Recommendations and risk outlook

Below are the risks and recommendations described in the Riksbank's most recent Financial Stability Report 2017:2.

Risks

The high level of household indebtedness and the banks' exposures to the housing market make the Swedish financial system vulnerable and sensitive to shocks. The structure of the banking system and the banks' limited capital and resilience to liquidity risks also contribute to this vulnerability. The risks are linked, among other things, to the current low interest rates as they can lead to exaggerated risk taking, to assets being overvalued and to various parties increasing their indebtedness to an unsustainable level. The risks linked to international developments remain but are less than they were in the spring.

Recommendations

Swedish households' high and rising indebtedness forms a palpable threat to financial and macroeconomic stability. It is therefore important to continue to implement measures to increase resilience in the household sector and reduce the risks linked to household indebtedness. At the same time, there are structural vulnerabilities in the Swedish banking system that make it sensitive to shocks. Resilience therefore needs to be strengthened as regards both the banks' capital levels and their ability to manage liquidity risks. It is also important that FI's mandate for taking decisions independently is clarified.

 

Current recommendations

The mandate for macroprudential policy

The Government and the Riksdag should clarify Finansinspektionen's mandate and tools for macroprudential policy.

Household indebtedness

It is urgent that the Government, the Riksdag and responsible authorities adopt, as soon as possible, further measures to reduce the risks in the household sector by targeted measures within housing policy and tax policy. At the same time, macroprudential policy measures must also be adopted.

The banks' capital levels

Finansinspektionen should introduce, as soon as possible, a leverage ratio requirement for the major Swedish banks of 5 per cent.

Finansinspektionen should set the countercyclical capital buffer value at 2.5 per cent with the aim of increasing banks' resilience.

The major banks' liquidity risks 

Finansinspektionen should set Liquidity Coverage Ratio (LCR) requirements in Swedish kronor for the major banks. The requirement should be set to at least 60 per cent.
Finansinspektionen should set LCR requirements in all significant currencies for the major Swedish banks.
The major Swedish banks should continue to reduce their structural liquidity risks and continue to attain a Net Stable Funding Ratio (NSFR) of at least 100 per cent.
The major Swedish banks should report their LCRs in Swedish kronor and other significant currencies at least once a quarter.

The major Swedish banks should report their Net Stable Funding Ratios (NSFR) at least once a quarter.

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