Impact of final Basel III in Sweden (2020)

The Basel Accord of December 2017, also called the ‘Final Basel III Framework’, is one of the most debated regulatory frameworks in recent years. The accord was supported by the G20 Finance Ministers and Central Bank Governors Meeting under the condition: “We confirm our support for the Basel Committee on Banking Supervision’s (BCBS) work to finalise the Basel III framework without further significantly increasing overall capital requirements across the banking sector, while promoting a level playing field.”

The accord sets out revised international standards, which are now to be implemented on a European level. A recent impact assessment from the European Banking Authority (EBA) has shown that the Final Basel III Framework could lead to a significant increase in capital requirements for European banks. On that basis, the European Banking Federation invited Copenhagen Economics to conduct a macroeconomic impact assessment. The resulting study was published in November 2019.

This report is a follow-up, specifically covering the impact of the final Basel III reform in Sweden, and was commissioned by the Swedish Bankers’ Association. In the report, we estimate the impact of the Final Basel III package in Sweden on the banking sector, bank customers and the real economy. We then evaluate the implementation against two criteria:

Does the package lead to better alignment between risk and capital requirements?
Does the implementation deliver net benefit to society, based on an economic cost-benefit analysis?

Finally, we will examine different options for implementation that could increase net economic benefits.