Erik Thedéen: Will the banks withstand the next crisis – what role will capital requirements play?

Discussing how the banks will withstand the next crisis is undoubtedly asuitable topic in October 2018, which marks exactly ten years since the mostdifficult phase of the financial crisis.

  • Date: 2018-10-09 
  • Speaker: Erik Thedéen
  • Meeting: SNS/SHOF Finance panel

 

I will try to describe some of the work that has been done by regulatory and supervisory authorities over the past ten years and what is left to do. In general, I can say that today's Swedish banking system is more resilient to crises.

A critical factor in the resilience of the banking system is whether individual banks have sustainable business models that can be profitable even if today's strong market conditions were to take a turn for the worse. From FI's perspective, however, I would like to highlight three important reasons for why the Swedish banking system is better equipped for crises today: higher capital requirements and stronger own funds in the banks, the implementation of regulation and supervision in the area of liquidity, and the creation of a resolution framework, i.e. how we manage crisis-stricken banks. Today I will primarily outline the role played by the capital requirements.

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