Swedish banks, already subject to some of the world’s toughest capital rules, may face even higher requirements as the government tries to protect the economy and public finances from future crises.
Financial Markets Minister Peter Norman today proposed a raft of measures aimed at strengthening bank industry stability in the largest Nordic economy. Steps include giving the Financial Supervisory Authority more tools and putting the regulator in charge of oversight, according to an e-mailed statement.
“In addition to these measures to form a stricter framework and tougher rules for the banks, the development and the risks that are tied to it means it may be necessary to sharpen the requirements on the financial sector further in the future,” Norman wrote in an opinion piece in Dagens Nyheter newspaper today. “That could, for example, include higher capital rules for banks.”
Sweden’s four biggest banks already face stricter capital requirements than standards targeted elsewhere. Nordea Bank AB, Swedbank AB, Svenska Handelsbanken AB and SEB AB must hold at least 10 percent core Tier 1 capital of their risk-weighted assets this year, and no less than 12 percent by 2015. The Basel Committee on Banking Supervision, headed by Swedish central bank Governor Stefan Ingves, sets a 7 percent minimum from 2019.
Shares of Sweden’s four largest banks were the biggest decliners on the benchmark Stockholm OMX30 index today, with Handelsbanken dropping 2 percent to 285.7 kronor as of 11:30 a.m. local time. Swedbank lost 1.9 percent to 153.7 kronor, while SEB and Nordea fell 1.5 percent to 70 kronor and 1.8 percent to 80.5 kronor, respectively. The Bloomberg Banks and Financial Services Index decreased 0.8 percent.
The central bank and the financial regulator have clashed openly over which body should have the main responsibility for limiting systemic risk in Sweden. Today’s proposal from the government marks a defeat for Ingves, who had argued that the central bank is best suited to handle macro-prudential supervision.
Sweden also plans to introduce counter-cyclical buffers for banks from 2014 and to require the financial industry to contribute to the Riksbank’s foreign currency reserves. The government will also set up a formalized financial stability board that includes the financial markets minister as well as the heads of the regulator, the Riksbank and the debt office.
The proposals include giving Sweden’s financial stability fund its own assets.