Admati and Hellwig (2013) provide a comprehensive and lucid account of the case for higher capital standards. Their argument centres on the fact that the impact of higher capital standards on banks’ overall cost of capital needs to take account of the lower risk that arises from this shift - the Modigliani-Miller offset (Modigliani and Miller (1958)). It needs also to distinguish between any private costs to banks from tighter regulation and the social benefits this confers, with the latter the key public policy yardstick. When it came to re-calibrating regulatory standards for capital and liquidity after the crisis, international regulators engaged in a detailed, quantitative exercise which sought to weigh these social costs and benefits of tighter regulation, drawing on existing empirical evidence. The Long-Term Economic Impact (LEI) study, published by the Basel Committee in 2010, is a useful starting point for discussion of the appropriate calibration of regulatory standards (BCBS (2010b)). The main conclusion from this work was that, under conservative assumptions about likely economic costs, there were positive economic benefits to society from a sizeable increase in the capital banks were required to maintain. The study did not settle on an optimal level of bank capital. But the results presented were consistent with societal benefits peaking at a Tier 1 risk-weighted capital ratio of between 16-19%.11 This is north of most global banks’ current capital ratios.
So to summarise... I welcome the amendments to the regulations regarding the banks’ capital requirements being discussed by the Basel Committee. Even if the final pieces of the  10 [12]  puzzle are not yet in place, the changes will most likely lead to more robust banks and an increased confidence and transparency in the banking system. They will also reduce the risks linked to internal models and lead to increased international harmonisation. This in turn will benefit the major Swedish banks, which compete in a global market. However, it is much too early to say yet exactly how the new regulatory framework will affect the real economy in Sweden. The effects will mainly depend on how Sweden's special national requirements change in the future and not on the Basel Committee’s global minimum standards. The time is now right to start a review our special Swedish requirements and this is work I welcome and to which the Riksbank would gladly contribute going forward. Thank you for listening.