Good morning, everyone, and welcome to this conference call for the 4th quarter 2014. Joining me today, I have Michael Hallacher, Head of IR Lars Hoerglund, Head of Debt IR and Olander, Group Head of Accounting. And the slides used for my presentation are as usual available at hamdersbanken.com. On Slide number 2, I will as always start by showing you the value creation of the bank. As you have seen now for so many quarters, equity per share including dividends has continued its steady growth of 15% on an annualized basis.
The board is proposing an ordinary dividend for 20.14 of SEK 12.50 and in addition to that an extra dividend of SEK 5. After deducting the proposed dividend, core capital ratio at year end still increased to 20.4%, up from 18.9% 1 year ago. And the board is also proposing a share split of 3 to 1. Then on slide number 11, you can see the profit and loss for the full year 2014 compared with 2013. The result for 2014 was the best full year result ever for the bank and both operating profit and total profit increased by 6%.
In the U. K, the profit rose by 41% and in Finland by 30%. Net interest income improved by 2% for the group. And in the home markets outside Sweden, the growth was 11%. The strongest development here was seen in the U.
K, the Netherlands and in Finland. Net commission income improved by 10% here mainly due to higher asset management and payment fees. And net gains and losses on financial items rose by 31%. However, adjusted for extraordinary capital gains early in 2014, the increase was 4%. Revenues in total were up 5%, while total expenses were down 0.5% in local currencies or up 2% when converted into Swedish kronor.
Loan losses increased in the 4th quarter and in total loan losses amounted to 10 basis points for 2014. The losses in the Q4 were mainly attributable to a small number of old exposures in higher risk classes and overall the credit quality in the loan portfolio remains stable. Then on slide number 26, you can see that net interest income was down 2% in the 4th quarter. Adjusted for benchmark effects and high status, net interest income was down only marginally. All in all, lending and deposits in our home markets added SEK 13,000,000 in the quarter, despite the continued decline in short term interest rates.
Deposit margins in Sweden decreased by €74,000,000 due to the lower nominal interest rates and increased deposit volumes contributed CHF 5,000,000 in the quarter. Lending margins in Sweden improved. Here the margin on the Swedish mortgage portfolio rose by 4 basis points to 100 basis points in the quarter. Together with higher lending volumes, improved margins added €54,000,000 to the revenues. In the home markets outside Sweden, increased lending volumes contributed DKK 57,000,000 and lowered deposit margins and volumes as well as somewhat lower lending margins in some markets lowered net interest income by SEK 29,000,000.
State fees increased by SEK 41,000,000. The so called benchmark effect in STAZUBERTIK decreased by €48,000,000 and some other effects such as lower interest rate on equity took away another SEK 56,000,000. Back to slide number 9, we here illustrate the dramatic decline in net interest income in Sweden over the past few years. And as you can see, since the peak in the Q4 2011, the STIBOR rate has fallen by some 230 basis points. In the bank, as you probably know, we invest our equity short.
And this means that on an annualized basis, the interest income we receive on the equity has dropped quite significantly in 2014 compared to 2011. Deposit margins deposit margin reductions in the same period as we have communicated many quarters before have also been high. So adding these two effects in Sweden, you can see from the chart that the negative impact in the 4th quarter of the historically low interest rate level is DKK 1.1 1,000,000,000 compared to the Q4 2011 or SEK 4 point 4,000,000,000 on an annualized basis. This is in spite of the fact that throughout the same period, we have increased our deposit volumes in Sweden by 14%. On slide number 10, we translate the interest rate decline into what it means to earnings growth, certainly a meaningful impact.
In 2012, 2013 2014, operating profit grew by 3%, 6% and 6%, respectively. And without the negative interest rate effect on deposit margins and interest income on the equity, that growth would have been 10%, 14% respectively instead. I think this theoretical example shows the strong underlying earnings growth capacity in the bank under more normal circumstances than we currently see. Then on Slide number 16, we show you the development of our fee and commission income. That number grew by 10% year over year in 2014.
