The aim is that the banks must reduce the differences in maturities between their assets and liabilities and their dependence on shortterm market funding. To achieve this, the banks must match their funding and lending to a greater extent than they do today. Assets with short maturities can have short-term funding while long-term illiquid assets, such as mortgages, will need more long-term and stable funding. All funding with a remaining maturity of more than one year will be counted as stable funding. This is a sound and important feature of the new Basel regulations. And it will probably affect the Swedish banks’ business models. Currently, none of the four major Swedish banks meet the structural liquidity measurement requirements (Net Stable Funding Ratio). This is mainly because they largely fund their lending through short-term market funding. The banks will need to think again here. In addition, a number of the Swedish banks do not meet the shortterm measurement (Liquidity Coverage Ratio) either. These banks must, before the LCR is introduced, either strengthen their liquidity buffers, for example by buying government bonds, or reduce their short-term net outflow. A weakness of the new standards is, however, that they do not contain any specific rules for matching maturities per currency. This is something Swedish authorities should look at more closely. Two thirds of Swedish banks’ market funding is in foreign currency. A certain proportion of this is converted via the swap markets to SEK and then lent.
The collapse of Lehman Brothers is just one of many examples of how a bank with problems in one country can constitute a threat to banks all over the world. The crisis revealed the lack of effective regulations In an increasingly globalised world it is important to have well-designed global rules and regulations that contribute to stable financial sectors in all countries. It has been obvious for quite some time that this is not the case. But a crisis was required to eradicate any doubts that reforms are necessary. This is a good aspect of crises. They have the capacity to unite decision-makers and to provide an impulse to processes for change. BIS central bankers’ speeches  1  Consequently, over the last two years, considerable resources have been devoted to determining why the crisis arose and how we can reduce the likelihood of a similar crisis occurring in the future. Politicians and decisions-makers have left almost no stone unturned. They have discussed everything from bonus systems and the role of accounting in the financial crisis to shortcomings in financial supervision and weaknesses in derivatives trading. Above all, however, they have discussed bank regulation. As a result they have realised that the current regulatory framework has a number of fundamental weaknesses that must be dealt with. The Basel Committee 1 has therefore drawn up new, revised regulations for capital and liquidity, the so-called Basel III regulations.