Sveriges Riksbank The Swedish Financial...

Sveriges Riksbank

The Swedish Financial Market

T H E S W E D I S H F I N A N C I A L M A R K E T 1 9 9 7

Introduction 2

The financial market 3

A deregulated market 3

The Riksbank’s role 4

Monetary management 4

Securities market 5

Money market 6

Bond market 7

Stock market 10

Overnight and repo markets 11

Financial intermediaries 12

Banks 14

Credit market companies 17

Other intermediaries 19

The new pension system 20

The payment system 21

The Riksbank and the payment system 21

Payment instruments 22

Agents 23

The RIX system 23

Developments in the RIX system 24

Statistical appendix 25

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Introduction

The Riksbank publishes this annual review to provide a regularly accessible account

of the function and structure of the Swedish financial market.

Notable changes in the past year are presented. A more comprehensive statisti-

cal picture is published in the Riksbank’s Statistical Yearbook and the monthly

Financial Market Statistics.

This overview is based on the Riksbank’s financial market statistics, which

are compiled with the primary purpose of monitoring monetary policy effects on the

financial market as well as the financial system’s stability.

The account is based mainly on statistics produced at the Riksbank. The use

of other sources is acknowledged in the text.


The financial market refers here tothe whole of the financial system,which besides the financial marketsas such includes financial instru-ments and institutions. The primaryfunctions of the financial system arethe redistribution of saving, riskmanagement and the provision ofeffective payment facilities. The sys-tem includes the securities marketsas well as intermediaries, that is,banks and other institutions thatbring together savers and those whoneed to borrow for consumption orinvestment.

A deregulated market

The financial market evolves in con-junction with general economicdevelopments, fiscal and monetarypolicy and rule changes.

Prior to 1985 the Swedish finan-cial market was strictly controlled.The regulatory measures were usedas instruments for monetary policy;credit restrictions in the form ofinterest rate regulations and creditceilings, statutory investment ratiosand minimum liquidity ratios areexamples. Today the Riksbank’smonetary policy instrument is therepo rate,1 while the primary func-tion of the regulatory system is topromote the financial system’s sta-bility and effectiveness.

Today’s financial system is char-acterised by efficient money andbond markets, with a large array offinancial instruments (derivatives)that can be used to cover financialrisks. The largest borrowers in themoney and bond markets are thecentral government and housinginstitutions. A characteristic featureof the Swedish financial market is

1 The rate at which the Riksbank arranges weeklyliquidity transactions with its counterparties.

The Financial Market

the mediation of private savings.The non-bank public (firms andhouseholds) participates in themoney and bond markets to only alimited extent as lenders and hardlyat all as borrowers. The creditrequirements of these borrowers aremet mainly by financial institutionssuch as banks, housing intermedi-aries and finance companies. Thisreflects the fact that the informationcosts involved in lending to house-holds and small or medium-sizedfirms are too high for the money andbond market. Indirectly, householdsand firms are a major source ofcredit via their savings in banks,investment funds and insurance insti-tutions.


Sveriges Riksbank, Sweden’s centralbank, is responsible for monetaryand exchange rate policy, as well asfor overseeing and promoting stabil-ity in the financial system. The over-sight of stability concerns the systemas a whole, while the supervision ofeach institution is a matter for theFinancial Supervisory Authority.

The objective of monetary poli-cy is to keep the value of money sta-ble. The Riksbank’s specific mone-tary policy target is to keep the rateof CPI inflation over the longer termat 2 per cent, with a tolerance inter-val of ±1 percentage point.

For a period prior to 19 Novem-ber 1992 the Riksbank operated afixed exchange rate regime (with thetheoretical ecu as the benchmark) asan intermediate target, with pricestability as the ultimate objective.The Riksbank then conducted mon-etary policy so as to defend the fixedexchange rate, by buying and sellingkronor in the foreign exchange mar-ket. Adjustments to the marginal rateof interest on bank borrowing fromthe Riksbank were used to managethe flow of foreign exchange so thatthe exchange rate remained within

The Riksbank’s role

a specified interval on either side ofthe benchmark.

Following the transition to a flex-ible exchange rate regime, the Riks-bank has not formulated a newintermediate target. Instead, variousindicators are used to assess the infla-tionary pressure in the economy.The indicators of real economicactivity include industrial capacityutilisation, unemployment and thedevelopment of wages. Examples offinancial indicators are the moneysupply and lending by financial insti-tutions. In the assessment of infla-tionary pressure, the indicators arenot viewed as having an inherentorder of importance.

Monetary management

The feasibility of influencing infla-tion by means of monetary policyrests on the central bank’s ability tocontrol the market’s shortest interestrate. The instrumental system formonetary policy consists of the inter-est terms for the banking sector’sovernight liquidity position (surplus

2 The current rates at which counterparties (thebanks) can borrow from and deposit in the Riks-bank.

or shortage) with the Riksbank,together with the amount of liquidi-ty and the interest terms for this thatthe Riksbank offers the market,mainly in the form of the weeklyrepo transactions. The Riksbank’slending and deposit rates2 representthe limits for the level of the short-est market rate, while the repoedamounts and their interest terms,together with the Riksbank’s man-agement of liquidity, determine thelevel of the overnight rate inside thiscorridor. The Riksbank uses theweekly repos to signal where itintends the overnight rate to be inthe coming week.

By determining the interest ratefor shortest transactions, the Riks-bank also influences the market ratesfor longer maturities. In that loansand deposits in the overnight marketare always an alternative to transac-tions with a longer duration, thelonger rates of interest are inevitablyaffected by expectations of the futurelevel of the shortest rates.

The securities market is an umbrellaterm for the various markets inwhich interest-bearing securities andequity are traded. Interest-bearingsecurities are traded at short-terminterest rates in the money marketand at longer rates in the bond mar-


Securities market

ket. An additional activity in thesemarkets is trading in derivativeinstruments.

The short-term interest rates(money rates) reflect the currentstance of monetary policy and indi-cate the market’s assessment of the

1993 1994 1995 1996 1997

The Riksbank´sinstrumental rate

Treasury bill rate (3-month)

Treasury bond rate(10-year)

0

2

4

6

8

10

12

Domestic interest ratesPer cent

monetary stance in the near future.The longer interest rates (bond rates)primarily indicate the expectedfuture rate of inflation and mirrorlong-term confidence in economicpolicy.


Money marketShort-term interest rates normallydenote rates on loans with a dura-tion of up to twelve months. Themoney market is therefore defined ascomprising trade in securities with amaturity of up to one year.

The largest borrowers here arethe central government and thefinancial sector; the non-financialsector undertakes very little financ-ing in the money market. The dom-inant instrument in this market istreasury bills, issued by the NationalDebt Office.

One reason why the NationalDebt Office borrows in this marketagainst treasury bills is to managefluctuations in the government bor-rowing requirement. Housing insti-tutions borrow here primarily so thatthe terms on which they obtain loansmatch those for their on-lending tocustomers, thereby avoiding or min-imising interest rate risks. Theirmoney-market borrowing tends to

Swedish government

Housing institutions

Banks

Other financial institutions

Companies, local govts.