Air fees from mutual fund management increased by 23% in 2014. This was mainly due to strong inflows even though also a good equity market also contributed. If we take the perspective from the level 2 years ago, you can see the chart to the right, which shows the development for fees from mutual funds, other asset management and insurance. That level has increased by 40% on a 12 month rolling basis. Looking over the last 5 year period, the bank has had the largest net inflows in mutual funds in Sweden of all large institutions.
But also in our other home markets, the development has been strong. In the U. K, for example, Asset Management fees rose by 115% in 2014. This is much thanks to Hartford Wealth Management, which now contributes more than 55% of fees and commissions in the U. K.
On slide number 17, we show the cost development in local currencies. This is the 6th quarter in a row where costs in the Nordic markets, including Sweden, have decreased. Since the Q3 2013, the cost reduction is around 5% in local currencies on a rolling 12 month basis. Again, this is the pure result of local decisions taking everywhere. Costs are adjusted to the current business environment in each location.
At the same time, we have opened up 24 new branches in 2014. All our home markets added new branches in the year. And we have also continued to develop other channels to the banks to the bank, such as mobile apps. In Anders Banken, we provide all different channels to all customers and we let them decide themselves how to contact the branch and how to make transactions. This we believe is yet another of many reasons why Handelsbanken has such a superior customer satisfaction in all our home markets compared with peers.
On a group level, in local currencies, costs in the Q4 were at the same level as in the Q3 2013. Cost income ratio improved to 45.2% for the full year compared to 47% 1 year ago. Then moving to slide number 15. You see the profitability here in our different home markets for the full year. And as you can see, Sweden and Norway are at 16% and U.
K. At 15%, while Finland reached 12% and Denmark and the Netherlands 9%. It goes without saying there is, of course, much more to do in all our home markets, even though the underlying results have moved in the right direction. The group return on equity for the full year amounted to 13.4%. Then on Slide number 13, we show the financial position of the bank, which has continued to strengthen even further in 2014.
Core Equity Tier 1 ratio increased to 20.4% and that is after deducting the proposed ordinary and extraordinary dividend. Retained earnings, positive risk migration and positive volume migration were important contributors to the increase from 18.9% 1 year ago. Total capital adequacy ratio was 25.6 percent, unchanged compared to the 3rd quarter and up from 21.6 percent 1 year ago. The Board has now also decided on the bank's capital target in CRD 4. The target is formulated as a buffer in normal circumstances to the required level communicated by the Swedish FSA.
The reason is, of course, that capital requirements in the new regulation has a lot of different building blocks, some of which are variable even quarter by quarter. The bank's core capital ratio should in normal circumstances exceed the required core capital ratio as communicated by the Swedish FSA by 1 to 3 percentage points. Furthermore, the Tier 1 ratio and total capital adequacy ratio should exceed the levels communicated by the FSA by at least 1 percentage point. The bank should also comply with all other regulatory capital requirements. In November, the Swedish FSA communicated its core capital requirements for the large Swedish banks.
And for Handelsbanken, this requirement was 17.7% and that is, of course, including all Pillar 2 add ons. Then regarding dividends, the Board has stated that the bank aims for the ordinary dividend to have a long term stable growth reflecting the value creation of the bank. Furthermore, on the back of the very high number of days when our share price has recorded new all time highs over the last few years, the board has decided to propose a split of 3 to 1 of the Handelsbanken's shares. Turn to slide number 18 and an update on our U. K.
Operation. The U. K. Has had another very strong year with operating profit in local currency up 28% year on year. And in Swedish kroner, profit was up 41%.
We have opened up 17 new branches in 2014 and appointed another 10 managers for further branch openings. This year, we have also started the 5th regional bank headquartered in Leeds. The new regional bank will operate within Yorkshire and Northeastern Great Britain. And this is, of course, a strong sign of the fact that we continue to see very interesting opportunities indeed to expand our business model into more and more locations in the U. K.
