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Stefan Ingves, 12 September 2013
Towards a
sustainable
financial system
Financial crises have significant costs
JapanUS UK
Korea Mexico Sweden
Source: BIS
Some key drivers of reform
Too low quality
and quantity
of capital
Too high leverage
No liquidity framework
Interconnectedness and
systemic risk
Too big to fail
Basel III – the regulatory response
Strengthened
capital
requirements
Cap on bank
leverage
New
requirements
on bank
liquidity
Objective: reduce the probability and severity of banking crises in the future
Higher capital requirements for
systemically important banks
Leverage ratio is a backstop to risk-
based capital requirements
Tier 1 capital
Total assets including off-balance sheet items
> 3 %
2010 2013 2015 2018
Basel III Leverage ratio
rules text
consultation
and decision
Disclosure
requirement
”view to migrate
to Pillar 1 treatment”
Leverage ratio adds a new perspective
on Swedish banks’ capital position
Core tier 1 capital ratio
according to Basel II
December 2012, per cent
0 2 4 6 8 10 12 14 16 18 20
Crédit Agricole
RBS
Banco Santander
Raiffeisen
Société Générale
Barclays
BBVA
UniCredit
Intesa Sanpaolo
DNB
Deutsche Bank
BNP Paribas
Lloyds
Commerzbank
HSBC
Nordea
Danske Bank
SEB
Credit Suisse
Swedbank
Handelsbanken
UBS
Sources: SNL Financial, Liquidatum and the Riksbank
0 2 4 6 8 10 12
Handelsbanken
SEB
Nordea
Swedbank
Equity in relation to total assets
(not equal to Basel III Leverage Ratio)
December 2012, per cent
Net Stable Funding Ratio highlights
structural liquidity risk
Cash
Securities
Loans (low risk
weights)
Loans (higher
risk weights)
Long term
debt
Retail
deposits
Wholesale
deposits
Short term
debt
ASSETS LIABILITIES
Liquid
Less
liquid
Stable
Less
stable
More focus on structural liquidity
risks in Swedish banks
Sources: Liquidatum and the RiksbankNote. The dashed lines show the mean value, the red dots illustrate a group
of 40 European banks.
Swedish banks’ progress towards the
new regulatory requirements
Note: the indicated positions in the diagram shows the average Basel III ratios for the major Swedish banks. For CET 1 Sweden has currently a
higher requirement at 12 % CET 1. the Basel requirement is 9.5% if the contra cyclical buffer and capital conservation buffer are included.
Source: The Riksbank
Requirements may be raised for
systemically important institutions
LCR
CET1
Leverage
ratio
NSFR
100 %
9.5 %
100 %3 %
Stricter
requirements for
systemically
important banks
Going forward, regulatory measures
may be substitutes, subject to minima
LCR
CET1
Leverage
ratio
NSFR
100 %
9.5 %
100 %3 %
Bank X
Bank Y
 Authority wants to set
higher requirements
on Banks X and Y
 Depending on banks’
business models,
requirements may take
different forms
 Due to higher
liquidity risks, Bank
X needs more
capital
 Due to weaker
capital, Bank Y
needs more liquidity
buffers
More than Basel III…
OTC-derivative
market reforms
Framework for
dealing
with failing
banks
Bail-in capital
Strengthened
capital
requirements
Cap on bank
leverage
New
requirements
on bank
liquidity
Better regulation contributes to a
more sustainable system
Enhanced
financial
stability
A more
sustain-
able
financial
system
Stronger
real
economy
Better
regulation
Thank you
EXTRA
Moving towards central clearing
Central clearing of
standardized OTC-
derivatives
Margining
Capital
requirements
Reporting to trade
repositories
Increased transparency Mitigated systemic risks

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Stefan ingves towards a sustainable financial system 12 sep 2013

  • 1. Stefan Ingves, 12 September 2013 Towards a sustainable financial system
  • 2. Financial crises have significant costs JapanUS UK Korea Mexico Sweden Source: BIS
  • 3. Some key drivers of reform Too low quality and quantity of capital Too high leverage No liquidity framework Interconnectedness and systemic risk Too big to fail
  • 4. Basel III – the regulatory response Strengthened capital requirements Cap on bank leverage New requirements on bank liquidity Objective: reduce the probability and severity of banking crises in the future Higher capital requirements for systemically important banks
  • 5. Leverage ratio is a backstop to risk- based capital requirements Tier 1 capital Total assets including off-balance sheet items > 3 % 2010 2013 2015 2018 Basel III Leverage ratio rules text consultation and decision Disclosure requirement ”view to migrate to Pillar 1 treatment”
  • 6. Leverage ratio adds a new perspective on Swedish banks’ capital position Core tier 1 capital ratio according to Basel II December 2012, per cent 0 2 4 6 8 10 12 14 16 18 20 Crédit Agricole RBS Banco Santander Raiffeisen Société Générale Barclays BBVA UniCredit Intesa Sanpaolo DNB Deutsche Bank BNP Paribas Lloyds Commerzbank HSBC Nordea Danske Bank SEB Credit Suisse Swedbank Handelsbanken UBS Sources: SNL Financial, Liquidatum and the Riksbank 0 2 4 6 8 10 12 Handelsbanken SEB Nordea Swedbank Equity in relation to total assets (not equal to Basel III Leverage Ratio) December 2012, per cent
  • 7. Net Stable Funding Ratio highlights structural liquidity risk Cash Securities Loans (low risk weights) Loans (higher risk weights) Long term debt Retail deposits Wholesale deposits Short term debt ASSETS LIABILITIES Liquid Less liquid Stable Less stable
  • 8. More focus on structural liquidity risks in Swedish banks Sources: Liquidatum and the RiksbankNote. The dashed lines show the mean value, the red dots illustrate a group of 40 European banks.
  • 9. Swedish banks’ progress towards the new regulatory requirements Note: the indicated positions in the diagram shows the average Basel III ratios for the major Swedish banks. For CET 1 Sweden has currently a higher requirement at 12 % CET 1. the Basel requirement is 9.5% if the contra cyclical buffer and capital conservation buffer are included. Source: The Riksbank
  • 10. Requirements may be raised for systemically important institutions LCR CET1 Leverage ratio NSFR 100 % 9.5 % 100 %3 % Stricter requirements for systemically important banks
  • 11. Going forward, regulatory measures may be substitutes, subject to minima LCR CET1 Leverage ratio NSFR 100 % 9.5 % 100 %3 % Bank X Bank Y  Authority wants to set higher requirements on Banks X and Y  Depending on banks’ business models, requirements may take different forms  Due to higher liquidity risks, Bank X needs more capital  Due to weaker capital, Bank Y needs more liquidity buffers
  • 12. More than Basel III… OTC-derivative market reforms Framework for dealing with failing banks Bail-in capital Strengthened capital requirements Cap on bank leverage New requirements on bank liquidity
  • 13. Better regulation contributes to a more sustainable system Enhanced financial stability A more sustain- able financial system Stronger real economy Better regulation
  • 15. EXTRA
  • 16. Moving towards central clearing Central clearing of standardized OTC- derivatives Margining Capital requirements Reporting to trade repositories Increased transparency Mitigated systemic risks