Money market issuersStock, SEK billion

0

100

200

300

400

500

1993 1994 1995 1996 1997

National Pension Fund

Insurance companies

Banks

Nonresidents

Companies, others

Money market investorsStock, SEK billion

0

100

200

300

400

500

1993 1994 1995 1996 1997

rise in periods when their customersopt for new or renewed loans ateither flexible or short-term rates.

The largest investors in themoney market are banks and non-financial companies. Nonresidents

are also active in this market but agrowing proportion of their invest-ments is being placed in securitieswith longer maturities (bonds).

vestors required a higher return.From 1994 onwards the differentialhas decreased; in 1996 and 1997 itfluctuated around 0.5 percentagepoints. In 1998, however, the differ-ential has increased. In recent yearsa growing proportion of the currentspread reflects the circumstance thathousing bond liquidity has contin-ued to be comparatively low, partlyon account of diminishing volumes.

Active trading in the bond mar-ket is undertaken mainly in treasurypaper and a number of standardised(benchmark) issues by housing inter-mediaries. Private bonds are issuedby banks and housing intermedi-aries; they are aimed primarily atprivate individuals and other small


Bond marketThe securities issued and traded inthe bond market have maturities ofat least one year. By far the largestborrowers here are the central gov-ernment and housing intermedi-aries. The stock of bonds issued byother categories of borrower is com-paratively small. Only a minor shareof corporate borrowing, for exam-ple, is undertaken in this market.

Government borrowing in thebond market, via the National DebtOffice, is undertaken to finance thebudget deficit and any other unfi-nanced expenditures approved bythe Riksdag (Sweden’s parliament).

The housing institutions issuebonds to finance their lending to thenon-financial sector, which uses thefunds mainly to finance real estate.

The rate for government (trea-sury) bonds is sometimes called therisk-free rate. The interest rate dif-ferential between treasury and hous-ing bonds is a consequence of thelatter’s higher credit risk and oftenlower liquidity. The main reason forthe large differential in 1992-93 wasthat loan losses incurred by housinginstitutions during the so-calledfinancial crisis weakened the solven-cy of these institutions, so that in-

1993 1994 1995 1996 1997

Spread between treasury bond and housing bond (5-year) ratesPercentage points

2.0

1.5

1.0

0.5

0.0

Bank holdings of SEK securities

Instrument, SEK billion Change Stockin 1997 end 1997

Treasury bills –22 17Certificates issued by:

Housing institutions 12 37Banks 3 3Other financial institutions 1 2Companies, local govts., others –1 7

Treasury bonds –1 47Bonds issued by:

Housing institutions –45 101Banks 1 4Other financial institutions 1 4Companies, local govts., others –1 14

Total –52 236

investors and are traded on theStockholm Exchange, as a rule withthe issuer acting as market maker byoffering two-way prices. Instrumentswhich are administered by the issuer(Caisse bonds and National DebtOffice saving accounts, for example)are usually also regarded as a formof private bonds.

The major bond market in-vestors are the institutions that man-age the greater part of the econo-my’s savings, that is, the NationalPension Fund, insurance companiesand banks. In recent years, nonresi-dent investors have been building upholdings of Swedish bonds; at theend of 1997 they owned just over 14per cent of the total stock.


by a tendency for housing institu-tions to arrange more of theirfinancing in the bond market; theoverall stock of outstanding bondswas virtually unchanged.

The 1997 turnover of the Riks-bank’s primary dealers (banks andsecurities companies appointed ascounterparties for the Riksbank’smarket operations) totalled SEK

The money market, which is smallcompared with the bond market,contracted during 1997 in connec-tion with a reduction of governmentshort-term borrowing against trea-sury bills. During the first half of1998 the National Debt Office pro-vided bills in exchange for bondswith a short remaining life; this mar-ket management has resulted in arenewed increase in the outstandingstock of treasury bills and caused themoney market to expand to its high-est level in two years. The size of thebond market did not change from1996 to 1997. A continued reductionin the stock of housing bonds wasoffset by increased bond borrowingby the government in particular butalso by banks and firms. In the earlypart of 1998 decreased governmentbond borrowing was accompanied

National Pension Fund

Insurance companies

Banks

Nonresidents

Companies, others

Bond market investorsStock, SEK billion

0

400

800

1,200

1,600

2,000

1993 1994 1995 1996 19971993 1994 1995 1996 1997

Swedish government

Housing institutions

Banks

Other financial institutions

Companies, local govts

Bondmarket issuersStock, SEK billion

0

400

800

1,200

1,600

2,000

Issuers in money and bond markets

SEK billion 1995 1996 1997

Money marketSwedish government 202 189 147Housing institutions 104 137 129Banks 9 15 20Other financial institutions 15 14 15Companies, local govts. 16 23 36

Total 346 378 347Bond market

Swedish government 698 746 802Housing institutions 792 660 588Banks 27 28 40Other financial institutions 36 44 44Companies, local govts. 61 72 76

Total 1,614 1,550 1,550

50,000 billion. The increase of justover 5 per cent from 1996 camemainly from trading in treasurybonds. Borrowing by the NationalDebt Office has been concentratedto a smaller number of issues thatare sufficiently large to attractinvestors who manage their portfo-lios actively; among other things, thishas led to increased trading.

interbank interest rates, while thoseunderlying long interest-relatedproducts are treasury and housingbonds. Contracts are written as arule in units of SEK 1 million. Inaddition to the standardised instru-ments, there are interest-relatedOTC derivatives; these are con-structed by banks to meet the needsof the final customer and are nottraded in organised markets, neitherare they normally cleared for settle-ment, as is done by OM.

Another category of derivatives


-

Trade in derivatives (forwards andoptions), which enables investors toadjust the level of risk in differentinvestments, accounts for a large partof market turnover. OM StockholmAB is an authorised exchange andclearing organisation for trade inSweden in both interest- and equity-related derivatives. The instrumentsunderlying short interest-relatedderivatives in OM trading are 6-month treasury bills and 3-month

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Spot

Futures, repos

1993 1994 1995 1996 1997

Money market turnoverSEK billion

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Spot

Futures, options, repos

1993 1994 1995 1996 1997

Bond market turnoverSEK billion

is swaps, which are normally used tomanage risk exposure when bor-rowed funds are converted intoanother currency (exchange rateswap) or another interest rate (inter-est rate swap). Swaps also feature inactive debt management to modifya debt portfolio’s cash flow. Swapsare arranged and mediated interna-tionally by large banks. Since theirintroduction in the early 1980s swaparrangements have become increas-ingly sophisticated and trading isnow very widespread.


Stock marketIn recent years the stock market hasbeen of growing importance as asource of risk capital for both thefinancial and the non-financial sec-tor. In recent years, new issues andintroductions on the StockholmStock Exchange have raised aroundSEK 20 billion a year.

The Swedish centre for spot tradingin shares is the Stockholm StockExchange, which was converted intoa limited company (StockholmsFondbörs AB), owned by membersand issuers, on 1 January 1993. Theexchange is under the surveillance ofthe Financial Supervisory Authority.The earlier exchange monopoly wasabolished from the same date, whichmeans that, in addition to the exist-ing competition from exchangesabroad, where shares in largeSwedish companies are traded, theStockholm bourse may have to com-pete with other market places inSweden.