So to summarize, equity per share including dividends continued to grow steadily by 15% per year since the start of the financial crisis in 2007. The Board is proposing an ordinary dividend of DKK 12.50 and on top of that an extra dividend of DKK 5 and a share split of 3 to 1. After deducting this proposed dividend, Core Equity Tier 1 ratio increased to 20.4%, up from 18.9% 1 year ago. The bank had its best full year result ever with operating and total profit up 6% in spite of the negative effect of falling Swedish interest rates. Theoretically, without this effect of the historically low interest rates, the profit growth would have been 14%.
Cost efficiency has improved and the cost decline in Nordic markets has cost wise financed expansion costs in the U. K. And the Netherlands. And with that, I conclude my presentation and open up for questions. Thank you.
Our first question comes from Jan Wolter from Credit Suisse. Please go ahead.
Good morning. Jan Wolter, Credit Suisse. A couple of questions. First on the credit quality. In the report you said that the loan losses this quarter
are taken due to a number of old exposures. What if you could elaborate what changed in this quarter that made the bank take the losses now rather than previously? So that's my first question. And the second one is around the capital target or the buffer 1 to 300 basis points. If you could separate the drivers here in terms of currency movements or pension movements in pension liabilities and capital requirements for that and the other relevant factors that is adding up to the 100 to 300 basis points?
Thank you.
Thank you very much for that. Regarding the credit quality, as you see from the report and it was also stated in the press conference that the higher credit losses in Q4 comes from 2 cases 1 in Denmark and 1 in Sweden. And so that is the explanation of the higher level. And with credit losses, it's of course always a matter of having the ability to explain to the auditors that you actually can see so much risk so that you can take the credit loss. We take as you know credit losses as early as we can, but it goes without saying that at year end, etcetera, there are maybe more possibilities than otherwise to do some calculations.
So it's 2 cases 1 in Denmark and 1 in Finland sorry, 1 in Sweden and 1 in Denmark. And it's when you look at the credit quality as you end the remark, the migrations that we've seen year on year is actually positive, slightly positive. We had a slight negative migration in Q4, but that is very, very small. So we when we look at the underlying figures, it's a very, very stable portfolio. The second question, the capital targets.
Yes, you mentioned a couple of items when deciding on the buffer levels, the 1% to 3% over the Swedish FSA number. And it's a combination of the things you talked about. It's also of course in anticipation of what kind of freedom one must have because of variations in the mix of the business and so on. So we want to with this capital target really get the message out that we will be targeting a level which of course should make any bondholder extremely safe and happy. But at the same time since our business model as you can see from the historic figures have been very good at producing good amounts of capital not only for regulatory purpose, but also for our high growth.
And on top of that also have generated extra capital, we want to give an indication on the upper band where we will if we are close to or above that, we will communicate how we look at that. And as you know if there's a question of distributing to shareholders there are 2 means It is buybacks or in the form of extra dividend. And as you can see from the proposal from the board, it's proposed SEK 5 kroner in extra dividends to the annual general listing.
Okay. Thanks. And just one follow-up question, if I may. What is the most appropriate response do you think if there is a prolonged period of negative rates if we look at the different ways that the bank can mitigate?
Yes. It's a very good question. And our answer to that is really of course a very granular one. That is to say that it's up to each branch office to decide on how to go about this. There are of course a toolbox of different things you can do in order to make sure that the total outcome of the customer relationship is satisfactory.
You could for instance turn to charging for accounts, so you can say that you're only allowed to have this and that amount on an account that has 0 interest rates. So we can start actually charging negative interest rates also on deposits. So there's a large toolbox in such a scenario. A general observation is that it depends very much on how the Riksbank goes about such measures. There have been talks about QE and other things and also of course what happens with the market rates in such a situation.
But I think the best answer is if you look at the value creation of the bank the first picture I always show. If you would have asked me in 2011 and say, Ulf, you will lose €4,400,000,000 on a yearly basis because interest rates will drop. How will you offset that? I would not have had a good answer on that. But as you can see from the figures, it has been more than offset when you sum up all the actions that our branches have taken.
