The Systemic Risk Council recommended the Minister for Industry, Business and Financial Affairs to activate a countercyclical capital buffer at a rate of 1 per cent for Faroese exposures from 31 March 2023.
The minister of Industry, Business and Financial affairs has decided to activate the counter cyclical capital buffer on the Faroe Islands at 1 pct. for Faroese exposures for the 1st quarter of 2022. The activation is inforced as of 31th of March 2023.
The countercyclical capital buffer requirement will take effect 12 months after the Minister has announced an increase. The institutions thus have time to adjust. The Government is required, within a period of three months, either to comply with the recommendation or to present a statement explaining why the recommendation will not be complied with.
Danish financial regulation, including Danish legislation implementing EU directives, is implemented in the Faroe Islands via decrees that may take into account special Faroese circumstances.
The decree whereby the rules on the Systemic Risk Council enter into force in the Faroe Islands took effect on 1 February 2015. The decrees concerning determination of the countercyclical capital buffer took effect on 1 July 2015 for the Faroe Islands.
The countercyclical capital buffer is a requirement to banks' buffers that varies with the developments of systemic financial risks. The Council regularly assesses the countercyclical capital buffer rate in the Faroe Islands, and publishes after each meeting the key indicators on which the assessment of the countercyclical capital buffer rate relies. The Council's assessment relies on further information in addition to the key indicators such as other indicators and policies.
Current countercyclical capital buffer rate in the Faroe Islands
1 per cent
Each quarter the Minister for Industry, Business and Financial Affairs sets the countercyclical capital buffer rate for the Faroe Islands, Denmark and Greenland.