In recent years a number ofunofficial lists have been introducedfor shares that are traded locallythrough brokers or smaller market-places. This new arrangement hasbeen used by SBI (StockholmsBörsinformation) and Innovation-

Market for channelling risk capitalto comparatively small companies.Trading in unlisted shares has alsobeen promoted by the StockholmStock Exchange, which has provid-ed access to its SAX system for itsAIM (Nya Marknaden) as well as for‘Share Market’ (Aktietorget).

Share trading via the Internet,mainly for private individuals,expanded rapidly during 1997. Ser-vices for entering orders via theInternet are now provided by sevenmembers of the Stockholm Ex-change. The transactions costs to thecustomers are considerably lowerthan those for trading through secu-rities companies and banks.

Automatic ordering facilitieswere introduced in 1996; briefly,they enable customers to placeorders via computer systems andhave them transmitted immediatelyby members to the Exchange’s trad-ing system. Eight members of theExchange were providing such facil-ities at the turn of 1997.

Membership of the StockholmExchange has been rising steadily inthe past five years. Seven new mem-bers joined in 1997, of which threeare remote members. Of the total offorty-eight members at the turn of1997, fifteen were remote members.

Plans to merge OM and theStockholm Stock Exchange were

Stock market

1993 1994 1995 1996 1997

Listed sharesTurnover, SEK bn 339 659 665 918 1,346Year-end market value, SEK bn 892 977 1,180 1,688 2,164Change in General Index, per cent 52 5 18 38 24Companies listed at year end, no. 205 228 223 229 261

Risk capital supply, SEK bn 27 42 26 24 17

Source: Stockholm Stock Exchange.

announced towards the end of 1997.OM’s offer was accepted by theExchange’s owners and the mergerwas completed at the beginning of1998. As a result, Stockholm StockExchange and OM have been re-organised as a single commercialentity, Stockholm Exchanges. Thenew arrangement provides moreflexible links between the spot andderivative markets in equity.

Activity on the Stockholm Exchangehas been high in recent years. Dur-ing 1997 aggregate turnover on allthe Exchange’s lists rose 47 per centto SEK 1,346 billion. The majorpart of this increase reflects the risein share prices, which averaged 24per cent. The velocity of turnover(annual turnover in relation to thetotal value of all listed shares) wasunchanged at the high level of 66per cent.

The total market value of all list-ed shares at the turn of 1997 wasSEK 2,164 billion. At the year-endthe number of listed companies,including those waiting to be intro-duced, totalled 269, a net increase of32.

In 1998, share prices continuedto rise until the summer; the high inJuly was 32 per cent above the levelat the beginning of the year. The

Exchange (SOX), affiliated with theStockholm Stock Exchange, is usedfor bond trading mainly by smallcompanies and private individuals.In 1997 SOX turnover remained atthe lower level of about SEK 12 bil-lion that had been established in1996. At the year-end the SOX listcomprised 253 loans from 20 issuers,with a total market value of SEK 69billion.

- Trading in Sweden in options andfutures as equity derivatives is large-ly arranged by OM Stockholm AB.The equity derivatives offered by thisexchange relate almost exclusively toSwedish equities and to the ex-change’s equity index. Contractshere are written in units of 100shares.

Overnight and repo markets

Efficient overnight and repo marketsare a major component of the


steep fall in the following monthsresulted in a negative trend from theturn of 1997, though there wassome recovery towards the end ofOctober.

Nonresident investors continue toaccount for a substantial share ofexchange trading: 29 per cent in1997. Their holdings, moreover, re-present approximately one-third of the total market value of the listed shares. During 1997, however,Swedish shares were sold back bynonresidents to such an extent thatimports exceeded exports by almostSEK 6 billion. This was followed bya return to a stronger purchasingtendency in the early part of 1998.

The automated SAX system (Stock-holm Automated eXchange) is usedfor trading on the Exchange not onlyin shares but also in convertibleloans, premium bonds and interest-bearing bonds. The Stockholm Bond

Total turnover, SEK billion (left scale)

General Index, annual percentage change (right scale)

0

200

400

600

800

1,000

1,200

1,400

1,600

Source: Stockholm Stock Exchange.

19971996199519941993

0

10

20

30

40

50

60

Listed shares: turnover and indexSEK billion and per cent

Swedish financial system. Bank usethe overnight market to manage thedaily fluctuations in their liquidity.

The overnight lending rate isconfined inside the interest rate cor-ridor which, as mentioned earlier, isdecided by the Riksbank. The Riks-bank adjusts the corridor so that itsmid-point corresponds approxi-mately to the desired level of theovernight rate. This gives banks anincentive to operate in the overnightmarket; they invest surplus liquidityhere and borrow to cover a liquidityshortage. For the banks, this is moreadvantageous than the alternative ofdepositing surplus liquidity in theRiksbank and borrowing at the Riks-bank’s lending rate. Besides banks,the players in the overnight marketinclude housing intermediaries andlarge manufacturing companies, forexample, but for them the interestterms are less favourable as a rulethan for the banks. The NationalDebt Office participates on the sameterms as the banks and can, forexample, use overnight operations toparry effects of budgetary fluctua-tions on liquidity.

Repos, which are basically loanscollateralised with securities, are analternative to overnight transactionsand carry less risk. In its simplestform, a repo involves one partytransferring securities for a pre-arranged period to the other party,who lends capital by paying for thesecurities. Repos can also be used fortaking positions in interest ratefutures, that is, with a view toincreasing the return on a securitiesportfolio.


Companies can obtain extraneouscapital (as opposed to equity capital)by borrowing either in the securitiesmarket or via financial intermedi-aries in the credit market. Financialintermediaries are specialists in theinformation-intensive assessmentand monitoring of risks involved inextending credit to households andto small and medium-sized firms.The costs involved in making suchassessments are often too great forthe securities market. Small andmedium-sized firms in Swedentherefore obtain finance almostexclusively via banks, housing insti-tutions and finance companies.

The financial intermediaries, acategory that includes insurancecompanies and securities companiesas well as credit institutions, are basi-cally engaged in the transformationof assets. The structure of the sav-ings invested in these intermediaries(their liabilities) therefore differs, interms of maturities and risks, fromthat of their assets.

Financial intermediaries

1993 1994 1995 1996 1997

Lending by credit institutions to non-bank publicNet flow, SEK billion

Total, incl. some credit marketcompanies (left scale)

Banks (right scale)

Housing institutions (right scale)

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

500

600

700

800

900

1,000

1,100

1,200

The credit market deregulation inthe mid 1980s had considerable con-sequences for the operations offinancial intermediaries and con-tributed to structural adjustments inthe form of take-overs and mergers,above all in the bank sector. This wasaccompanied by a proliferation ofother institutions such as financecompanies. With the bank crisis andits effects in the early 1990s, thestructure of the credit marketchanged once more. The number offinance companies decreasedsharply, accompanied by mergersand acquisitions that resulted in

fewer banks with subsidiaries. Withone exception, however, some moreyears passed before the changesaffected the major players. Nord-banken AB and Merita Abp werecombined in 1997 under Merita-Nordbanken, a holding companylocated in Finland; the two bankscontinue to exist as legal entitiesunder the holding company andNordbanken has an indirect link tothe euro area via Merita’s operationsin Finland. Svenska HandelsbankenAB and Stadshypotek AB alsomerged in 1997 and HandelsbankenHypotek AB is now a subsidiary ofStadshypotek AB. Östgöta EnskildaBank AB was taken over by Den

ponents of the state housing loansthat had previously been carried onthe government balance sheet weretransferred to the group of housinginstitutions. In the group of othercredit market companies, structuralrearrangements among the formerfinance companies have led, as men-tioned earlier, to sharp reductions intheir number and size.

