The Swedish financial system is functioning well and the banks' resilience to disruptions is satisfactory. At the same time, measures are required to reduce the risks linked to household indebtedness. These are two of the conclusions drawn in FI's Stability Report, which is being presented today.
Resilience in the Swedish financial system is satisfactory. The banks have sufficient capital and good access to low-cost funding, which means that they have the capacity to provide both companies and households with loans.
At the same time, there are vulnerabilities in the Swedish financial system. Sweden has a large and interlinked financial system, including four major banks that all have a substantial need for a market funding to finance their lending, particularly in the form of Swedish mortgages. A disruption to the banks' financial market could therefore have a major impact that spreads rapidly throughout the Swedish system.
A further vulnerability is that many Swedish households are highly leveraged, which makes the Swedish economy more vulnerable to financial disruptions.
Historically low interest rates, both globally and in Sweden, also present major challenges, primarily owing to investors looking for more risky investments, which builds up risks in the economy. The low interest rates also push up the price of homes and other assets. All in all, the low interest rates present an increased risk of a significant fall in the price of assets, which may lead to increased financial stress.
The best way of preventing these risks is to require banks and households to build up their resilience. However, these measures must be well-balanced and accurately targeted in the light of the continued curbing of economic development. Sweden already imposes stringent requirements in respect of the banks' capital, but accelerated lending generates new risks and FI has therefore proposed that the countercyclical capital buffer be increased to 1.5 per cent. It is important that an amortisation requirement be put into place swiftly to reduce the risks associated with household debt.
The conclusions of the Stability Report will be presented by FI's acting Director General Martin Noréus and Chief Economist Henrik Braconier at a press conference at FI's premises today at 10.00.
This press conference is for the media only but will be broadcast live on FI's website.