Does SEK 2 800 in loss-absorbing capital provide sufficient resilience for a loan of SEK 1 million? My answer is no, it does not. The market’s requirements are also often higher today. I welcome the international discussion on a general increase in the capital requirements once the crisis is over. More capital is needed. I also think it is positive that the quantity requirements governing the capital in the capital base and the regulations governing hybrid capital will be tightened up and harmonised. Better capital is also needed. Ultimately, resilience is measured by common risk-bearing share capital. The discussion now underway in the international arena also concerns whether the banks’ resilience can be strengthened by having regulations that require the banks to build up capital buffers when times are good that they can then use when times are bad. To a certain extent, the build-up of capital buffers may also counteract the procyclical tendencies of the financial system by means, for example, of new regulations that increase the price of lending when times are good and reduce it when times are bad. Another method that is similar in principle is to allow the banks to make provisions for expected losses in economic upturns. The banks would thus build up a buffer against bad times in their accounting. In this context, the international discussion centres around which method – capital buffers or provisions – is most appropriate. Using capital has the advantage that it provides greater transparency and is more difficult to manipulate than provisions.

Let me return to the mortgage example I used above. Controlling prices would in this case entail an increase in the capital requirement for mortgages. In the EU, for example, it has been discussed whether the capital requirement should to a greater degree depend on the leverage ratio. Quantitative regulations could include stipulating amortisation requirements or regulating the loan-to-value for mortgages. Economists usually advocate price control, but the arguments for price control are not as strong when we are facing an either/or situation – crisis or no crisis. In such situations, price control may entail too much uncertainty and thus make it necessary to control the behaviour of the participants in a more concrete way. The choice between price control and quantitative regulations thus requires a lot of thought, both on the general level and when designing specific regulations. Influencing behaviour by regulating capital is however, not the only form of price control that is being discussed. More direct control by levying charges is also under discussion in various international arenas. One element of this discussion concerns the regulation of systemically-important banks. Risks in systemically-important banks also entail the risk that problems will spread to other parts of the economy, that is there are external effects. It is thus not unreasonable to expect that this systemic risk should be internalised. Several different measures are therefore under discussion to achieve this. One possibility is to introduce a special capital surcharge for systemically important banks. Another is to introduce a charge for systemically-important banks.