Sweden banks to make lower losses due to improving conditions
STOCKHOLM: Swedish banks will make lower losses than expected in the next few years due to improving economic conditions, but they could face financing problems if domestic house prices fall, the central bank said on Thursday.
This compared with a previous estimate, issued in June, of 61 billion crowns of losses in the 2010 to 2012 period.
"The recovery in the Swedish economy is contributing to a continued decline in the banks' loan losses," the bank said in its twice-yearly financial stability report. "At the same time, access to market funding has improved. The Swedish banks are well capitalised in an international comparison, and their resilience to unexpected events is thus good."
The Riksbank noted that banks remained sensitive to financial market disruptions and should therefore maintain or raise capital levels and continue to extend funding maturities. The situation in Lithuania, Estonia and Latvia --where Scandinavian banks have invested heavily among the worst victims of the financial crisis --has improved in recent quarters, easing pressure on the banks. But concerns linger that soaring house prices and surging credit growth to households in Sweden could undermine lenders further ahead.
The public debt woes in the euro zone and the resulting market turmoil has also caused some worries regarding Swedish banks' access to funding in international financial markets should the situation deteriorate further. -PB News