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February 13, 2013

Banks in Capital Race to Top as Sweden’s 12% Rule Sets Pace

Since Swedish regulators told their banks to target minimum capital buffers equivalent to 12 percent of their risk-weighted assets, banks across Europe have faced pressure to converge up in a race to the top.

“That would create a super-strong banking system,” European Banking Federation President Christian Clausen said in an interview in Helsinki yesterday. “That is three times as much capital as we had before the crisis.”

Clausen, who is also the chief executive officer at Stockholm-based Nordea Bank AB, says Europe’s capital requirements need to become more uniform to be effective. And as banks with the highest regulatory buffers enjoy lower funding costs, the industry’s biggest association in Europe is signaling that the benefits of converging up may outweigh the costs of setting aside extra reserves.

“The total package of regulation will make it necessary for all banks to move fairly high,” Clausen said.”


Read full Bloomberg article here

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