percentage of total risk exposure amount)||19,1 %||19,1 %|
|1 075 667||1 043 985|
|Capital requirement total *||663 015||659 725|
|of wich: Pilar II additional capital requirement||70 485||27 380|
|Capital buffer||412 652||384 260|
*The capital requirement is formed by the statutory minimum capital adequacy requirement of 8%, the capital conservation buffer of 2.5% according to the Act on Credit Institutions, 1.25% Pillar 2 requirement set by the Financial Supervisory Authority and the country-specific countercyclical capital requirements of foreign exposures.
|Tier 1 capital||1 069 578||1 028 632|
|Total leverage ration exposures||12 286 958||11 277 336|
|Leverage ratio||8,7 %||9,1 %|
According to the Savings Banks Group’s estimate, the most significant regulatory changes influencing capital requirements in 2021 will be the implementation of the new definition of default and the amendments to the EU Capital Requirements Regulation (CRR2). The implementation of the new definition of default, which is broader than the previous definition, will increase the total amount of risk-weighted receivables effective from 1 January 2021. A binding 3% minimum leverage ratio and a 100% minimum requirement for the net stable funding ratio (NSFR) will enter into effect on 28 June 2021 as part of the amendments to the Capi-tal Requirements Regulation. CRR2 also includes amendments related to the capital requirements concerning investments in investment funds, derivatives and lending to SMEs.
Pillar III note includes the information in accordance with the EU’s Capital Requirements Regulation (575/2013) regarding the capital adequacy of the Amalgamation.