The good news is that since the crisis broke, banks in the UK and elsewhere have made significant progress in rebuilding capital. Evidence to support this is that at its last meeting in June, the Bank’s Financial Policy Committee decided to close its recommendation of March last year that the largest UK banks and building societies should meet a minimum 7% Common Equity Tier One ratio on the socalled end-point (ie full implementation) basis set out in the EU rules to implement Basel III, after taking into account adjustments for expected loss on more vulnerable loan portfolios, the impact of future conduct of business costs, and prudent use of risk weights. Since then the actions taken by a number of major UK banks and building societies have put them on course or ahead of the planned actions to meet the FPC’s test. In a few cases, there are more actions to be undertaken in their plans, but overall this is a welcome story of action taken to strengthen capital positions. I do however accept that there remains a perception in some quarters that higher capital standards are bad for lending and thus for a sustained economic recovery. I agree with those who argue that banks have a lot more to do to demonstrate that they support lending to small businesses. Interestingly, in recent weeks the messages I have seen from the Bank of  4  Bank calculations based on supervisory data.
Switzerland is a good example of this: thanks to the inclusion of the major political players in government responsibilities, and to the extension of direct democracy processes even to financial matters, a deeply rooted culture of stability has developed. It is this which provides the foundation for the stabilising effect of the well designed and constitutionally anchored debt brake. This has made a decisive contribution to ensuring that federal government finances are in good shape despite the financial and economic crisis. As a general rule, any efforts to establish a sustainable fiscal policy in countries with debt problems can ultimately only bear fruit if they succeed in fostering a broad-based culture of stability. BIS central bankers’ speeches  1