Nationalbankens direktør, Lars Rohde, skriver i et opinions-indlæg i Financial Times i dag, at reglerne for de danske og europæiske bankers kapital-buffer ikke fungerer. De er ikke tilstrækkelige til at håndtere en finansiel krise. De kan ikke opsuge store tab. Derfor er det nødvendigt, at reglerne for et kapital-buffer bliver ændret.

Uddrag fra Financial Times:

Bank capital buffers aren’t working

Lars Rohde. The writer is governor of Danmarks Nationalbank

Bank capital buffers aren’t working.  For many of the largest Danish banks, and their counterparts in Europe, the early triggering of banking insurance measures means that their capital buffers cannot properly absorb heavy losses.

Here is the problem: under the Basel III regulatory framework adopted after the crisis, bank capital requirements consist of both minimum requirements and capital buffers. Minimum requirements are “hard” mandates that send a bank into resolution when breached. Capital buffers, on the other hand, are “soft” requirements that allow banks time to try to recover.

Even if measures such as mandatory capital buffers may help contain the impact of adverse shocks to banks, a prudent society may still want an insurance policy against potentially disastrous rare events. That means setting up a way to wind down failing banks properly without using taxpayer money.

In banking regulation, such an insurance policy is called MREL, the minimum requirement for own funds and eligible liabilities. This aims to ensure that bank shareholders and creditors bear the losses of when banks go bust. Banks need to fulfill the mandatory capital buffer requirements and MREL simultaneously. But that is where the problem lies: when the fire alarm sounds, you want the sprinkler system to start before the fire trucks arrive.

Similarly, banks should be able to use their capital buffers long before being put into resolution mode. This is currently not the case for all banks. For many of the largest Danish banks — as well their European peers — MREL quickly becomes the binding requirement well before the capital buffers are depleted.

This means that the capital buffers cannot fulfill their purpose and contain the fire. To make matters worse, MREL is not the only overlapping requirement.

The introduction of a binding leverage ratio requirement next year will further reduce capital buffer usability. In practice, this means banks will not be able to use as much of their buffers as intended by the regulation.

The Covid-19 economic shock is the first big crisis since the full implementation of the Basel III capital buffers. So far, banking sector losses have remained lower than feared. That is primarily due to unprecedented government measures to alleviate the strains from the sharpest plunge in economic activity many countries have ever experienced.

Unlike in 2008, this crisis did not emerge from economic imbalances or from too much risk-taking in the financial sector. But that is no excuse for entering the next financial calamity unprepared.

In light of what we have learnt from this experience, it is time to review the regulatory framework so that capital buffers can better serve their purpose.