Governor Ingves at the Riksdag Committee on Finance: Hearing on financial stability
"The economic vulnerabilities have become even greater during the pandemic.” Riksbank Governor Stefan Ingves said today when he participated in the annual open hearing of the Riksdag Committee on Finance, which dealt with vulnerabilities in the light of increasing debts among households and commercial property companies. In addition to the Riksbank Governor, others taking part in the hearing included Minister for Financial Markets Max Elger, Finansinspektionen’s Director-General Erik Thedéen, and Swedish National Debt Office Director-General Karolina Ekholm.
Date: 01/02/2022 09:00
Speaker: Governor Stefan Ingves
Place: Sveriges Riksdag, Andrakammarsal (Second Chamber) or Online
Mr Ingves emphasized that prices of a variety of assets have increased during the pandemic. At the same time, the debts of both households and property companies have risen. The price trend in the housing market has been particularly noteworthy, said Mr Ingves, and pointed out at the same time that a number of new trends affect the risk spectrum in the commercial property market. The transition from physical trading to e-commerce has been accelerated during the pandemic, and increased teleworking can lead to changes in the way companies use office space. These trends may in turn affect the demand for such premises and could ultimately lead to more vacancies, lower rent levels and falling property values, Mr Ingves pointed out.
The focus must now be on addressing growing imbalances
Mr Ingves underlined that overall economic policy needs to focus more on counteracting the risks of growing indebtedness. The most appropriate approach is to use targeted structural measures, well designed financial regulation and macroprudential policy. “Resolving the fundamental problems linked to the housing market and high household indebtedness will requires broad reforms in housing and tax policy”, commented Stefan Ingves. If they are not implemented to the necessary extent, the need for macroprudential policy measures will increase. It is also important that the banks properly account for the risks associated with lending to commercial properties.