​The European Banking Authority (EBA) today published two Opinions following the notifications by the Swedish Financial Supervisory Authority (FSA) of its intention to extend the period of application of two existing macroprudential measures targeting certain exposures secured by immovable property. The measures aim at maintaining the resilience of institutions against a potential severe downturn in the real estate market. Based on the information provided, the EBA does not object to the extension of the measures.

The proposed measure under Article 458 of Regulation (EU) No 575/2013 concerns the extension of a measure applicable as of 30 September 2023 for a two-year window. The measure applies for institutions using the Internal Ratings Based approach (IRB) and introduced two exposure-weighted floors on average risk weights for corporate exposures secured by immovable property physically located in Sweden, which are owned to generate income through rental to tenants (CRE).

The floors are calibrated as follows:

– 35% for corporate exposures secured by commercial properties;

– 25% for corporate exposures secured by residential properties

The following type of properties are outside the scope of the measure: i) agricultural properties, ii) properties owned directly by municipalities, states and regions, iii) properties where more than 50% of the property is used for own business (not rental), iv) multi-dwelling properties where the purpose of the property is not commercial (for example housing associations that are owned by the residents and that are not profit making) or where the number of dwellings is less than four. According to the Swedish FSA, these exemptions target types of real estate associated with a different level of risk compared to other CRE firms because of their ownership or income characteristics.