Another area where we need stricter requirements for Swedish banks is the area of shortterm liquidity risk. At present, the largest Swedish institutions are required to have a liquidity coverage ratio of at least 100 per cent. The LCR requirement applies in total for all currencies together and for operations in euros and US dollars separately. However, separate quantitative requirements for individual currencies are not included as a quantitative minimum requirement in the Basel III framework. In my view, however, it is very important that the banks maintain a high level of resilience to liquidity stress by holding liquidity buffers in the currencies in which they have their largest cash flows. An LCR requirement per currency ensures that this is the case in euros and US dollars. It is also reasonable that the banks report their LCRs in Swedish kronor to provide a more complete picture of their liquidity risks. The Riksbank therefore recommends the major banks to publish their LCRs in Swedish kronor. 2 Unfortunately, only one bank, Swedbank, meets this recommendation today. There are good reasons for introducing some form of quantitative requirement for LCRs in Swedish kronor. The banks have low liquidity buffers in Swedish kronor at present, which means that they would have to rely on foreign markets and swap markets if they were to need liquidity in Swedish kronor.
BIS central bankers’ speeches  5  But the structure of the Swedish banking system calls for greater safety margins Although the new regulatory framework will strengthen resilience in several ways there are structural vulnerabilities in the Swedish banking system that mean that the safety margins provided by the Basel III framework are not enough in all respects. As every country’s financial system and banking system are unique and have their own special characteristics and vulnerabilities, the basis of the Basel frameworks is that the regulations are minimum requirements. Countries that believe it is necessary to set stricter requirements can and should do so. In my opinion, the size and high degree of concentration of the Swedish banking sector, as well as the banks’ extensive dependence on both foreign and domestic market funding, create vulnerabilities that justify complementing the internationally-agreed frameworks. The high and growing indebtedness of the Swedish households poses further risks to the financial system. All-in-all, this justifies Sweden taking action sooner and having stricter regulations in certain respects. On the basis of several of these factors, the Riksbank has recommended, together with Finansinspektionen and the Ministry of Finance, that from 1 January next year the major Swedish banks should have CET 1 capital ratios of at least 12 per cent. This is significantly higher than the requirement in the Basel III framework. Several other countries with large banking systems have for similar reasons introduced or are discussing higher capital requirements for their banks. Two closely-related examples are Switzerland and the United Kingdom.