And I guess that is really in my mind the beauty of the Handelsbanken system. You have to be prepared for the worst and hope for the best. But the answer to your question is very different from branch to branch.
Okay. Many thanks for your help with that.
Our next question comes from Mr. Anton Kuchak from UBS. Please go ahead.
Good morning. Thank you very much for taking my questions. Just a couple of questions please. First, can you elaborate a little bit more how your branches in Sweden are responding to the falling interest rate environment that we have seen in the last couple of quarters? Can you talk about any repricing on any of the products that the branches are trying to put through to defend ROE against a contracting deposit rates?
And secondly, please, can you talk a little bit about the risk of introduction of risk weight force on corporate exposures. 1 of your peers have raised this topic recently. And given your strong track record and therefore low risk weighting on the corporate exposures? Do you see this as a particular risk to your capital planning? Thank you.
Right. Well, on the first question of how the Swedish branch offices have reacted. I mean, if you look at the historical numbers, there is a variety of answers that have counteracted the downturn in normal interest rates. One is, of course, that our branches nowadays typically are doing much more of work when it comes to alternative investments to deposits that is to say mutual funds, insurance solutions, but also other sort of securities that can be offered to our clients. And as you can see, we are currently taking more than double the back book market share in these kind of products.
We are taking the new net new production. So you can see that's on the commission side. Another factor as you've probably seen is the ongoing cost efficiency measures. Again different in different branches how they do this. Then of course supported by the general technical development meaning that our branches to a larger and larger extent can use the same Internet platforms that we have put out for our clients.
And then of course, there's always the possibility to work active with the pricing of your products. And as a general observation, when you add up what has happened in the market, As you know our branches have surprised towards the clients. And since we are very well handling our clients in effect we are price takers. We follow the price, the market price, for instance, in mortgages. But you can see from the figures here is that the mortgage margin has gone up 4 basis points in the quarter when you add it up.
But again, I want to stress in Handelsbanken, we don't see that the central head office undecided these things. They are decided out there. But if you sum up the decisions that have been taken out in the branches, this is the result. Risk weight floors, that's an interesting issue. And the debate is, of course, ongoing out there with the Basel Committee also how and if this should be implemented in the EU.
You also have got of course national differences in this view. As you probably know, the Swedish FSA has been very skilled in implementing extra capital charges for the large Swedish banks in a risk weight regime basically. And that means that what have been communicated from them as well as the National Debt Office and other parties except for Swedish Riksbank is that they are in total rather happy with the current regime in Sweden, which means that in my mind if Sweden were forced to take on minimum risk weights on corporates or leverage ratio as more than a backstop. As a backstop that's one thing, but as a real restriction then in my anticipation, you will have to reduce the kind of buffers that have been implemented in the risk weighted regime. Having said all this, this is a rather probably a rather long journey.
So by getting out our capital goal, which is of course the capital goal in CRD IV in the current what we know now, we think it's good for the investors to know where we stand and how we reach them with the information that we got. And I think both risk weighted floors and leverage ratio will be a question mark for quite some time yet if it will come and in what form.
Thank you. That's very helpful.
Our next question comes from Mr. Christophe Veruschris from Barclays. Please go ahead.
Yes. Good morning. Christophe from Barclays. Just one question on the trading result in treasury. I've just whether you can comment on if that's more of a temporary nature, these buybacks or if this is something that you expect to continue?
I suppose this is somewhat difficult to guide on the treasury trading and rate environment. But if you could just add some color, that would be most appreciated. And then secondly, also, looking at the NPL formation, you've given us color on the provisions. But I just wondered if you could confirm if the increase or the NPL formation that we see is driven by the same few exposures that you mentioned in Sweden and Denmark? And perhaps also seen an increase in loss in Finland, which I think you mistakenly mentioned there for a while.
