In December 2017, the Basel Committee on Banking Supervision agreed on a new regulatory framework, denoted “Final Basel III Framework”. The accord sets out international standards, which are now to be implemented on a European level.
The purpose of the new regulatory package, called the Final Basel III Framework, is to ensure better alignment between capital requirements based on internal models and underlying risks. However, we find that the package is more likely to have the opposite effect in Sweden.
We find that a one-to-one implementation of the Final Basel III Framework will significantly increase financing costs for Swedish businesses, which will bring about real-economy costs far exceeding potential benefits. The higher levels of required capital will increase interest rates for Swedish corporates by some 0.5 percentage points, corresponding to an increase in the cost of lending of around 40-50%.