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Handelsbanken Ordered to Change Credit Risk Methodology at UK Unit

09/15/2020 | 08:43am EST

By Dominic Chopping

 

STOCKHOLM--Svenska Handelsbanken AB said Tuesday the Swedish Financial Supervisory Authority has decided that the bank must change its methodology for calculating capital requirement at the bank's U.K. subsidiary.

Handelsbanken currently calculates the capital requirement for credit risk at its Handelsbanken plc U.K. subsidiary by applying a standardised approach.

At group level, the Swedish bank said it applies the internal ratings-based approach, including for those parts of its volumes which are reported by Handelsbanken plc.

However, the Swedish FSA has said that from Jan. 1, 2021, the bank must also to use the standardised approach at group level when calculating the capital requirement for credit risk at Handelsbanken plc.

Handelsbanken said the risk exposure amount, or REA, at the bank will consequently increase by around 65 billion Swedish kronor ($7.4 billion) as a result of the new method.

As at 30 June 2020, the total REA was around SEK705 billion and the common equity tier 1 ratio was 18.7%, while the common equity tier 1 capital requirement communicated to the bank by the Swedish FSA was 14.0%.

The bank said it doesn't yet know what capital requirement the FSA will assign to the U.K. volumes at group level, so the impact of this decision on the common equity tier 1 ratio and total capital ratio at group level will be announced later.

 

Write to Dominic Chopping at dominic.chopping@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
REA GROUP LIMITED 1.09% 144.35 End-of-day quote.-3.03%
SVENSKA HANDELSBANKEN AB 0.52% 85.32 Delayed Quote.3.29%
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