Swedish Bank Capital Requirements: FI Moves Model Add-Ons to Pillar 1

ByRegReportingDesk

On 28 August 2026, Finansinspektionen (FI) published the Swedish bank capital requirements it discloses each quarter, this time as of the end of the second quarter of 2026 (FI Ref. 26-1525). The memorandum covers Sweden’s three major banks, Handelsbanken, SEB and Swedbank, plus seven other institutions in supervisory categories 1 and 2. Most quarters this is a routine restatement of buffers and Pillar 2 figures at group level.

This edition is different in one respect. FI announced a planned methodological change that, from 31 December 2026, will shift how it treats deficiencies in banks’ internal models: out of Pillar 2 measures and into Pillar 1. The percentage-based total requirement will fall, the total risk exposure amount (REA) will rise, and, if FI’s assessment of the deficiencies holds, the requirement expressed in Swedish kronor will be broadly unchanged. For capital-planning and prudential-reporting teams, that recomposition is the number to watch.

Related reading: EBA revised SREP Guidelines: ICAAP, ILAAP and Pillar 2 capital

The dates that matter

FI published the Q2 2026 memorandum (FI Ref. 26-1525) on 28 August 2026, drawing on data the banks submitted on 18 August; the reference date for the figures is 30 June 2026. The underlying supervisory review and evaluation for these institutions dates from September 2025. Two other dates frame the current picture: on 1 April 2026, the Riksbank assumed responsibility for the countercyclical capital buffer, and 31 December 2026 is FI’s target date for moving internal-model deficiency treatment from Pillar 2 into Pillar 1.

What the Q2 2026 capital requirements memorandum reports

FI publishes these figures to show the effect of its total capital requirement, including Pillar 2, for the banks and credit market companies it supervises in categories 1 and 2. The 2026 edition covers the three major banks alongside Länsförsäkringar, Klarna, Kommuninvest, Svensk Exportkredit (SEK), SBAB, Avanza and Nordnet. The data is reported at group level.

Two labelling points repay attention. FI uses the term “capital requirement” in place of the legal term “own funds requirement”, and it includes Pillar 2 guidance in the tables even though guidance falls outside the formally decided requirement. A reader who takes every bar in FI’s charts as a hard obligation will overstate the binding stack by the 0.5 per cent guidance layer.

One institution that belongs in category 1 does not appear here. Nordea Hypotek, the Swedish mortgage subsidiary of the Finland-domiciled Nordea group, is excluded because FI omits Swedish subsidiaries of foreign banking groups from this memorandum.

The Pillar 2 to Pillar 1 shift, and what it does not mean

FI’s starting point is the design of the capital framework itself: shortcomings in the internal models a bank uses to calculate its Pillar 1 requirement should, in principle, be corrected inside Pillar 1. Supervisors are permitted to reach for Pillar 2 measures instead, and FI has predominantly done so. Other EU supervisors have leaned on Pillar 1, which left Swedish banks’ headline percentages hard to compare with peers. From 31 December 2026, FI plans to make Pillar 1 measures its primary tool for model deficiencies.

The effect is a change in composition. Because a model-deficiency add-on moved into Pillar 1 raises the denominator, the total requirement expressed as a percentage of REA will be lower while REA itself increases. FI states that, provided its view of the degree and extent of the deficiencies is unchanged, the requirement expressed in kronor will stay largely the same.

The trap is to read the lower percentage as a capital cut. The same krona amount is measured against a larger exposure base. The total capital requirement expressed in SEK is expected to remain largely unchanged, provided FI’s assessment of the degree and extent of the deficiencies remains unchanged, while total REA increases. The change is forward-dated: FI plans to make Pillar 1 measures its primary approach to model deficiencies with effect from 31 December 2026; the expected SEK outcome remains conditional on FI’s assessment of the degree and extent of those deficiencies remaining unchanged. Teams that rebuild capital plans off the percentage alone, without carrying the REA increase, will misstate both the ratio and the headroom. The mechanics echo the treatment debate in the PRA’s Pillar 2A review, where the boundary between structural Pillar 1 capital and firm-specific add-ons drives the reported ratio.

The buffer stack for the major banks in Q2 2026

For the three major banks, the total requirement including Pillar 2 guidance ranges from 18.75 per cent of REA at SEB to 18.77 per cent at Handelsbanken and 19.02 per cent at Swedbank. The Common Equity Tier 1 (CET1) portion of that requirement sits at 14.64 per cent, 14.74 per cent and 14.82 per cent respectively.

The stack, from base to top, starts with the 8 per cent Pillar 1 minimum under Article 92 of CRR, comprising at least six per cent in Tier 1 capital and at least 4.5 per cent in CET1. On top of that, each institution carries a firm-specific Pillar 2 requirement set under Article 104a of CRD: 2.07 per cent at SEB, 1.57 per cent at Handelsbanken and 2.16 per cent at Swedbank. The combined macroprudential layer then adds the 2.5 per cent capital conservation buffer (Article 129 CRD), a systemic risk buffer of 3 per cent for the major banks under Article 133 of CRD (shown at slightly above that level once FI recognises systemic risk buffers applied by other EU member states), a 1 per cent O-SII buffer under Article 131 of CRD, and an exposure-weighted countercyclical capital buffer ranging from 1.60 to 2.04 per cent under Article 130 of CRD. Above the binding stack, FI also shows a 0.5 per cent Pillar 2 guidance figure. FI states that the guidance is not a formally decided requirement; under Article 104b(6) CRD, failure to meet it does not by itself trigger the Article 141 or 141b distribution restrictions where the applicable binding requirements are met, while repeated failure to maintain adequate own funds to cover the guidance can support an additional own-funds requirement under Article 104a(1)(e).

