Sweden plans tougher rules for banks in bid to avoid fresh crash

City A.M. Reporter
SWEDEN should introduce tough new capital requirements for its banks, already subject to some of the world’s most stringent regulations, to shield taxpayers from any future bailouts, the government said yesterday.

Although none of Sweden’s banks went bust in the financial crisis, the sector is viewed as a potential pressure point because it dwarfs the domestic economy with assets about four times the size of annual output, and because of high levels of household debt.

The country plans to introduce so-called counter-cyclical capital buffers for its banks next year, which will be in addition to other capital requirements.

Financial markets minister Peter Norman told a news conference the government wanted these buffers to start at the high end of a previously given range of 0-2.5 per cent of banks’ risk-weighted assets, despite a still sluggish economy.

“It’s up to the Financial Supervisory Authority to decide their exact levels but with the structure of the Swedish bank system, it is reasonable to have high (levels),” he said.

He said such buffers should be lowered in the event of another financial crisis but should remain high otherwise.