But if there is something increasing in Finland as well, if you could just comment on what that is that we see in the report? Thank you.
Thank you. Yes, it was my mistake. The 2 items I referred to was in Denmark and Sweden, and it's not Finland. And we don't see any trends in the underlying portfolio. We have very, very granular data of course on each and every credit and we follow this very carefully.
So the credit quality of the portfolio is very, very stable. We had, as I said, a positive migration slight positive migration for the whole year, although a small negative migration in Q4, but that's really when you round the figures. And when it comes to the NPL, actually if you deduct the 2 cases I'm talking about, the number would have gone down. As you know, the accounting rules for NPLs is that when you take a credit loss, you will affect the whole credit, although you might have 100 percent ultra good collateral for the remaining part. So that is the number that you see there and not taking into account the collateral you have.
Trading result in treasury. Yes, as you have seen from the figures, we are attracting quite a lot of deposits because that we are attracting new clients to the bank. And therefore, of course, also in managing our funding situation, we from time to time do buybacks of funding that we have previously issued and that has been the case in Q4. And technically what happens is that if you buy back a bond that has been The good news is, of course, that you will get better funding situation in the future as you understand, because on the asset side nothing has happened. But you exchange more expensive funding by buying it back.
And then of course when you issue the new issue you fund at lower interest rates. And yes, there is such an effect as you can see and mention in the segment that is not a segment, but it's other and it's in the treasury department.
So should we expect that this could reoccur if the inflow deposits if this pattern of deposit inflows continues and the pricing of those versus your wholesale funding costs is the same as it was in this quarter, then you would react in a similar way. Is that correct?
It's more it's not a strategic thing. It's a strategic thing. It's a tactical thing quarter by quarter. And it also has to do a little bit about the benchmark issues that we have in staff Supertig. And we have some benchmark issues that are maturing here during the spring and so on.
So it's naturally in order to get a very good maturing structure to do these kind of things. So it's more of a technical nature or than anything else. It's not a structural thing. So it might vary a bit from quarter to quarter actually.
Okay. Thank you very much.
Our next question comes from Mr. Omar Khina from Deutsche Bank. Please go ahead.
Good morning. Thanks very much for taking the questions. I had a question on interest rate sensitivity. In the Sweden Banking division, you have SEK415,000,000,000 of deposits. Now one of your peers has said that roughly 3 quarters of their retail deposits now essentially pay nothing.
So I was wondering if you could disclose what proportion of those deposits essentially there's floor risk around that and there's nothing being paid. And then I just have a follow-up question on interest rate sensitivity.
Yes. If you look in Sweden, you can say that about half of the deposits in Sweden is currently giving 0 interest rates on the deposit side. So my answer is 50%, about 50%.
Okay. Thank you very much. And I guess if think about an updated interest rate sensitivity, the equity base is something like €120,000,000,000 So bearing in mind that interest rate sensitivity increases, is EUR 3,200,000,000 for 100 bps in the right ballpark? Or do you think it's higher or lower? Thank you.
Well, I leave it to you to calculate which portion is what. But I think the whole issue of falling interest rates and the mechanics that we have seen is very well captured on slide number 9 when you compare it for instance with the situation in 20 11, we're talking ballpark SEK 4,400,000,000 on an annualized basis. You also will find in the report that the total amount year over year is SEK 1,300,000,000 And that is the effect of deposit margins in Sweden and also the effect of the equity of lower normalized interest rate.
Great. Thank you. That's very clear. And could I just ask a follow-up question on capital and sustainable payout ratios? So if you've been sort of giving us kind of your view that you need to operate with a capital buffer of 100 to 300 basis points and there's a lot of room within there for you to operate.
At the top end of that range, there doesn't seem to be kind of excess capital, but at the bottom end
of the range there might be some. But
sustainable kind of run rate payout ratio for Handelsbanken. Clearly, you're committed to the 50% ordinary payout. But given kind of ROEs, you grew balance sheet at 7% last year. What do you think is a sustainable payout ratio that kind of the market can assume? Thanks.
