Frontpage News 2016 Nordic and Dutch b...

Nordic and Dutch banks share common concerns about Basel IV with European Commission

15 November 2016

Banks in the three Nordic countries Denmark, Sweden and Finland and in the Netherlands take a joint position in underlining their concerns to the European Commission about the extensive consequences of the Basel IV requirements, if they are implemented in their present form.
 
Today the CEO’s of the four countries’ banking associations have a meeting with European Commission Vice-Presidents Valdis Dombrovskis and Jyrki Katainen, where they will express their concerns about the serious threat Basel IV represents to European banks and to these banks’ ability to support European growth.
 
The main issue is the proposed capital floor requirements. A capital floor would reduce the risk-sensitivity of prudential regulation and distort incentives for lending, meaning it would cost roughly the same for European banks to provide lending to financially weak clients as to financially stronger clients. This means that banks with low-risk portfolios should, in principle, set aside just as much capital as banks with much higher risk in their lending portfolios.
 
The result would be a very large increase in capital requirements for banks in the Nordic region and the Netherlands, which on average have comparably low-risk portfolios. This would probably lead to higher borrowing costs for citizens and businesses in Europe and a decreased supply of credit to the European economy.
 
The Danish Bankers’ Association has calculated that the effect of a capital floor of 80 % would lead to an increase in capital requirements for Danish financial institutions alone with 55 %.
 
The Danish Bankers’ Association also estimates that this would reduce employment in Denmark by approximately 15,000 jobs.
For Swedish banks, the consultancy firm Oliver Wyman has calculated the capital deficit of a floor of 75 % to EUR 25 billion, corresponding to 53 % of the CET1 capital.
 
For most Nordic and Dutch banks even a 60 % output floor will likely be the new binding restriction.
 
The banks of the four countries also underline that the requirements will overwrite the current incentives to provide lower-risk loans and therefore push banks towards riskier lending portfolios.
 
Ultimately, the intended result of the Basel IV requirements – to secure a more stable banking sector – could turn out to be the opposite as the risks could even increase.
 
 
Further information: 
Please contact Head of Media Relations at the Danish Bankers Association, Stine Luise Hansen, by phone: +45 3016 1009 or

We gather statistics by using cookies. If you continue using the site, you automatically agree to this. Reject here