Ingves: From the Vasa to the Basel framework: The dangers of instability
In his role as Chairman of the Basel Committee on Banking Supervision (BCBS), the Governor of the Riksbank Stefan Ingves spoke on Monday about the Committee's future work, at a conference arranged by the Asociación de Mercados Financieros in Madrid. As his starting-point, he used the historical events of 1628, when the Swedish warship, the Vasa, sank on its maiden voyage.
The Basel Committee's work on Basel III seeks to address the key weaknesses of the regulatory framework as highlighted by the financial crisis. Completion of the reform package that constitutes Basel III is clearly within reach, Mr Ingves noted. He explained that the focus of the Committee's work is now on finalising outstanding reforms and finding a good balance between simplicity, comparability and risk sensitivity in the capital adequacy regulations. The outstanding reforms can be divided into three broad categories:
- enhancing risk sensitivity and robustness of the standardised approaches for credit , market and operational risk,
- reviewing the role of internal models in the capital framework, and
- finalising the design and calibration of the leverage ratio and capital floors.
"In my speech today I have touched on history that many have already forgotten – I am referring of course to the recent financial crisis rather than the Vasa! The Committee's post-crisis reforms will be mindful of the lessons of history and they will help deliver a stable regulatory framework. This in turn will provide the foundation for a resilient banking system that supports the real economy." Stefan Ingves concluded.
