Swedish cbank chief calls in­ter­ven­tion scope lim­it­less

The Pak Banker - - FRONT PAGE -

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.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.