With the deregulation of credit,the provision of credit has virtuallyceased to depend on the purpose ofthe loan; instead, the institutionsbase their assessments on the bor-rower’s ability to service and repaythe loan. It is now primarily the col-lateral and the duration of the inter-est rate terms for the loan that deter-mine the institution to which theborrower applies. Thus it is quitecommon for house mortgage loansto be obtained in order to finance


Danske Bank AS and subsequentlytransformed into a branch. Fören-ingsSparbanken AB was likewiseestablished in 1997 by mergingSwedbank (Sparbanken Sverige AB)and Föreningsbanken AB. This wasa accompanied by the merger ofFöreningsbanken Kredit AB and ABSPINTAB. In 1998, moreover, SEBAB has acquired Trygg Hansa ABand subsequently closed downTrygg-Banken AB.

Government moves to reduce orterminate State ownership in thefinancial sector have also left theirmark. During the bank crisis theState and the banks each set up acredit market company—SecurumFinans AB and Retriva Kredit AB—to which problem loans and assetswere transferred for management.These companies have now beenlargely closed down. In 1995, com-

Balance sheet totals and assets of financial institutions, end 1997

SEK billion Balance Loans to non- Other Othersheet total bank sector loans Securities Equity assets

Banks 2,150 842 625 341 96 246Housing institutions 1,218 1,008 165 5 10 30Other credit market companies 335 214 19 73 3 26Insurance companies 1,212 27 – 540 542 103National Pension Fund 583 22 – 498 38 25Securities companies 25 7 – 3 4 11Total 5,523 2,120 809 1,460 693 441Mutual funds 364 51 293 20

the purchase of a car or other con-sumer durables. In such cases theloan may be provided by either abank or a housing institution. Iden-tifying borrowing for consumption istherefore more difficult in Swedenthan in many other countries. A fur-ther complication is that credit stocksare regularly transferred betweenparent banks and their housing sub-sidiaries. The most representativepicture of consumption trends inSweden is accordingly provided by aweighted sum of lending by banksand housing intermediaries.

The legal construction of aSwedish financial intermediaryreflects certain distinguishing fea-tures of banks and housing institu-tions, for example. Today, however,it is mainly a way of guaranteeingthe financial system’s transparencyand security.


vide the full range of bank services,such as the mediation of paymentsand securities. For some time now,virtually all banks offer customersfacilities for doing banking businessvia the Internet in entities (Internetbanks) that are separated from therest of the bank. Together with newtechnology for bank vendingmachines, cash cards, et cetera, thismay ultimately replace traditionalbanking services.

Besides the core operations ofreceiving deposits and providingcredit, the banks perform an impor-tant function as payment intermedi-aries. Their daily discharge of pay-ment instructions, e.g. paying out aloan or crediting a child allowanceto a household’s deposit account,leads to wide fluctuations in cash liq-uidity. The banks can parry thesefluctuations by using the Riksbank’sdeposit and lending facilities. Differ-ences in liquidity between the banksare smoothed in inter-bank trading.This is reflected in short-term lend-ing and deposits between the banksand other financial institutions.

Following the deregulation of thecredit market, the banks set theirdomestic currency lending anddeposit rates (with some time lag) inrelation to changes in money marketrates. In this way, the banks have animportant role in the transmission ofmonetary policy to other parts of theeconomy. In addition to the reporate, other factors that banks consid-er when setting lending and depositrates are the ability of borrowers toservice and repay loans, which isinfluenced by the general economicsituation, and the competition fromother types of saving.

BanksBanks differ from other credit insti-tutions in that they finance illiquidloans (unmarketable, risk-bearingloans) with fully liquid funds deposit-ed by the non-bank public. Bankingoperations are regulated by theBanking Business Act, which servesamong other things to protect thefunds of depositors and promotefinancial market stability. In July1996 the State bank guarantee wasreplaced by a deposit guarantee thatis designed to strengthen consumerprotection for the non-bank public’sbank deposits. Deposits up to250,000 kronor are protected in theevent of bankruptcy. To finance thesystem, banks pay a fee to cover theestimated annual long-term cost.

The banks are the second largestgroup of lenders among financialinstitutions. The balance sheet totalfor all the banks at the end of 1997was SEK 2,150 billion, of whichfour banks contributed just over 80per cent.

The largest item in bank assets isloans to the non-bank public, aboveall to non-financial companies.Lending in foreign currency grew

No. of banks operating in Sweden

No. in 1997

Banks 124Swedish commercial banks 16Foreign commercial banks 21

subsidiaries 4branches 17

Savings banks 87

Most Swedish banks offer a com-prehensive range of services, includ-ing fund management and travelcurrency. They also trade in curren-cy and interest-bearing securities forcustomers as well as for their ownaccount. The bank sector in Swedenalso includes branches of foreignbanks as well as niche banks, whichtend to concentrate on deposits andoffer their services by telephone orthe Internet from a single office.Niche banks do not necessarily pro-

S-E-Banken 25%

Nordbanken 15%

Handelsbanken 28%

FöreningsSparbanken 19%

Foreign-owned banks 3%

Savings banks 3%

Other Swedish-owned banks 7%

Banks' balance sheet total, end 1997Total: SEK 2,150 billion

from around 10 to over 15 per centof the aggregate balance sheet total.Another reason for investing in secu-rities was the low level of capital ade-quacy (equity in relation to risk-weighted assets) on account of mas-sive loan losses; compared withadvances to the non-bank public, therisk associated with securities is lowerand can therefore be covered withless capital.


rapidly in the early 1990s but afterthe move from a fixed to a flexibleexchange rate these loans wererepaid in the course of 1993 and1994; since then, their proportion ofbank assets has been smaller (about10 per cent).

In connection with net loanrepayment by households and firms,during the bank crisis the banksincreased their holdings of securities

Other liabilities 17%

Swedish non-bank depositors 34%

Nonresident non-bank depositors 8%

Foreign banks 18%

Swedish financial institutions 10%

Issued securities 8%

Shareholder equity 5%

Banks' liabilities, end 1997Total SEK 2,150 billion, of

which 1,387 billion in

Swedish kronor and 763

billion in foreign currencies

Swedish non-bank borrowers 30%

Nonresident non-bank borrowers 9%

Foreign banks 14%

Swedish financial institutions 15%

Interest-bearing securities 16%

Other assets 16%

Bank's assets, end 1997Total SEK 2,150 billion, of which

1,472 billion in Swedish kronor and

678 billion in foreign currencies

0

9512 9603 9606 9609 9612 9703 9706 9709 9712 9803 9806

2

4

6

8

10

12

Lending rate Treasury bill rate (6-month)

22

44

66

88

1010

1212

Deposit rate

Average bank lending and deposit rates; treasury bill ratePer cent

0

500

1,000

1,500

2,000

2,500

All banks Commercial banks (incl. Swedbank from 1992 onwards)

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Balance sheet totalSEK billion


Whereas bank lending is direct-ed mainly at non-financial compa-nies, it is financed to a large extentwith deposits from the non-bankpublic. The development of depositsis highly dependent on the alterna-tives for household saving. This hasbeen particularly apparent since1995, in that deposits in niche banksand private bonds have given a bet-ter return than traditional bankaccounts. The generally strongercompetition is evident from the nar-rowing spread between short-termmarket interest rates and depositrates. In the past two years the steepupward trend in share prices and thepublic debate about the new pensionsystem have led to higher householdsaving in equity, mutual funds andvarious forms of insurance saving.The negative effect of this on banksaving lasted until the stock marketfall began in the second half of1998.

