A stable, well-functioning financial market for allA stable, well-functioning financial market for allResult
2024
FI would like the financial market to shift its sustainability work into the next gear
There is a lot of work left to do before the financial market fully contributes to a sustainable economy. For example, firms need to be better at identifying and integrating sustainability risks. One condition for this is that they have the right competence in sustainability-related matters. Firms also are responsible for preventing their operations from being used for criminal purposes. These are several of the conclusions we draw in our sustainability report that is being published today.
Interest rate puts pressure on indebted households
Households continue to be under pressure from both higher interest rates and other costs. This is evident in FI’s mortgage report, which is being published today. The report looks at new mortgagors during the autumn of 2023. We can see that there are fewer mortgagors than in previous years. Home buyers also bought slightly less expensive homes and borrowed slightly less. Total lending to households has stagnated, but despite this household indebtedness continues to be high.
2023
FI Analysis No. 43: d-SRI: A systemic risk indicator for Sweden
In this FI-analysis we adapt the systemic risk indicator d-SRI to Swedish conditions. d-SRI is intended to give an early warning signal before crises caused by domestic imbalances arise. d-SRI indicates build-up of risks during the years leading up to the crisis in the 1990s, the 2000 dot-com crash, and the 2008 financial crisis. In present time when we see reduced credit growth and lower asset prices, d-SRI is showing that financial conditions are tight.
FI Analysis No. 41: Commercial real estate firms may need to reduce their debt
In this analysis, we estimate how much Swedish listed and larger privately owned commercial real estate firms need to reduce their debt in a climate of rising financing costs and falling property values. We calculate the firms need to reduce their debt to maintain certain levels of interest coverage ratio and loan-to-value.
Stability in the Financial System (2023:2): Adjustments to higher interest rates remain to be made
The higher interest rate means that households and companies need to make adjustments to their finances. Finansinspektionen (FI) is now seeing a decline in risk-taking. However, the change in the state of the economy and uncertainty regarding how long the higher interest rates will remain pose a risk to financial stability. Commercial real estate undertakings with high debt are particularly at risk should the interest rates remain high. These are the conclusions of the second Stability Report of the year.
Stability in the Financial System (2023:1)
Since the publication of the stability report last autumn, inflation has slowed somewhat in the large economies but is still significantly higher than the central banks’ inflation targets. Monetary policy has therefore been tightened further, and interest rates continued to rise. High inflation and rising interest rates mean that the forecasts for global economic development continue to be weak.
The Swedish Mortgage Market 2023
Mortgagors are under pressure from rising interest rates. At the same time, the majority of new mortgagors continue to have good margins in their personal finances. These are the conclusions drawn by Finansinspektionen in this year’s Swedish Mortgage Market report, which is being presented today.
2022
FI Analysis No. 39: Are the capital buffers fulfilling their purpose?
The minimum requirement for own funds and eligible liabilities (MREL) is designed in such a way that the banks can breach it before they breach the capital requirements. As a result, this can reduce the usability of the capital buffers. This is shown in FI’s analysis of how the capital buffers are impacted when a bank must meet both MREL and the capital requirements.
Roadmap for sustainable finance
In 2019, FI’s overarching mandate was expanded to include a responsibility to ensure that the financial system contributes to sustainable development. FI is also the responsible supervisory authority for a number of new regulations related to sustainable finance that are the result of the EU’s ambitious sustainability agenda.
Stability in the Financial System (2022:2)
High inflation has led to rapidly rising interest rates. Given the current rapid change in conditions, both participants on the financial markets and borrowers need to transition quickly. In the short term, this means elevated risks and greater uncertainty. The already high risks in the commercial real estate sector have continued to increase.
FI Analysis No. 37: Stress tests of funds’ liquidity risks
FI’s stress tests show that the majority of Swedish funds appear to be able to handle relatively large outflows in an effective manner. However, some corporate bond funds and a relatively large share of high-yield bond funds may experience liquidity problems under stressed market conditions.
Stability in the Financial System (2022:1)
Interest rates and interest rate expectations have increased in 2022 due to high and rising inflation. One sector that is vulnerable to rising interest rates is the commercial real estate sector. FI has also noted that liquidity on the bond markets has decreased, and the functionality of the corporate bond market is once again impaired.
FI Analysis No 36: Has FI’s risk weight floor had an impact on banks’ CRE lending?
In this FI Analysis, we study how the risk weight floor has impacted the banks’ lending to CRE firms using detailed lending data. The aim is to analyse whether the risk weight floor impacted the banks’ interest margins and the risk in their lending. We also investigate how the volume of bank loans and bonds to CRE firms has changed before and after the introduction of the risk weight floor.
The Swedish Mortgage Market 2022
Swedish households continue to take increasingly larger loans. More new mortgagors than in previous years had both a high loan-to-income ratio and a high loan-to-value ratio. Higher inflation and rising interest rates mean that mortgagors have smaller margins in their personal finances. This decreases the consumption capacity at the same time as the mortgagors’ ability to repay their loan is impaired.
2021
Stability in the Financial System (2021:2)
Sweden’s economy has largely recovered and there is good access to financing in the financial system. The Riksbank should therefore begin the phase-out of asset purchasing to avoid further increase of risk-taking. Amongst others, FI sees growing risks within the commercial real estate companies.
Overall assessment of macroprudential measures
Since 2010, FI has implemented a number of macroprudential measures aimed at increasing the resilience in the financial system and subduing the risks associated with high and rising household debt. These measures include tightening the capital requirements on banks and introducing a mortgage cap and two amortisation requirements. In this report, we present an overall assessment of these measures, with a focus on the measures that, via lenders, place restrictions on households’ mortgage borrowing.
FI Analys No 34: Temporary amortisation exemption led to new mortgagors borrowing
The temporary amortisation exemption resulted in new mortgagors borrowing almost 4 per cent more and buying homes that were approximately 1 per cent more expensive, concludes a new FI Analysis.
FI Analysis No. 33: Household debt and resilience
The ability to borrow is beneficial to households in many ways. At the same time, debt can make their consumption more sensitive to unexpected changes in interest rates, income, and house prices. This, in turn, can affect how the economy evolves in a crisis. But measures that lead to lower debt don’t necessarily increase the resilience of all households. To assess the effects of borrower-based measures, it is necessary to also consider households’ balance sheets, in particular their liquid assets.
Stability in the Financial System (2021:1)
The economy is continuing to recover. Support measures have been necessary to speed up the recovery, but they need to be gradually phased out as the economy strengthens. This applies primarily to measures that are associated with the build-up of stability risks.
The Swedish Mortgage Market (2021)
New borrowers continue to take larger mortgages in relation to their income and the value of their home. At the same time, they have good margins for servicing their loans under weaker economic conditions.
