FI proposes new framework for macroprudential measures

FI shall be entitled to propose measures, the Government shall approve the measures and the Swedish Parliamentary Committee on Finance shall evaluate FI's work. FI Director General Erik Thedéen is presenting this framework in a speech today.

Finansinspektionen is currently responsible for the supervision of the operations of financial undertakings. Granting FI the right to make proposals is a natural extension of what it is already doing. This will enable FI to quickly propose measures.

Some macroprudential measures can naturally have major consequences for households, companies and the economy. It is therefore reasonable from a democratic legitimacy perspective that such measures are subject to Government approval.

"When FI's authorities are expanded, it is also reasonable for its work to be regularly evaluated," explains Erik Thedéen in a speech today.

Summary

  • There are considerable gains to be made by having macroprudential tools gathered under one roof, which in Sweden's case is with FI. At the same time, however, financial markets are influenced by a number of conditions and measures – in particular various measures related to stabilisation policy – that are under the purview of the Government and other authorities. As a result, consultation and cooperation, for example within the framework of the Stability Council, play a key role.
  • The ongoing discussion regarding the amortisation requirement has shown that FI needs a clear mandate to be able act under the expanded assignment it has received to counteract financial imbalances.
  • The measures that FI should be able to take should be clearly linked to lending. Unfortunately, the need for a certain type of measure and how it should be designed cannot always be predicted, at the same time as the development of methods from an international perspective is progressing very quickly. A more expansive mandate is therefore required in order to be able to take measures that can quickly and effectively handle different types of problems.
  • Measures to counteract financial imbalances will not always focus on households. Imbalances can also arise even in other parts of the credit market, one example being the development in the commercial property market prior to the crisis in the 1990s. FI needs a wide macroprudential mandate even in this respect.
  • The entire toolbox that FI has its disposal should be used to achieve all of the goals with which FI has been entrusted – consumer protection, financial stability and the prevention of financial imbalances. It would be unfortunate and inappropriate if FI were able to implement a certain measure with the aim of achieving one goal, but not for the purpose of achieving a different goal. For example, FI is currently able to implement a mortgage cap under its consumer protection mandate, but not with the aim of counteracting financial imbalances.
  • FI believes that technical implementation is possible through the introduction of a provision into Chapter 6 of the Banking and Financing Business Act and a delegation of authority. FI believes it is important that this be done as soon as possible.
  • Since some credit market measures could have a tangible and immediate impact on individual households and companies and are also directly linked to economic policy, FI believes that it is reasonable and preferable for any measures it proposes to have political support. Therefore, the Government should be able to take a position on the measure proposals of the type that FI would present.
  • FI also believes it to be reasonable and preferable that the Swedish Parliament and its financial committee regularly evaluate the work of FI to promote financial stability and counteract financial imbalances.
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