019971996199519941993

400

200

600

800

1,000

Local governments

Non-financial enterprises

Household sector

Nonresidents

Other, incl. residual

Bank depositsSEK billion

019971996199519941993

400

200

600

800

1,000

Local governments

Non-financial enterprises

Household sector

Nonresidents

Other, incl. residual

Banks’ loan portfolioSEK billion

Household sector’s financial assests

SEK billion December December Change1996 1997 per cent

1996-1997

Bank deposits 410 392 –4

National savings accounts 44 30 –32

National Debt Office accountsPrivate bonds 173 150 –13Premium bonds

National savings funds*168 262 56Other mutual funds*

in foreign currency 51 63 24Swedish listed shares* 315 392 24

Individual pension saving*290 333 15Insurance saving*

in foreign currency 18 19 6

*Source: Statistics Sweden.

for new credits has been notablysubdued in connection with the verylow level of residential construction.Moreover, compared with the early1990s, more saving by householdsand housing companies has takenthe form of advance loan repay-ment. Low demand for new credithas led the institutions to competemore strongly for the renewal of existing loans. Together withchanges in the ownership of certaininstitutions, this has resulted in size-able transfers of credits betweenthem.

Net loan repayment by housingcompanies continued in the latterpart of 1997 and the first half of1998. Household demand for creditrose, on the other hand, as fallinginterest rates were accompanied byrising sales of owner-occupied andtenant-owned dwellings, with anupward price tendency in the met-ropolitan regions. The house priceappreciation also provided room foradditional mortgage loans to financeconsumption and property mainte-nance.

The level of market interestrates, together with customers’expectations of the future level ofshort- and long-term rates, influencecustomers’ choices of fixed interestperiods and this in turn has conse-quences for the structure of thehousing institutions’ financing. Theduration of fixed interest periods isalso of importance for monetarypolicy transmission mechanism; thelonger the interest period, the moreit detracts from monetary policy’simmediate impact.


Credit market companies

Credit market companies, a categorydefined in legislation that came intoforce at the beginning of 1994, num-ber more than a hundred specialisedfinancial intermediaries, includingthe former intermediary institutionsand finance companies. The spherefor credit operations is delimited foreach institution or group of institu-tions in the articles of association,which are laid down by the Finan-cial Supervisory Authority.

The operations of the housing insti-tutions cover real estate financing,focusing primarily on residentialproperties. Loans are secured main-ly with real estate mortgages or localgovernment sureties. State creditguarantees are also used. Most ofthe housing institutions are ownedby banks.

The housing institutions havebecome the largest lending group inthe Swedish financial market; with80 per cent of the aggregate balancesheet total of credit market compa-nies, they are the market’s largestgroup of specialist institutions. Thereare eleven housing institutions, ofwhich the largest two—StadshypotekAB and AB SPINTAB—account forover half of this group’s balancesheet total, which at the end of 1997was SEK 1,218 billion.

Lending by the housing institu-tions has slackened markedly inrecent years, partly because demand

Bokredit i Sverige AB 0.5

Föreningsbanken Kredit AB 38.7

Handelsbanken Hypotek AB 115.1

Konungariket Sveriges stadshypotekskassa 91.3

Nordbanken Hypotek AB 119.0

S-E-B BoLån AB 102.5

SkandiaBanken Bolån 4.3

Aktiebolaget SPINTAB 265.8

Stadshypotek AB 303.9

Statens Bostadsfinansiering AB 141.0

Svensk Bostadsfinansiering AB 1.7

Venatius AB 33.8

Housing institutions' balance sheet total, end 1997Total: SEK 1,218 billion

0

200

400

600

800

1,000

1,200

1993 1994 1995 1996 1997

1- and 2-family houses

Multi-family housing

Commercial and office buildings

Tenant-owned housing

Other

Housing institutions loans to non-bank publicSEK billion


During 1997, when short-term andflexible interest rates were at a lowerlevel than long-term rates, the pro-portion of loans from housing insti-tutions that have a fixed interest peri-od of five years decreased 12 per-centage points to 45 per cent of thetotal loan stock. During the first halfof 1998, the narrowing spreadbetween short- and long-term ratesled to a renewed preference forlonger fixed interest periods.

have increased their financing in theform of promissory note loans fromthe parent banks. Following the abo-lition of exchange controls in 1989,the institutions have also borrowedin markets abroad; the associatedexchange and interest rate risks (inthat housing credits are predomi-nantly denominated in the domesticcurrency) can be limited by usingderivatives.

-

This group consists of the formernon-housing intermediaries andfinance companies. These institu-tions concentrate on financing a par-ticular segment of the market, e.g.local governments, agriculture, thecorporate sector and/or specialoperations such as export financing.The former finance companies pro-vide firms and households with var-ious forms of financing, e.g. leasingand factoring (firms), promissorynote loans and credit cards (house-holds).

0

200

400

600

800

1,000

1,200

Certificates

Bonds

Other borrowing

1993 1994 1995 1996 1997

Housing institutions’ borrowingStock, SEK billion

Banks 32%

Housing institutions: flexible rates 8%

Housing institutions: fixed rates 5%

Housing institutions: fixed rates 55%

Loans from banks and

housing institutions

with altered interest

terms, 1997 Q4

Unchanged interest terms

Altered interestterms

Balance sheet totals for non-housing credit market companies

SEK billion 1993 1994 1995 1996 1997

Non-housing credit market companies 318 287 274 306 335former intermediary institutions 168 177 176 200 219former finance companies 150 110 98 106 116

Stock of loans from non-housing credit market companies

SEK billion Stock at end 1993 1994 1995 1996 1997

Non-housing credit market companies 206 186 186 196 214former intermediary institutions 104 102 99 106 114former finance companies 102 84 87 90 100of which leasing 36 36 40 44 53

The housing institutions financetheir lending mainly by issuingbonds and certificates. They borrowmainly from the institutions thatmanage the major financial surplus-es in the economy, for instance theNational Pension Fund, insurancecompanies and banks. Borrowingdirectly from firms and households

in Sweden has become increasinglyimportant in recent years. Borrow-ing from households took off during1995, when the high level of nomi-nal interest rates made interest-bear-ing securities more attractive tohouseholds; the institutions respond-ed by issuing private bonds on a larg-er scale. The housing institutions


Otherintermediaries

In addition to banks and the spe-cialised credit market companies, theinstitutions operating in the financialmarket include insurance companiesand mutual funds.

