Faroe Islands to Revamp Banking Regulations to Prevent Financial Crime

The Systemic Risk Council in the Faroe Islands has proposed a set of stricter regulations for banks operating in the country, with the aim of preventing financial crime and ensuring stability in the economy.

Proposed Changes

According to the council’s proposal, a lower limit should be set for when a credit institution is designated as a systemically important financial institution (SIFI). SIFIs are subject to additional requirements to reduce the risk of failure and minimize negative consequences in case of their collapse. Currently, institutions are designated based on indicators measuring their size in relation to the Faroese economy and banking sector.

Key Points

• A lower limit will be set for designating a bank as a SIFI
• The proposed limit is 3 billion kr.
• Two banks in the Faroe Islands will be designated as SIFIs, rather than three

Background

The Systemic Risk Council was established to identify and monitor systemic financial risks in the Faroe Islands and provide recommendations for macroprudential measures. In this context, the council assesses whether the requirements for banks are adequate to address systemic risks.

Expert Reaction

Lars Rohde, Chairman of the Systemic Risk Council, welcomed the government’s attention to the recommendation and emphasized the importance of strengthening the financial sector in the Faroe Islands. “The introduction of stricter regulations will help prevent potential risks associated with SIFIs and ensure stability in the economy,” he said.

Next Steps

The government has taken note of the recommendation and will decide on its implementation within three months. The move is seen as a step towards strengthening the financial sector in the Faroe Islands and preventing potential risks associated with SIFIs.