Swedish cbank chief calls intervention scope limitless
Sweden's central bank governor said there are no restrictions on the scope for interventions as a debate swirls over the bank's legal mandate to directly intervene in the krona. There are no limits "in the law," Riksbank Governor Stefan Ingves said in an interview after a presentation Tuesday to the Swedish parliament's Finance Committee.
"As long as currency interventions are carried out for a monetary policy purpose, we can do it." The mandate has been called into question after the bank ratcheted up threats to directly weaken the currency in its battle to revive inflation.
Swedbank missed fourth-quarter operating profit expectations on Tuesday and lowered its dividend hurt by worse-thanexpected trading income and loan losses.
One of Sweden's biggest mortgage lenders, Swedbank reported an operating profit of 4.80 billion Swedish crowns ($562 million), below an average forecast of 5.14 billion in a Reuters poll of analysts but unchanged from a year earlier.
Banks' interest margins have come under pressure from Sweden's ultra-loose monetary policy.
The central bank cut rates to an unprecedented -0.35 percent last year and initiated a bond purchase program to stave off stubbornly low inflation.
Negative interest rates mean Swedish banks have to pay to deposit money in the central bank's accounts. That cost is hard to pass on to customers as few people are willing to pay to deposit money. Swedbank proposed a dividend of 10.70 crowns per share, down from 11.35 crowns in 2014 and lower than the expected 11.00 crowns. The dividend was in line with the bank's policy of paying out 75 percent of profits. Financial items at fair value, which includes trading, rose to 165 million from 69 million a year earlier but lower than the expected 366 million. "It was a tough environment for trading throughout the autumn but somewhat better in December," CEO Michael Wolf told journalists on a conference call.
Losses from loans came in at 399 million crowns, worse than the 275 million loss expected by analysts. The bank said the increase was due to a large provision for a single commitment.
Swedbank said the low oil price had not yet resulted in any credit impairments but said it saw signs of lower credit quality among a few commitments towards the end of the quarter and that a need for provisions was likely. "If the oil price remains at current levels around 30 dollars, it will be tough on the sector. There's no doubt about that," said Swedbank risk officer Anders Karlsson. The debate was stirred up last month after a review of Swedish monetary policy, co-written by former Bank of England Governor Mervyn King, said there was a need to make clear in the Riksbank law that any decision on the exchange rate regime "is a matter for government."
The government quickly countered that it was prepared to look into clarifying details in the framework for the exchange rate regime of the largest Nordic economy.
Policy makers are reaching deeper into their toolbox to revive inflation, after cutting rates far below zero and unleashing an unprecedented bond purchasing program. Swedish inflation has hovered near zero for more than three years.