A breakdown of the assets ofthese institutions into loans, securi-ties and other assets shows that thedominant investment instrument in every group is securities. Insur-ance companies and the NationalPension Fund also provide loans forfirms, local governments and house-holds. The other assets of insurancecompanies are dominated by realestate.

Securities trading companiescombine some of the functions ofintermediaries and service providers.Other service providers in the secu-rities market are OM StockholmAB, the Stockholm Stock ExchangeAB, and the Central SecuritiesDepository (VPC AB).

This group comprises the privateinsurance companies and the Natio-

Assets of insurance institutions, mutual funds and securities trading companies, end 1997

SEK billion Balance Loans to Interestbearingsheet, total the public securities Equity Other

Insurance companies 1,212 27 540 542 103National Pension Fund 583 22 498 38 25Mutual funds 364 – 51 293 20Securities trading companies 25 7 3 4 11

nal Pension Fund. The investmentcapacity of these institutions is deter-mined by the difference betweenpremiums received and investmentincome on the one hand and, on theother, disbursements arising frompension and insurance commit-ments.

The private insurance institutionscomprise traditional life insurancecompanies, unit-linked life insurancecompanies and non-life insurancecompanies. According to the Finan-cial Supervisory Authority’s quarter-ly report on nation-wide companies,at the end of 1997 the assets of thesecompanies totalled SEK 1,212 bil-lion.

The National Pension Fund hasconsisted of five separate funds, eachwith specific administrative statutes;a sixth fund, for investment in thecorporate sector, was set up in 1996.The first three funds manage mostof the assets in the national supple-mentary pension system and areresponsible for the disbursement ofthese pensions, while the fourth, fifthand sixth funds invest primarily inequity. The aggregate balance sheettotal for the five funds in 1997 wasSEK 583 billion.

The mutual funds manage invest-ments on behalf of customers andtheir assets consist mainly of equity,above all in Swedish companies.

The Act concerning national sav-ings funds was repealed at mid 1998and such funds are now subject tothe same legislation as ordinarymutual funds; the tax relief associat-ed with national savings funds hadbeen terminated earlier. Besides themutual funds for equity and interest-bearing securities, there are funds forlife insurance premiums whichenable the policy-holder to decidehow the premiums are invested; dif-ferent levels of risk can be chosen,with consequences for the probablereturn. Net saving in all mutualfunds totalled SEK 71 billion in1997.

The securities trading companiesfunction as brokers, trading in theirown name for a commission onbehalf of customers, as well as mar-ket-makers, which involves offeringtwo-way prices on their ownaccount. Professional trading in secu-


rities, internally as well as on behalfof customers, requires an authorisa-tion from the Financial SupervisoryAuthority. These companies are alsoin a position to extend credit to cus-tomers in connection with securitiestransactions, to provide administra-tive services and to accept depositsto a limited extent for these services.The companies also participate inmarket issues of securities.

The securities trading compa-nies, like the commissioned opera-tions of the banks, perform theimportant functions of mediatingbetween buyers and sellers and ofmaintaining markets by quoting two-way prices. Trading is undertaken inshares as well as in interest-bearinginstruments such as treasury bills,certificates and bonds.

As these companies do not takepositions—other than intra-day as arule— in the securities in which theytrade, their aggregate balance sheettotal is relatively small; at the end of1997 it was SEK 25 billion.

The new pension system

A reform of the old-age pension sys-tem was decided recently; in thisconnection the National PensionFund has been extended to include aseventh fund. The new pension sys-tem is of the premium-reserve typewith fund insurance; the insurancefunction is linked to the State. Thecapital is to be managed in mutualfunds administered by independentcompanies; eligible companies arethose that are authorised and super-vised as mutual fund companies bythe Financial Supervisory Authority.The insurees are entitled to choosefunds and fund managers for theirpension premiums, defined as 2 percent of their pensionable income inthe period 1995-98 and rising to 2.5per cent as of 1999. Those who donot exercise this choice have theirpension premiums managed insteadby the State in the form of the Pen-sion Fund’s seventh fund.

Pending the introduction of thenew system, in the period 1995-98 acertain proportion of the fees paid

into the national old-age pension system has been invested in NationalDebt Office accounts. The pensionpremium entitlements for the in-come years 1995-98 are to be de-cided in 1999 and will then be trans-ferred from the National DebtOffice’s interim management to thePremium Pension Authority forinvestment either in the mutualfunds of the insuree’s choice or, forinsurees that do not exercise thischoice, in the Pension Fund’s newseventh fund. The amounts that areto be transferred are calculated tototal SEK 37 billion.

The old-age pension reformentails a considerable redistributionof incomes and expenditures be-tween the government budget, theNational Pension Fund and the newPremium Pension Authority. One ofthe effects on government financingis an increased borrowing require-ment in the years ahead; but as com-pensatory transfers are to be madefrom the National Pension Fund tothe central government, the overalleffect on the government budget isjudged to be positive.

The payment system

The Riksbank andthe payment system

The mediation of payments is a pri-mary function of the financial sys-tem. All operations in this systemthat represent monetary value (lend-ing and borrowing, for example)involve some form of payment trans-action. The payment system can beseen as a vehicle for transportingmoney in the economy. The effi-ciency and security of the paymentsystem are vital for the proper func-tioning of the financial system andthereby for a practical and effectiveimplementation of monetary policy.Besides being responsible for theconduct of monetary and exchangerate policy, the Riksbank is thereforerequired by law to “promote a safeand efficient payment system”.Because the mediation of paymentsis closely bound up both with theimplementation of monetary policyand with other financial operations,the Riksbank has not only to consid-er the payment system as such butalso examine and analyse the func-tions of the financial system and itsgeneral tendencies. Analysis andoversight by the Riksbank focus onsystems and markets, while the


Financial Supervisory Authorityconcentrates primarily on the super-vision of individual institutions..

The Riksbank has three mainfunctions in the payment system:

■ to provide means for final pay-ment (notes and coins, as well asdeposit and lending facilities forbanks), that is, assets that do notentail a credit risk for the holder.

■ to provide a basic infrastructure inthe form of distribution systemsfor notes and coins, the RIX sys-tem, etc., and

■ to oversee the mediation of pay-ments in general.

The basic reason for the Riksbank’scommitment is that, like other formsof infrastructure, for example rail-ways and roads, the payment systemis associated with external effects.This means that the costs andreceipts are not fully visible to oropen to the influence of the individ-ual producer. There is therefore arisk that the market will not arriveunaided at the solutions which arebest for society in general. Besidesspecific questions of security andconfidence in connection with notesand coins, the most important mat-ter for the overseer is systemic risk,

that is, the risk that effects of the fail-ure of one agent, for example, willspread in ways that other agents arenot capable of mastering on theirown. Such risks, which may threat-en to disrupt the payment system asa whole, are primarily connectedwith the settlement of payments,often very large, between financialinstitutions. The Riksbank accord-ingly concentrates on this segment ofthe payment system.

For the Riksbank the primaryobjective is thus to identify andreduce systemic risks. In the event ofa risk still materialising, due forinstance to the failure of a financialinstitution, the Riksbank can act inits capacity as lender of last resort inorder to limit the damage to societyin general. The Riksbank is able toprovide temporary liquidity forfinancial institutions in this contextbut its task is not to solve problemsof solvency.

