But then one must remember that the explanation for these capital ratios looking so good is largely because the banks use low risk weights in their internal risk models. If one instead looks at the non risk-weighted capital adequacy, the picture is different. The so-called leverage ratio is almost at the same level as prior to the financial crisis. The risk of a new financial crisis is thus certainly not eliminated, and we should make higher demands of the banks regarding capital, so that the banking system becomes more robust and can better withstand a crisis. The major banks’ risk-weighted capital adequacy ratios are relatively high, but the leverage ratios are at almost the same levels as prior to the financial crisis…  Note. Per cent. The major Swedish banks’ core capital ratios, Sources: The banks’ interim reports and the risk-weighted compared with non risk-weighted. Weighted average. the Riksbank  ...and relatively low in an international perspective  Note. Per cent, March 2017. Leverage ratio for European banks. Calculated according to the applicable definition in Basel III. Sources: SNL Financial and the Riksbank  4 [14]  The Swedish banks are dependent on foreign funding. I mentioned earlier that banks around the world are using funding from abroad to an increasing extent. So what about the Swedish banks? Well, the Swedish banking system’s funding in foreign currency currently amounts to around 150 per cent of GDP, which is three times as much as at the beginning of the 2000s.
2  “The Repertoire of Official Sector Inventions in the Financial System: Last Resort Lending, Market-Making, and Capital”, speech by Paul Tucker given at the Bank of Japan’s 2009 International Conference in Tokyo on 28 May 2009. Also see, “The Development of the Bank of England’s Market Operations”, a consultative paper by the Bank of England, October 2008. 2  BIS Review 83/2009  their savings. It turned out to be naïve on two fronts. First, it proved unrealistic to expect households generally to take such care. And second, it brought politics into bank rescues, because of the hardship that could still be suffered by regular depositors when their bank failed. Nearly a decade ago I became convinced of the need for 100% insurance of a meaningful amount in order, as I put it in internal exchanges, “to take politics out of crisis management”. In the wake of Northern Rock and Bradford and Bingley, the FSA moved to 100% insurance of £ That means that nearly all regular households in this country are completely protected; and when today I refer, rather approximately, to “100% insurance”, that is what I mean. 3 The Bank’s view has been that in such a system, the banking system’s contribution to the insurance scheme should be risk-based and pre-funded. The industry has been more doubtful about the idea of pre-funding and so I want to explain our thinking. A system of 100% insurance of a meaningful amount changes the landscape. First, it alters the purposes of bank regulation.