Basel III Forthcoming - How Swedish banks perceive the impact of the Basel III Accord and its effect on systemic risk

• Main Authors: Jordbru, Marlene, Sjöqvist, Lina
• Format: Others
• Language: English
• Published: Umeå universitet, Handelshögskolan vid Umeå universitet 2012
• Subjects: Systemic risk; The Basel III Accord; Swedish bank sector; Perception
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-56919

The banking sector plays an important part of the modern society and a collapse of the financial system would have severe consequences for the society. In order to protect the system from a systemic collapse, regulations have been put in place to ensure a more stable financial system. Because of the financial instabilities experienced in recent years, the Basel Committee has released an improved framework in order to deal with the systemic risk which contributed to the crisis. Parts of the new Basel III Accord will be implemented in 2013, and this is why we have chosen to study how Swedish banks perceive the impact of the Basel III Accord and its effect on systemic risk. Our intention is to study the perception of the impact of the Basel III framework on the Swedish bank sector through a study of the four largest banks in Sweden. We examine how these four banks expect the Basel III Accord to affect systemic risk and consequently improve the protection of these banks, and also the Swedish banking industry and more generally the Swedish economy. The research paradigm of this study is constructivism, which is in line with our research question and purpose, since we have studied and analyzed the perceptions of the Swedish banking sector. In order to answer our research question and purpose we have used an inductive research approach, as well as a qualitative research strategy. The data was collected through 10 semi-structured interviews with people from the four largest banks in Sweden. The theoretical frame of reference is divided into four parts. The first part consists of a discussion on the Swedish banking sector, as well as a presentation of the four largest banks. In the second part of the chapter we review the current research regarding systemic risk. We then present the most important aspects and elements of the forthcoming Basel III Accord and at last we assemble the three areas together in a final discussion. The findings in the study disclose new knowledge. The knowledge consist of the Swedish banks’, through the 10 interviewees, perception of the impact of the Basel III Accord and its effect on systemic risk. The Swedish banks hold a positive perception of: higher capital requirements set out in Basel III, the counter cyclical buffer, the basic concept of implementing liquidity standards, the Basel III will (1) to some degree reduce systemic risk, (2) improve the protection of the Swedish banks, (3) decrease the probability of financial instabilities, and (4) enhance the Swedish banks ability to meet a new financial crisis. The Swedish banks hold a neutral perception of: the risk coverage and the LCR. The Swedish banks hold a negative perception of: the higher capital requirements implemented in Sweden, the frameworks’ competitive disadvantage, the capital conservation buffer, the NSFR, the leverage ratio, that the Basel III will (1) increase costs that will affect customers, shareholders and/or employees negatively, (2) impair growth, and (3) not be able to prevent a new kind of financial crisis.