Clarifying whether a bank inneed of additional liquidity is solventor not tends to be a complicatedmatter that requires knowledgeabout the institutions and their mar-kets. The Riksbank, as mentioned,therefore monitors the financial mar-kets at a general level, as well as theoperations and performance of the


institutions. This is done in close col-laboration with the Financial Super-visory Authority.

Paymentinstruments

Payments between economic agentscan be arranged in cash (banknotesand coins) or by transferring fundsbetween bank accounts. The latterarrangement accounts for approxi-mately 90-95 per cent of the totalvalue of all payments. The cashlesspayments are handled by intermedi-aries, mainly banks and clearingorganisations; they keep the accountsand maintain technical facilities,rules and ancillary financial serviceswhereby money can be transferredsafely and efficiently both within andbetween financial institutions. Thepayment system can be seen as thesum of these facilities.

A notable feature in the case ofretail payments (payments by house-holds and firms) is the rapid spreadof electronic techniques. Telephonebanks and a steep increase in the

number of payment terminals andcash dispensers have promoted agrowing use of various types ofaccount card and of the electronicinitiation of payments. A trial withe-money was launched in Sweden inthe autumn of 1996, when a cashcard or “electronic purse” was intro-duced in two large towns. The cardis intended as an alternative to phys-ical cash for small purchases. Thesystem has been extended since thenand work has begun on integratingit with traditional bank cards.

The Swedish version, operatedby three of the four major banks, isbased on the Proton system that hasbeen in operation for a time in Bel-gium, for example. As the “money”is stored in a chip, payments can bemade off-line (without an identityand card check). Cash-card transac-tions are therefore cheaper andquicker than those with traditionalcards. The technique can also beused with a personal computer forpayments via the Internet, thoughthis type of system is still in its infan-cy.

The introduction of e-money hascalled, in Sweden as well as else-

0

20,000

40,000

60,000

80,000

1993 1994 1995 1996 1997

No. of payment terminals

where, for studies on the legal andregulatory aspects of this new meansof payment, which combines fea-tures of cash and deposit accounts.One of the question concerns theright to issue cards; in Sweden, theE-money Enquiry has proposed thatthis right should be restricted tocompanies supervised by the Finan-cial Supervisory Authority.

AgentsThe payment system is supported bythe Riksbank and the banks, with thebanks’ deposit accounts as its nucle-us. The Riksbank can be seen as thehub of this network: the banks’accounts with the Riksbank are usedfor direct inter-bank payments aswell as for the settlement of bankcustomers’ inter-bank paymentinstructions. This is arranged bymeans of the Riksbank’s RIX sys-tem.

In addition to the Riksbank andthe banks, important functions in thepayment system are performed byclearing organisations such as theBankGiro Centre (BGC), the Cen-tral Securities Depository (VPC) andoptions brokers (OM). In the man-agement of liquidity, these organisa-tions can be said to function as ser-vice agencies to the banks; theyprocess payment instructions forfinal settlement against accounts inthe banks.

In recent years, partly new formsof payment services, provided bynew agents, have come into being,for instance paycard systems set upby retail chains and petrol compa-nies, in some cases with deposit orlending facilities. To date, however,these companies have not acted aspayment intermediaries; they han-dle payments bilaterally, directly withtheir customers, but not between twoother parties. Recently, moreover, asmentioned above, e-money has beenintroduced in Sweden on a trialbasis.

The RIX-systemThe RIX system settles paymentscontinuously, one by one, by trans-ferring funds between the partici-pants’ accounts in the Riksbank,thereby making the funds immedi-ately available for new paymentsduring operating hours. This con-cept, known as real time gross settle-ment (RTGS), has been or is beingintroduced in all the EU countries asa basis for the TARGET system, theforthcoming common network forlarge-value payments.

Via their accounts in the RIXsystem the banks can obtain creditfrom the Riksbank (full collateral inthe form of securities has beenrequired as of 1995): intra-day topromote a smooth flow of paymentsand overnight as part of the practi-cal implementation of monetary


Structure of the Swedish payment system

The Riksbank

BGC

OM

VPC

RIX

Savings banks (87)

Postal giro Bank

Swedbank

retail payments

securities

derivatives

Bank Bank Bank

Clearingorganisations:

Authority:

Banks:Bank

NationalDebt Office

policy. The RIX system is accord-ingly also a part of monetary poli-cy’s infrastructure.

Besides the Riksbank, at the endof 1997 the participants in RIXtotalled twenty-seven institutions,made up of twenty-three banks andthe BankGiro Centre (BGC), theCentral Securities Depository (VPC),OM Stockholm AB and the Nation-al Debt Office. In 1997 the numberof RIX transactions averaged about1,500 a day and daily turnover aver-aged about SEK 300 billion, whichis equivalent to about 20 per cent ofGDP. In other words, a turnoverequivalent to annual GDP is gener-ated by the system about every fivedays.


The RIX system has been modifiedand developed in several respects inrecent years. Common features ofthe changes have been to provide theagents with an incentive to improvetheir risk management, to render thesystem more transparent and toadapt it to changes in the rest of theworld, in particular to the require-ments arising out of European cen-tral bank cooperation. To this endthe RIX system, along with othernational systems, is being adapted sothat these systems can be linked upto form the TARGET system, whichis to be in operation when the thirdstage of EMU commences on 1 Jan-uary 1999. Although Sweden is notparticipating initially in the euroarea, the Riksbank and Swedishbanks will be able to use the systemfor euro payments, subject to certainrestrictions as regards the supply ofeuro liquidity. This means that inpractice, from 1999 there will be asecond system, E-RIX, for handlingpayments in euro, while the RIX sys-tem will continue to handled pay-ments in Swedish kronor.

Work on the RIX system in 1997was therefore conditioned by thepreparations for and adjustments to

the TARGET system. Besides thepreparations for the third stage ofEMU, work was done in the domes-tic field mainly to integrate RIX withthe banks’ internal computer sys-tems. The specific changes to theRIX system in recent years includenew times for the registration andsettlement of different payment cat-egories and longer opening hours. A

The TARGET system

NCB

NCB

NCB NCB ECB NCB NCB

NCB

NCB

B B B

NCBNCB

ECB: European Central BankNCB: National central banksB: Banks, etc

The Riksbank

BGC

OM

VPC

RIX

Savings banks (87)

Postal giro Bank Bank Bank Bank

Bank

NationalDebt Office

separate routine has been introducedfor customer payments exceedingSEK 20 million, whereby thesetransactions, like interbank payments, can be settled continuously inreal time. Furthermore, a new back-up system has been developed sothat the system can be restartedwithout loss of information within 1-2 hours.

