A framework for advice on the systemic risk buffer
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The systemic risk buffer (SyRB) is a part of banks’ total capital requirements and one of the macroprudential instruments used in Norway. The SyRB is intended to increase banking system resilience by ensuring that banks hold a capital buffer based on the level of structural vulnerabilities in the financial system. The SyRB was introduced following the financial crisis as part of the EU/EEA capital framework (CRD IV and CRR) implemented in Norwegian law (Financial Institutions Act with regulations). In Norway, the SyRB was activated in 2013. The Ministry of Finance sets the SyRB rate. Norges Bank is responsible for preparing a decision basis and providing advice on the SyRB rate to the Ministry of Finance at least every other year.1 The decision basis is to contain analyses based on relevant indicators, recommendations and guidance from the European Systemic Risk Board (ESRB) and Norges Bank’s assessment of structural vulnerabilities and other systemic risks of a long-term nature. In this work, information and assessments are to be exchanged with Finanstilsynet (Financial Supervisory Authority of Norway). This paper describes the framework for Norges Bank’s advice on the SyRB and is organised as follows: Section B explains what the SyRB is and how it relates to other capital requirements. Section C describes the principles followed by Norges Bank when it provides advice on the SyRB rate. Section D provides a description of the information basis for Norges Bank’s advice on the SyRB rate. A detailed description of indicators is provided in the Appendix.