A presentation held by Mr Stefan Ingves, Riksbank Governor, at the high level seminar "Towards a sustainable financial system" hosted by the Stockholm based think tank Global Challenge in cooperation with London School of Economics and The Swedish House of Finance on September 12th 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

14. Thank you

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