Statistical appendix


Lending by credit institutions to non-bank public

SEK billion HousingTotal Banks institutions

1993March 2,044 880 953June 1,995 828 966Sept. 1,980 799 980Dec. 1,937 738 993

1994March 1,907 702 1,001June 1,886 696 995Sept. 1,865 684 987Dec. 1,852 694 971

1995March 1,867 709 969June 1,863 724 959Sept. 1,878 709 989Dec. 1,861 689 990

1996March 1,881 702 992June 1,892 703 1,000Sept. 1,891 697 1,007Dec. 1,927 715 1,016

1997Jan. 1,935 726 1,015Feb. 1,947 735 1,018March 1,953 740 1,017April 1,960 744 1,018May 1,972 754 1,018June 1,995 772 1,019July 1,992 768 1,019Aug. 2,015 790 1,019Sept. 2,027 806 1,016Oct. 2,021 796 1,017Nov. 2,040 816 1,018Dec. 2,051 828 1,008

1998Jan. 2,072 851 1,006Feb. 2,092 867 1,009March 2,096 869 1,007April 2,109 882 1,006May 2,140 910 1,006June 2,154 922 1,006

Money supply: M0, M3 and M3+

12-month change, per centM0 M3 M3+

1993March 0.1 4.8 –0.9June 0.4 5.0 –0.2Sept. 3.9 12.3 –5.4Dec. 4.3 4.0 –6.6

1994March 7.5 6.2 –0.9June 5.2 6.5 1.0Sept. 5.7 4.5 4.3Dec. 2.6 0.3 3.1

1995March 1.0 –2.8 –0.9June 1.9 –2.7 –1.6Sept. 3.6 –0.0 –3.8Dec. –0.4 2.7 0.1

1996March 0.4 9.4 6.6June 1.9 10.4 8.5Sept. 1.9 11.3 9.7Dec. 5.3 11.5 10.6

1997Jan. 5.3 7.5 7.6Feb. 5.8 7.4 6.6March 7.4 6.5 5.5April 5.4 4.3 2.3May 5.1 4.1 2.7June 4.7 5.4 3.5July 5.0 3.2 1.1Aug. 4.0 4.6 3.0Sept. 3.7 2.2 0.3Oct. 5.7 3.4 2.0Nov. 4.6 1.3 –0.5Dec. 3.0 1.3 –0.4

1998Jan. 4.8 3.8 0.5Feb. 4.4 3.0 –0.4March 1.3 –0.6 –3.9April 4.0 2.4 –1.8May 4.8 2.6 0.4June 4.4 2.8 –0.5


Financial institutions: balance sheet totals and market shares

December 1997 Balance Marketsheet total, share

No. SEK billion Per cent

Banks 124 2,150 39Swedish-owned commercial banks 16 2,011 36Foreign-owned commercial banks 21 66 1

Subsidiaries 4 13 0Branches 17 53 1

Savings banks 87 73 1Housing institutions 12 1,218 22Other credit market companies 108 335 6Securities trading companies 38 25 0Insurance companies 109 1,212 22National Pension Fund 6 583 11Total – 5,523 –Mutual funds 368 364 –

Banks: balance sheet totals, year end

1996 1997SEK billion Per cent SEK billion Per cent

Commercial banks 1,784 96 2,077 97S-E-Banken 458 25 535 25Nordbanken 283 15 330 15Swedbank 495 26 595 28FöreningsSparbanken 367 20 411 19Other Swedish-owned 125 7 140 7Foreign-owned 56 3 66 3

Subsidiaries 7 0 13 1Branches 49 3 53 2

Savings banks 73 4 73 3Total 1,857 100 2,150 100

Assets of the banks, year end

SEK billion 1996 1997

SEK loans 593 646Foreign currency loans 134 195Foreign banks 269 302Swedish financial institutions 190 323Housing bonds 392 341Other assets 279 343Total 1,857 2,150

In SEK 1,283 1,472In foreign currencies 574 678

Liabilities of the banks, year end

SEK billion 1996 1997

Deposits, non-bank residents 750 752Deposits, non-bank nonresidents 111 169Foreign banks 351 388Swedish financial institutions 138 207Certificates of deposit 106 168Other liabilities 320 363Capital 81 103Total 1,857 2,150

In SEK 1,219 1,387In foreign currencies 638 763

Bank loans to and deposits from non-bank public

Stock figures Loans DepositsSEK billion 1996 1997 1996 1997

Local governments 26 29 22 23SEK 24 28 22 23Foreign currency 2 1 – 0

Non-financial enterprises 390 417 240 258SEK 320 348 219 228Foreign currency 70 69 21 30

Household sector 179 198 424 406SEK 177 196 424 406Foreign currency 2 2 0 0

of which:Unincorporated business 45 47 55 47

SEK 44 46 55 47Foreign currency 1 1 0 0

Nonresidents 134 195 111 169SEK 16 15 20 24Foreign currency 118 180 91 145

Other, incl. residual 13 14 63 64SEK 11 12 57 59Foreign currency 2 2 6 5

Total 742 853 860 920SEK 548 599 742 740Foreign currency 194 254 118 180


Average bank lending and deposits rates; treasury bill rate

Lending Deposit T-billrate rate rate






1998March 6.87 2.46 4.61June 6.63 2.44 4.11


Housing intermediaries: balance sheet totals, year end

1996 1997SEK billion Per cent SEK billion Per cent

Bokredit i Sverige AB 1 0 1 0Föreningsbanken Kredit AB 36 3 39 3Handelsbanken Hypotek AB 112 10 115 9K Sveriges statshypotekskassa 91 8Nordbanken Hypotek AB 110 10 119 10S-E-Banken BoLån 93 9 102 8SkandiaBanken BoLån 4 0 4 0AB SPINTAB 253 24 266 22Stadshypotek AB 295 28 304 25SBAB 145 14 141 12Sv Bostadsfininansiering AB 2 0 2 0Venantius AB 24 2 34 3Total 1,075 100 1,218 100

Housing institutions’ stock of loans to non-bank public

SEK billion 1993 1994 1995 1996 1997

1- and 2-family houses 387 389 397 423 439Multi-family housing 483 484 497 497 471Commercial and office buildings 46 40 36 37 32Tenant-owned housing 29 27 25 27 29Other 28 24 25 29 35Total 973 966 984 1,012 1,006

Housing institutions’s borrowing

SEK billion 1993 1994 1995 1996 1997

Certificates 57 79 104 137 131Bonds 873 832 778 777 712Other borrowing 35 49 75 53 196Total 965 960 957 967 1,077

In foreign currencies 3 5 65 2 1

Issuers and investors in the bond market

SEK billion 1993 1994 1995 1996 1997

Issuers Swedish government 457 516 698 746 802Housing institutions 873 838 792 660 588Banks 28 27 27 28 40Other financial institutions 36 41 36 44 44Companies and local governments 75 58 61 72 76Total 1,469 1,480 1,614 1,550 1,550

InvestorsNational Pension Fund 420 433 448 419 434Insurance companies 328 334 397 414 429Banks 177 187 198 207 185Nonresidents 184 112 143 183 224Others 360 414 428 327 288Total 1,469 1,480 1,614 1,550 1,550

Issuers and investors in the money market

SEK billion 1993 1994 1995 1996 1997

IssuersSwedish government 213 275 202 189 147Housing institutions 57 79 104 137 129Banks 6 5 9 15 20Other financial institutions 13 13 15 14 15Companies and local governments 20 14 16 23 36Total 309 386 346 378 347

InvestorsNational Pension Fund 23 30 33 68 64Insurance companies 42 35 25 45 46Banks 85 143 116 91 69Nonresidents 33 56 72 47 32Companies and others 125 122 100 127 136Total 309 386 346 378 347


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