Riksbank supports proposal on management of banks in a crisis - but only in a systemic crisis

The Riksbank writes, in its comments on the final report of the Banking Law Committee, that the bank agrees with the assessment that there is a need for a regulatory framework for managing banks in the event of a crisis. The experiences from the bank crisis in the 1990s show the importance of having prepared effective measures that can be implemented rapidly, in the event of a major crisis in the financial system. The Riksbank therefore supports the proposals to establish a Crisis Management Authority and a system for placing banks in distress under public administration.

 

However, the Riksbank rejects the proposal that the Crisis Management Authority and public administration should be brought into operation even in cases where an individual bank experiences problems that do not threaten the stability of the financial system. The Riksbank is concerned that if banks could count on public measures being taken in the event of limited crises, they might increase their risk-taking to an unsound level.

 

The Riksbank also rejects the proposal that the Riksbank should provide 'lender of last resort' credit to banks even when there is no risk of disruptions in the financial system.

Questions regarding the Riksbank's comments can be answered by Deputy Governor Villy Bergström, tel: +46-8-787 07 10 or Advisor to the Executive Board Göran Lind, tel: +46-8-787 04 64.