Thank you. It's a good question, but I think you are looking for the wrong answer in our view a number here. We are on the contrary of the firm belief that the first thing you have to do is of course to be compliant with regulation. Secondly, the capital generation that you have should go, of course, to the growth you will have. And there is a natural pace in Handelsbanken of how fast we can grow.
And that has to do with credit policy and also, of course our conservatism when it comes to good order and so on. And it's a decentralized decision, for instance, how we expand in the U. K. And after that and that everybody knows it's a very good investment that we are doing and you can see that from the figure. So that's very obvious and very good from a shareholder perspective.
And but if we generate capital above that, we are very happy to distribute that. So looking from the period Lima, you can see that we have grown value by 15% on an annualized basis. That's equity per share including accumulated dividends. And last year, the payout ratio happened to be 72%, something like that. Now we're at 73%.
But it's very counterproductive in our view to have a goal for the payout ratio. The goal should be to maximize value for shareholders, but do it in a way of course that you are compliant with the regulation so that you don't get negative effects from authorities or ultimately that to be taken over by the authorities in the downturn.
Okay. Great. And maybe just lastly, for the coming year, are you still thinking about paying out kind of above the ordinary payout ratio with an extra dividend? Or has your thinking evolved between extra dividend and buybacks? [SPEAKER JACQUES VAN DEN
BROEK:] Yes. Good question. The Board has also stated and you can see that from the report that we the aim with the ordinary dividend is that it should show a long term and stable growth that reflects the value creation in the bank. And again, on top of that development, the ordinary dividend, if the bank has excess capital, we are very happy to distribute that. And that can be in 2 forms.
One is the more flexible tool you can say during the year when it comes to buybacks. And then you have the, of course, annual general meeting typically at the time of the year where you can have the chance to adjust with extraordinary dividends if that is the case.
No, that's understood. I guess my question was in the past 2 years, you made a decision specifically to go for extra dividends rather than buybacks. Do you foresee that thinking changing? I guess was the question that I was trying to ask. Sorry,
I misunderstood you. We I don't want to outrule anything. It's good to have the buyback possibility in the toolbox. But we have also, I think, yes, try to say clearly observed that more and more investors tend to favor dividends over buybacks. I think before the financial crisis, in my view, my best estimate would be that it would be sort of a fifty-fifty among investors, while nowadays, I would say, maybe 80%, 20% or something like that in favor of getting the value creation that can be distributed to give it in the form of dividends as opposed to buyback.
Having said that, buyback is a flexible tool. So it's good to have it in the toolbox.
Okay, great. Thank you very much.
Our next question comes from Mr. Heine Lutz from Goldman Sachs. Please go ahead.
Hello. Thank you, Mike. I've got a very brief question coming back sort of to the loan losses we've seen. Mike, you basically now had sort 2 quarters in a row where you basically had more loan losses than you would usually have. So basically and particularly sort of this quarter now being at a level you've seen last time in 2,009, so it's sort of being devil's advocate, it feels a bit like sort of lightning striking twice.
But on can you basically sort of give us an idea if you feel like sort of there's a cleanup element in there, so you're very confident that this sort of not sort of moving from 2 quarters to becoming a 3rd one and going on. And particularly when looking at the breakdown, it's the first time when I look at your provisions and how it breaks down for a while that you actually had underlying a substantial net write off in there sort of €177,000,000 So is this actually sort of saying that you now also see exposures that you feel like you can't recover and therefore feel you have to sort of take higher provisions? [SPEAKER
STEPHEN ROBERT BINNIE:] Well, when it comes to credit losses, to me the best way to look at it and when you look into the future is to look at our very granular credit ratings. Looking over the credit rating scale that we have. So that and also there is a lot of control mechanisms ranging from auditors, central risk control, etcetera, following that this dynamic rating is actually working in a coherent way throughout the group and in each branch office and so on. So it is a very, very good system to follow what is happening in reality and in real time. And as I said from that material, it's a very, very stable development.
