Swedish banks able to survive increased losses: Riksbank

While Swedish banks are expected to suffer increased losses due to the credit crisis through 2010, the Riksbank believes the country’s banks have sufficient capital to deal with the situation.

Swedish banks will lose €16 billion ($22.5 billion) this year and next because of the credit crisis, the Riksbank estimated on Tuesday.

The losses, worth 170 billion kronor, will arise mainly from activities in the Baltic countries and eastern Europe, the Riksbank said.

But it added that big Swedish banks such as Nordea, Handelsbanken, SEB and Swedbank were well-placed to weather the losses.

“The credit losses will increase in the years to come,” the bank’s governor Stefan Ingves said in a statement.

“Nevertheless, the banks have sufficient capital to deal with losses of this size and are well capitalized compared to their international competitors.”

The Riksbank cautioned, however, that the main scenario outlined in the latest version of its Financial Stability report is fraught with uncertainty, and that a number of risk factors could contribute to a greater deterioration than expected for the balance sheets of Sweden’s major banks.

Specifically, the bank cited the possibility of a longer and slower than expected economic recovery, as well as a continued worsening of economic conditions in the Baltic countries.

SEB suffered losses of 2.4 billion kronor in the first quarter and Swedbank lost 6.8 billion kronor, of which 4.2 billion in Baltic countries and 1.4 billion in Ukraine.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Sweden’s central bank keeps interest rate steady at zero percent

Sweden’s central bank has predicted that its interest rate, which has not edged above a historic zero for over six years, will remain unchanged for three more years.

Sweden's central bank keeps interest rate steady at zero percent
Sweden's central bank has presented its latest monetary forecast. Photo: Fotograferna Holmberg/TT

“Despite the spread of the coronavirus having increased again, the Swedish economy has developed relatively well, supported by extensive economic policy measures,” said the central bank, the Riksbank, in its latest monetary policy report on Tuesday morning.

“The economic outlook is slightly brighter now than it was in February, but the pandemic is not over, and inflationary pressures remain low. Monetary policy needs to remain expansionary to support the economy and for inflation to be close to the target of two percent more permanently,” it added.

The Riksbank said it would continue to purchase assets within a 700 billion kronor framework as previously decided, and hold the country’s key interest rate, the repo, at zero percent. It predicted, as before, that the repo rate would remain at zero until at least 2024, and said it could also cut it below zero if necessary to stimulate inflation.

The bank took the landmark decision to slash the rate below zero in February 2015, hoping that the strategy would boost inflation to raise the price of everyday goods and services which had been stagnant, and therefore improve the Nordic nation’s economic prospects. Almost five years later, it was raised from -0.25 to zero in December 2019.

Sweden’s GDP is expected to grow 3.7 percent this year, which is higher than the Riksbank’s previous forecast of 3.0, released in February, and 3.6 percent next year (lower compared to the February forecast of 3.9). It expects Sweden’s unemployment rate to land at 8.6 percent this year, and recover slightly to 7.7 percent next year.

“Towards the summer, GDP growth is expected to gear up in Sweden and abroad,” said the bank. “However, the differences between various sectors and groups on the labour market are expected to remain substantial. The Riksbank assesses that total economic activity in Sweden will approach more normal levels towards the end of the year.”