The value of capital buffers

FI Director General Erik Thedeén explains in an opinion piece entitled New Reforms Could Make Banks More Vulnerable why it is important for the capital requirements for banks to have the right balance between minimum requirements and buffer requirements. Generous capital buffers enable banks to absorb losses without needing to reduce lending or in any other way worsen an economic downturn.

The Basel Committee is discussing a leverage ratio designed as a minimum requirement, which would reduce the capital buffers of many banks. According to Erik Thedéen, it is important that the rules created within the EU find the right balance between minimum requirements and buffers.