Regulatory Alerts2015-10-26
Categorization of Loans to Small and Medium-Sized Enterprises as Mass Market
The Norwegian Financial Supervisory Authority issued Circular 11/2015 to clarify the requirements for categorizing loans to small and medium-sized enterprises (SMEs) as mass market, emphasizing that such classification reduces capital requirements for credit risk. The circular mandates that institutions must establish board-approved guidelines ensuring portfolio diversification and risk reduction, with a specific note that the standard 1 million euro limit may be too high for the Norwegian context. Furthermore, Internal Ratings-Based (IRB) banks are required to obtain prior approval for their categorization guidelines from the regulator, which applies stricter documentation standards to limited liability companies compared to sole proprietorships.