Thedéen outlines capital rule trends and simplification efforts for banks
Riksbank Governor Erik Thedéen discussed evolving capital rules for banks, focusing on the countercyclical capital buffer and international efforts to simplify regulations. He spoke at the SHoF/SNS Finance panel on March 31, 2026.
Sweden's capital rules enter new phase
Effective April 1, Sweden's macroprudential regulations are changing.
The mortgage cap rises from 85 to 90 percent, and the stricter income-linked amortization requirement is removed.
The Riksbank also assumes responsibility for setting the Swedish countercyclical capital buffer (CCyB) for banks, taking over from Finansinspektionen.
Banks require equity capital to ensure financial stability, manage risks, and protect depositors.
Macroprudential policy aims to mitigate systemic risks, addressing both structural issues like 'too-big-to-fail' institutions and time-varying vulnerabilities.
The CCyB builds resilience in good times, allowing capital release during downturns to absorb losses and maintain lending.
This new role aligns with the Riksbank's financial stability mandate and crisis coordination, leveraging its expertise in real economy and credit market analysis.
Unlocking the countercyclical buffer's power
The countercyclical capital buffer (CCyB) has evolved to mitigate external shocks, not just systemic risks, leading to a positive neutral level in many countries.
However, banks often hesitate to use capital buffers during stress, preferring to reduce lending.
Thedéen highlighted the CCyB's unique 'releasable' nature, converting mandatory capital into usable funds, increasing banks' flexibility and reducing credit crunch risks.
The Riksbank advocates for revising EU reciprocity rules, seeking to remove or substantially raise the 2.5 percent ceiling for mandatory reciprocity to ensure fair competition among banks.
Simplification: A complex necessity
The current capital adequacy framework for banks is undeniably too complex, with multiple parallel requirements often creating unintended binding constraints.
This complexity, born from intricate bank operations and evolving international standards, hinders clarity even for authorities.
While simplification efforts are underway internationally, achieving a balance between reduced complexity and preserved resilience will be a delicate and protracted task.
Source: Thedéen: Trends in capital rules for banks
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