Swedish banks pass the European stress test

FI has tested the resilience of the major Swedish banks to a sharp deterioration in the economy. The study is part of the extensive stress test of 123 European banks coordinated by EBA.

As a basis FI, in cooperation with European Central Bank (ECB) and the supervisory authorities of the Nordics, Baltics and UK, has examined the banks' loan portfolios and assessed the quality of the banks' assets. This is known in the EU as the Asset Quality Review (AQR).

The review applies at consolidated level and examines commercial real estate lending, lending to SME's, large corporates and mortgages. The Swedish banks' subsidiaries in the euro area have been separately reviewed by ECB.

In FI's view, the banks' assets are of good quality. Impairments of nonperforming loans for 2013 are adjusted somewhat, from EUR 4,628 million to EUR 5,775 million, which is 0.51 per cent of their total exposures. Hence, common equity Tier 1 capital ratios, on which the stress test is based, is reduced by 0.3–0.4 percentage points for participating Swedish banks. The adjustment is only made for the stress test and FI will not require the banks to restate their 2013 financial accounts.

The stress test shows that the banks can cope with adverse economic scenarios. In a situation of severe financial stress, the banks' common equity Tier 1 capital ratio is at its lowest point 11.8 per cent for Nordea, 12.8 per cent for SEB, 16.3 per cent for Swedbank and 16.9 percent for Handelsbanken.

In FI's opinion, the major Swedish banks have sufficient capital to withstand a sharp deterioration in business conditions. The same conclusion was drawn by FI in its Stability Report in June this year. On an ongoing basis, FI tests the Swedish banks' resilience and the results of the next stress test will be in FI's Stability Report in December this year.

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