LN presentation Swedbank Sept2911
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Transcript of LN presentation Swedbank Sept2911
Lars Nyberg, 29 September 2011
Sweden’s Lessons from
Financial Crises
Global Interdependence Center Conference, Stockholm
The 1990-94 financial crisis in Sweden
Policy and bank evolution between the crises
The global financial crisis in Sweden
Comparisons and lessons learned
Rapidly falling demand around 1990 put Sweden and her banks under severe stress
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GDP growth (left-hand axis)
After-tax real interest rate(left-hand axis)
Private credit growth (right-hand axis)
1 2 3
In the fall of 1992, policymakers decided on far-reaching and acute measures
20-30 September: Bi-partisan austerity
packages I and II
16 September: 500 % interest rate
24 September: General bank
guarantee
19 November: Floating krona
9 September: Gotabanken guarantee
18 December: Parliamentary decision on Bank Support Authority
15 Januari: Inflation target
August: Foundation of Securum
August September October November December January
Fiscal Policy
MonetaryPolicy
Financial Stability
The 1990-94 financial crisis in Sweden
Policy and bank evolution between the crises
The global financial crisis in Sweden
Comparisons and lessons learned
After the acute phase of the crisis, important structural reforms were made
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Fiscal Policy
Monetary policy
Financial Stability
Fiscal policy framework
Inflation targeting
Independent central bank
Financial Stability Report
Fiscal consolidation
Deregulation and competition fostering
Basel II III
Sustainable pension system
Crisis management exercises
Inattention: No law for bank resolution
The fiscal policy framework has supported sound public finances
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1995
1996
1997
1998
1999
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2001
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2008
2009
2010
Public debt/GDP An explicit surplus target: 1 percent of GDP on average over a full business cycle
A three-year rolling nominal ceiling for central government expenditures (including pension system)
Balanced municipal budgets
A strict, top-down budgetary process
…in contrast to those of many other countries
Source: IMF WEO april 2011
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USA
Grekland
Irland
Italien
Portugal
Spanien
Public debt, percent of GDP
…and become dependent on market funding
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500
1 000
1 500
2 000
2 500
3 000
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Foreign Currency SEK
Market funding of major Swedish banks, SEK billion
Banks have truly become internationally exposed
Breakdown of the major Swedish banks’ profits before loan losses, 2010
The major Swedish banks’ loan losses, SEK billion per quarter
The 1990-94 financial crisis in Sweden
Policy and bank evolution between the crises
The global financial crisis in Sweden
Comparisons and lessons learned
The Riksbank has combatted the crisis with low repo rates and liquidity measures
Central bank balance sheets, percent of GDP
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ECB Federal Reserve Riksbanken
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Riksbank’s policy interest rate, percent
The Riksbank’s SEK and USD liquidity facilities were phased out in 2010
Riksbank’s extraordinary liquidity measures, MSEK
In the fall of 2008, Government and Riksbank intervened in close coordination
6 October: Extended deposit
insurance
1 October: First USD auction
18 September: T-bill issue to cover shortage
September October November December
Govern-ment
Riksbank
8 October: Liquidity facility
for Kaupthing
20 October: Guarantee program
and bank support law
27 October: Liquidity facility
for Carnegie
10 November: Nationalization
of Carnegie
16 December: Swap line with
Latvia
6-8 October: 3-6-months SEK facility
The 1990-94 financial crisis in Sweden
Policy and bank evolution between the crises
The global financial crisis in Sweden
Comparisons and lessons learned
Crises are different
Large government debt in Sweden
No major international crisis
Domestic real estate crisis
Swedish bank solvency problems
Sound public finances in Sweden
European debt problems
World liquidity crunch
Swedish bank liquidity problems
1990-1994 2007-
Important differences between the current situation and that of 2007-08
Unexpected situation
Global crisis
International liquidity crunch
Evolving, expected crisis
Crisis in EU and USA
Sovereign debt problems
2007-2008 2010-