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Sweden’s Bankers Complain of Misrepresentation in Basel Talks 

March 14, 2016

Amanda Billner and Johan Carlstrom, Bloomberg Business

The head of the Swedish Bankers’ Association has expressed concern that Basel is being fed a message that doesn’t represent the position of regulators or banks in his country.

The disagreement is over the leverage ratio: how much capital a bank should hold as a percentage of total, unweighted assets. The Swedish Financial Supervisory Authority doesn’t want a high ratio, arguing it would take away the freedom to set capital based on risk. Bankers agree.

But the governor of Sweden’s central bank, Stefan Ingves, has signaled he wants a stronger backstop to prevent lenders basing capital ratios on optimistic interpretations of their balance sheets. Ingves also happens to be the chairman of the Basel Committee on Banking Supervision, which sets the framework for regulation globally.

“When I talk to people in Basel and Brussels, I hear that there are a few countries that are totally against the risk-based view,” Hans Lindberg, the head of the Swedish Bankers’ Association, told Bloomberg. “They mention the U.S., India, to a certain extent Switzerland, and then they mention Sweden. But that’s not the official Swedish view, the view of the government or the FSA.”

European regulators will recommend a level later this year. Basel said in January that the ratio should be set at a minimum of 3 percent.

Sweden’s biggest banks have a leverage ratio of just over 4 percent, under Basel III rules, while common equity Tier 1 capital as a percentage of total, unweighted assets hovers just below that -- and “has been largely unchanged over the last few years,” Ingves said in a November speech. Read more

 
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