Erik Thedéen visited the Committee on Finance today for a Q&A session. He discussed the unprecedented economic conditions that Sweden is currently experiencing.
The Swedish economy is thriving, but a strong economy combined with low interestrates has resulted in high asset prices and rapidly rising household debt.
Households with high loan-to-income ratios, i.e. large loans in relation to income, are vulnerable. They are sensitive to rising interest rates since their monthly expenses are affected more than households with lower loan-to-income ratios. They are also somewhat more sensitive to a loss of income, for example if they become unemployed.
Finansinspektionen’s report, Stability in the Financial System, shows that the high level of household debt and rising house prices are causing vulnerabilities to build up in the Swedish economy. FI therefore would like to introduce a stricter amortisation requirement for new mortgage holders who take large loans in relation to their income.
Finansinspektionen publishes the capital requirements of the ten largest Swedish banks and credit institutions as of the end of the first quarter 2017.
The design of the Swedish regulations for capital adequacy and crisis management is appropriate for reducing the risk of financial crises and ensuring effective management if a crisis were still to occur. This is the conclusion reached by Finansinspektionen (FI) and the Swedish National Debt Office in a joint report. The report emphasises that Sweden should safeguard national discretions in the framework of banking requirements in ongoing EU negotiations.
FI decided on 27 April not to change the countercyclical buffer rate. The buffer rate of two per cent, which has applied since 19 March 2017, shall thus continue to apply.
Erik Thedéen is commenting today on the EU Commission’s proposed changes to banking regulations during a Q&A session in Brussels in EU Parliament’s Committee on Economic and Monetary Affairs (ECON).
This year’s supervision report describes, at an overarching level, the Swedish banking system, how FI works with supervision and a number of topical risk areas currently in focus.
The amortisation requirement that was introduced last year has had a slow-down effect thus far. Households with new mortgages are borrowing less and buying less expensive homes, but the risks associated with high household debt remain.