We're talking really just rounding off figures in Q4. And looking for the whole year, we'll have a slight improvement. So on the ground of that, I have said and we also see in the report that our best estimate is that it's a very stable situation. We are not proud of having 10 basis points in credit losses, although I know quite a lot of European banks that would be extremely happy of that kind of level. We are not.
We aim at 0. So of course, we look very seriously into each credit loss and ask ourselves if we could do something better. And on your cleaning up remark, of course, we have looked at every possibility to take a credit loss. And that is without any doubt.
Okay. Thank you very much. Very helpful.
Our last question comes from Mr. Jacob Kruse from Autonomous. Please go ahead.
Hi. Thank you. Just two questions. Firstly, on your property management business in Sweden. You've been shrinking that this year while growing the remaining overall property management business and your lending book, which is a quite a clear contrast to some of your peers like Swedbank, which is growing it very aggressively.
Have you changed your approach to this market? Or do you feel other market participants has become more aggressive and you are not willing to compete for some of those loans there? Or is it or would it be a view of a buildup of risk? And secondly, just you say on the in your discussions about risk weight floors that they would replace the transitional rules potentially, are you suggesting that they would be a regulation that would not be held against the current FSA floor capital hurdle rates as the current transitional rule under Basel II is? Or is that relating to something else?
Thank you.
Thank you. I'm not exactly knowing what you are referring to. I mean, we have on page 36 a split 36 in the report. We have a split when it comes to property management. And you can see there that the figures have actually gone up when it comes to the 2 figures.
Then there are some changes and so on.
Yes. I'm looking at the next page.
No, I'm looking on Page 30.
In general, I would say, there was one question in the press conference and maybe that is the best way to what you're after is that when you look at lending to corporates in Sweden the whole market it has gone up very, very slightly while we have not in Handelsbanken. And we mentioned at the press conference also a little bit about that the risk willingness in Sweden has undoubtedly got up in the market. There's a lot of money around. And of course, there are we have the same credit philosophy, credit policy throughout the business cycle. So yes, there are these that we are not competing for, But it has nothing to do with price or so on.
And on the private mortgage side, we are holding our position and that has to do with the fact that the branches of course defend their clients. We are as I mentioned a price taker which means that we follow the price in the market. We're not the price leader. And as you see here, the price has gone up 4 basis points in the quarter. Yes.
No. On the conditional rules, I was just referring to the whole notion of minimum corporate risk weights, ultimately leverage ratio, non risk weight regime, contra the risk weighted regime, which Sweden has implemented. And so my remarks was on a more general level. I'm not saying that I don't believe that there will be transitional rules in the future. And indeed as you know, Basel Committee is now eagerly contemplating what kind of mechanism that that could be with standardized risk weights so on.
But I'm talking about the back whether it will be a backstop something that you check or if it will be the hard measure under which you under no circumstances might go under. And I think on a higher level, I think it's very fair to say that the Swedish stance is that the Swedish regime with high capital requirements or buffers, which is not hard as you know. The Pillar 2 Swedish requirements are not hard in the sense that you will have to close the bank if you go under the figure that the FSA wishes us to have. But if you do not show that you have the ambition to go over and come back to that kind of number, of course, you are in trouble. So that is a different system to where you have, say, a number, choose pick your number yourself 10% or whatever and saying that under that number it's goodbye and over that number it's okay.
So the Swedish regime by having this inbuilt flexibility also in situations where not only the countercyclical buffer may go down because that there are harder times, but also other things may happen. I think in my view it's a very intelligent piece of legislation making sure that the capital requirements are adjusted to the situation of the economy and the banking system in a fair way not to get out resolution situations where it would not benefit the whole society. We can discuss this a long time, but the debate will of course go on.
Okay. Thank you.
There are no further questions from the telephone.
Okay. Then I thank you very much for attending. And as usual, if you have more questions, we would be very happy to answer them. So just give us and our IR department a call.