Financial Stability December 2007. Financial stability in Sweden is sound at present However, the...
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Transcript of Financial Stability December 2007. Financial stability in Sweden is sound at present However, the...
Financial StabilityDecember 2007
Financial stability in Sweden is sound at present
However, the banks’ resilience to unexpected, negative events has declined somewhat
Surrounding risks have grown
Financial stability is sound
The Swedish banks are financially
strong
Profitability is favourable
Borrowers are financially strong, this includes companies as well as households
Substantial profitability and low loan losses
Totalled over four quarters, all four major banks, SEK billion
Sources: Bank reports and the RiksbankChart 3:1
-20
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Profit before loan lossesLoan lossesProfit before loan losses according to IFRS (International financial reporting standards)
Somewhat lower resilience
Credit risks have increased Increased lending to the Baltic
countries Margins on lending have fallen
Stress tests confirm the assessment
Associated risks have increased
Risks in financial markets have grown
Risk of a sudden slowdown in the Baltic countries
Risk of price adjustment in commercial property
Risk that house prices and household indebtedness will increase more quickly than incomes
Shocks in the interbank marketThe difference between the interbank rate and treasury bills in
2007, basis points
Source: Reuters EcoWin
Chart 1:2Note. The differential is calculated as the difference between the three-month interbank rate and the three-month treasury
bill rate in the respective country
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100
150
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jan feb mar apr maj jun jul aug sep okt nov dec
Sweden Euro area USA UK
Investors demand higher compensation for risk
Credit spreads for corporate bonds in Europe, percentage points
Source: Reuters EcoWinChart 1:5
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AAA BBB High-yield
Note. Definition by Moody’s and Merrill Lynch. High-yield is classified by Moody’s/Standard & Poor’s as Ba/BB or
lower.
Large deficits in the Baltic countries’ current accounts
Current account as percentage of GDP, per cent, totalled over four quarters
Source: Reuters EcoWinChart 2:25
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-15
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Estonia Latvia Lithuania
Substantial rise in inflation in the Baltic countries
Harmonised index for consumer prices, annual percentage change
Source: Reuters EcoWinChart 2:26
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6
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12
15
00 01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
High levels of credit growth in the Baltic countries
Household borrowing in the Baltic countries, annual percentage change
Sources: National central banks
Chart 2:28
-20
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120
140
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Estonia Latvia Lithuania
Household indebtedness and house prices increasing at a
high rate in SwedenAnnual percentage change
Sources: Statistics Sweden and the Riksbank
Chart 2:10
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dec-03 dec-04 dec-05 dec-06 dec-07
Loans from mortgage institutions House price
Household debts and interest expenditure
in relation to disposable incomePer cent
Sources: Statistics Sweden and the RiksbankChart 2:8
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120
160
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82 86 90 94 98 02 06 10
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Debt ratio (left scale) Interest expenditure ratio (right scale)
Low required rate of return on property
Direct earnings requirement for office premises in city centres, per cent
Sources: Newsec AB and Reuters EcoWin
Chart 2:20
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81 83 85 87 89 91 93 95 97 99 01 03 05 07
Stockholm Göteborg Malmö Five-year government bond
Financial stability in Sweden is sound at present
However, the banks’ resilience to unexpected, negative events has declined somewhat
Surrounding risks have grown