The systemic risk buffer and the O-SII buffer sit side by side here, both counted into the total. That reflects the CRD framework as amended, under which the systemic risk buffer for domestic macroprudential risk is cumulative with the O-SII buffer, as an exception to the general higher-of rule in Article 133(4). For a fuller walk-through of how these interact, see our note on macroprudential buffer stacking.

The countercyclical buffer is now the Riksbank’s call

Responsibility for the Swedish countercyclical capital buffer moved from FI to Sveriges Riksbank on 1 April 2026, and the Riksbank now sets the rate each quarter. The rate remains 2 per cent, the level that has applied since 22 June 2023, and the Riksbank has signalled it intends to keep a positive neutral rate of 2 per cent. For a reporting team, the decision-maker and the source to monitor have changed, while the rate itself has remained at 2 per cent.

The institution-specific countercyclical buffer rate is the weighted average of the countercyclical buffer rates applicable in the jurisdictions where the bank’s relevant credit exposures are located, calculated in accordance with Article 140 CRD; the Swedish domestic rate is therefore one input for a cross-border bank. That is why Handelsbanken shows 2.04 per cent while SEB shows 1.60 per cent: cross-border exposures pull the institution-specific rate above or below the domestic setting, and neighbouring rates feed in directly, as with Norway’s 2.5 per cent buffer. A team that treats the reported figure as a proxy for the domestic Swedish rate alone will misstate its exposure-weighted buffer unless it also models the rates applicable in the other jurisdictions where its relevant credit exposures are located.

What the shift means for COREP and capital planning

FI states that the planned Pillar 1 treatment will increase total REA and that, if its assessment of the degree and extent of the deficiencies remains unchanged, the total capital requirement expressed in SEK will remain largely unchanged. The memorandum does not specify the COREP templates, cells or validation rules through which the change will be reported; institutions should confirm the supervisory-reporting treatment applicable at the 31 December 2026 reference date before implementing the change.

Headroom is the other figure to recheck. FI reports the three major banks’ effective CET1 capital headroom at around 2.5 per cent of REA as of Q2 2026, measured against each bank’s most binding requirement. A shift that raises REA changes the denominator headroom is measured against, so internal headroom should be recomputed on the new basis before the ratios are relied on.

Frequently Asked Questions

Does the planned change reduce how much capital the major banks must hold?

No. FI states that, if its assessment of the model deficiencies is unchanged, the requirement expressed in kronor will be broadly unchanged. The percentage falls only because the same amount is measured against a larger risk exposure amount once a Pillar 1 treatment applies.

Which banks does the model-deficiency shift affect?

FI does not identify in the Q2 memorandum which individual institutions will be affected. The planned change concerns deficiencies in internal models that FI has addressed using Pillar 2 measures; each institution therefore needs to confirm whether its own Pillar 2 measures include amounts attributable to such model deficiencies.

If the Riksbank now sets the countercyclical buffer, does FI still report it?

FI continues to publish each bank’s institution-specific countercyclical buffer figure as part of the total requirement it supervises. The rate that feeds Swedish exposures is set by the Riksbank from 1 April 2026, while the weighted figure a bank reports also reflects buffer rates in the other countries where it has relevant credit exposures.

For supervisory context on how the Pillar 2 requirement and guidance interact under the SREP methodology, see our note on EBA revised SREP Guidelines: ICAAP, ILAAP and Pillar 2 capital. The UK counterpart to FI’s model-deficiency question is covered in PRA Pillar 2A review: ICAAP capital add-ons. How systemic risk, O-SII and countercyclical buffers combine under CRD is set out in our explainer on macroprudential buffer stacking, and the Norwegian rate and reciprocity that feed Nordic banks’ weighted CCyB figure appear in our note on Norges Bank’s countercyclical buffer at 2.5 per cent. The EBA’s view on the O-SII buffer and cumulative systemic buffers is covered in EBA O-SII buffer opinion and combined systemic buffers.

Key Takeaways

FI’s Q2 2026 memorandum (FI Ref. 26-1525, published 28 August 2026) reports the capital stack at group level for ten institutions, the three major banks plus seven others in categories 1 and 2, with Pillar 2 guidance shown as a transparency item alongside the formal requirement. The dominant forward-looking change is the planned shift, from 31 December 2026, of internal-model deficiency treatment from Pillar 2 into Pillar 1: percentage requirements will fall, REA will rise, and the krona requirement is expected to stay broadly unchanged; plan it as a recomposition around a larger denominator, carrying the REA increase into ratio and headroom calculations. The Riksbank now sets the countercyclical buffer from 1 April 2026, holding it at 2 per cent, though each bank’s institution-specific rate is a weighted average of the rates applicable in the jurisdictions where its relevant credit exposures are located, calculated in accordance with Article 140 CRD, a weighting that explains why Handelsbanken shows 2.04 per cent while SEB shows 1.60 per cent. As of Q2 2026, the three major banks’ total requirement runs from 18.75 to 19.02 per cent of REA including guidance, with CET1 at 14.64 to 14.82 per cent and effective CET1 headroom near 2.5 per cent.

Sources and References

What to reconcile before 31 December 2026

The productive work between now and the 31 December 2026 reference date is reconciliation. Map which of your current Pillar 2 add-ons relate to internal-model deficiencies, model the REA increase a Pillar 1 treatment implies, and confirm the applicable supervisory-reporting treatment for the 31 December 2026 reference date before implementing any COREP change. Because FI plans the change with effect from 31 December 2026, a Q3 2026 memorandum with a 30 September reference date cannot show the recomposition; the Q4 2026 memorandum is the first quarter-end publication that could do so if FI implements the change as planned. FI expects the total capital requirement in SEK to remain largely unchanged if its assessment of the deficiencies remains unchanged.

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

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