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Basel Urged to Keep Hands Off Mortgage Market in Nordic Scenario 

September 12, 2016

Frances Schwartzkpff, Bloomberg

Global bank regulators need to drop a plan to set minimum capital requirements for home loans, according to the man overseeing the world’s oldest and biggest market for mortgage-backed covered bonds.

Jesper Berg, director general of the Financial Supervisory Authority in Denmark, says the capital floors that the Basel Committee for Banking Supervision wants to enforce globally ignore major national differences in risk levels. In neighboring Sweden, the FSA also argues it’s wrong to try to standardize risk models across borders. The Stockholm-based regulator says it’s making that case to the Basel Committee now.

Basel needs to rethink its proposal in order to stop “capital requirements in Europe going through the sky,” Berg said in an interview. 

“The floor would make the most sense in relation to the corporate book and the least sense in relation to mortgages,” he said. “The corporate book is where the competition across borders is and so that is where you need to have a level playing field.”

Basel is working on proposals to address what it considers unwarranted differences in banks’ assessments of their balance-sheet risks. Read more

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