Oma Savings Bank Plc: Navigating New Capital Requirements and Liquidity Challenges

The Finnish Financial Supervisory Authority (FIN-FSA) has recently imposed additional capital requirements and a liquidity requirement on Oma Savings Bank Plc (OmaSp) following a completed review (SREP). These new regulations aim to enhance the bank's financial stability and risk profile in the long term. This article explores the implications of these changes and the strategic measures OmaSp can implement to meet these new requirements while maintaining its competitive position.

New Capital Requirements and Liquidity Requirement

The FIN-FSA has increased OmaSp's Additional Tier 1 capital requirement (P2R) to 2.25% and the Additional Tier 2 capital requirement (P2R-LR) to 0.25%. These requirements will take effect from 30 June 2025 and remain in effect until 30 June 2028. Additionally, the bank must maintain a minimum survival horizon of at least three months in a scenario according to the stress test methodology of the European Central Bank, effective from 31 December 2025 until 31 December 2028.

Impact on Financial Stability and Risk Profile

These new requirements are expected to have a positive impact on OmaSp's financial stability and risk profile in the long term. The increased capital adequacy will make the bank more resilient to potential financial shocks, while the enhanced liquidity position will ensure that OmaSp has sufficient liquidity to meet its obligations even in stressed conditions. By adhering to these requirements, OmaSp demonstrates its commitment to effective risk management and compliance with regulatory standards, contributing to a lower risk profile in the long term.

Strategic Measures to Meet Additional Capital Requirements

To meet the additional capital requirements and maintain its competitive position, OmaSp can implement the following strategic measures:

1. Strengthen capital base: OmaSp can raise additional capital through issuing new shares, bonds, or other securities to meet the increased capital requirements and maintain its financial stability.
2. Optimize capital structure: OmaSp can adjust the mix of Tier 1 and Tier 2 capital to meet the new requirements, ensuring that at least three-quarters of the additional capital requirement is covered by Tier 1 capital, and of this, at least three-quarters by Common Equity Tier 1 capital.
3. Improve risk management: Enhancing risk management practices will help OmaSp minimize potential losses and maintain its capital base. The bank can invest in advanced risk management tools, train its staff, and implement stricter lending guidelines to reduce the risk of non-performing loans.
4. Diversify revenue streams: OmaSp can explore new revenue streams to boost its profitability and maintain its competitive position. This can include expanding its product offerings, entering new markets, or forming strategic partnerships.
5. Maintain strong customer relationships: OmaSp can focus on providing excellent customer service and maintaining strong customer relationships to ensure customer loyalty and attract new customers, helping the bank maintain its market share and generate stable revenue.
6. Monitor regulatory changes: OmaSp should closely monitor regulatory changes and adapt its strategies accordingly to ensure compliance with new requirements and maintain its competitive position.

Conclusion

The new capital requirements and liquidity requirement imposed by the FIN-FSA on Oma Savings Bank Plc are expected to have a positive impact on the bank's financial stability and risk profile in the long term. By implementing strategic measures to meet these additional capital requirements and maintaining strong customer relationships, OmaSp can effectively navigate these challenges and maintain its competitive position in the Finnish banking market.