Monday 18 December 2017

Swedish debt burden reaches record levels

Johan Carlstrom and Niklas Magnusson

Swedish households need to cut back on borrowing as their debt burdens reach record levels this year, the central bank and government said.

In joint statements to the parliament finance committee in Stockholm, Riksbank Governor Stefan Ingves and Financial Markets Minister Peter Norman said yesterday that consumer indebtedness in the largest Nordic economy must come down.

The nation's proposal to tighten bank rules and empower the financial regulator will help "create better potential for reducing risks associated with high household debt," Mr Ingves said in a slide supporting his speech.

Sweden last month unveiled plans to raise capital requirements for Sweden's biggest banks from levels that already exceed standards elsewhere, arguing the clampdown is necessary to protect Swedes from a financial industry that's grown to four times the size of the economy. Having a large bank system has left Sweden "vulnerable" to financial shocks, Mr Norman said.

In an effort to deleverage the economy, the Financial Supervisory Authority is looking into introducing an amortisation requirement if debt burdens continue to swell, FSA Director-General Martin Andersson said yesterday.

Since the global financial crisis started more than five years ago, the FSA has taken many steps to try to curb financial industry risks, in part after credit growth exceeded levels the government said were safe.

In October 2010, the regulator capped mortgages at 85pc of a property's value and this year raised risk weights on mortgage assets to 15pc from as low as 5pc.

Household indebtedness will reach 177pc of disposable incomes in 2015, the central bank estimates.

Irish Independent

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