Financial Crime World

Greenland’s Banking Regulations Come Under Scrutiny: Systemic Risk Council Recommends 0% Countercyclical Capital Buffer Rate

The Systemic Risk Council, responsible for identifying and monitoring systemic financial risks, has made recommendations on banking regulations in Greenland to ensure financial stability in the autonomous region.

Background

Representatives from the Greenlandic self-government participated in a discussion with the council, which assessed the current economic and financial situation in Greenland. The council’s assessment took into account the unique circumstances of the Greenlandic banking system.

Recommendation

The Systemic Risk Council has recommended that the countercyclical capital buffer rate for Greenland remain at 0%. This decision was made based on the council’s general method of evaluating the buffer rate, with data replicated as far as possible to accommodate Greenland’s distinct financial environment.

Methodology

The council publishes a dataset following each quarterly meeting, providing insight into the information basis for its assessment. The dataset is used to evaluate the countercyclical capital buffer rate and inform recommendations to mitigate systemic financial risks.

Regulatory Framework

Greenland’s banking regulations are influenced by Danish financial regulation, which implements EU directives through decrees tailored to special Greenlandic circumstances. Two key decrees took effect in 2016:

  • Systemic Risk Council: This decree established the Systemic Risk Council and defined its role in identifying and monitoring systemic financial risks.
  • Countercyclical Capital Buffer Rates: This decree determined the countercyclical capital buffer rates for Greenland.

Next Steps

The Minister for Industry, Business and Financial Affairs is responsible for setting capital buffer rates in Greenland. The council’s input aims to mitigate systemic financial risks and ensure the stability of the banking system in Greenland.

Key Takeaways

  • The Systemic Risk Council has recommended a 0% countercyclical capital buffer rate for Greenland.
  • The recommendation takes into account the unique circumstances of the Greenlandic banking system.
  • The council’s assessment is based on its general method of evaluating the buffer rate, with data replicated to accommodate Greenland’s distinct financial environment.