FI’s stress tests show that the majority of Swedish funds appear to be able to handle relatively large outflows in an effective manner. However, some corporate bond funds and a relatively large share of high-yield bond funds may experience liquidity problems under stressed market conditions.
In this FI Analysis, we study how the risk weight floor has impacted the banks’ lending to CRE firms using detailed lending data. The aim is to analyse whether the risk weight floor impacted the banks’ interest margins and the risk in their lending. We also investigate how the volume of bank loans and bonds to CRE firms has changed before and after the introduction of the risk weight floor.
There are different types of lenders. They offer different types of loans, and their risk tolerance varies. The risk tolerance is evident in their business model, which consists in part of how they conduct their credit assessment. There are also different types of borrowers. Some want small loans, and others want big loans. Both the lender’s credit assessment and the borrower’s repayment capacity are often better for large loans. The small loans represent a large share of early repayment problems – reminders and collection notices. But the borrower can often pay back small loans before they are registered with the Swedish Enforcement Authority.
The temporary amortisation exemption resulted in new mortgagors borrowing almost 4 per cent more and buying homes that were approximately 1 per cent more expensive, concludes a new FI Analysis.
The ability to borrow is beneficial to households in many ways. At the same time, debt can make their consumption more sensitive to unexpected changes in interest rates, income, and house prices. This, in turn, can affect how the economy evolves in a crisis. But measures that lead to lower debt don’t necessarily increase the resilience of all households. To assess the effects of borrower-based measures, it is necessary to also consider households’ balance sheets, in particular their liquid assets.
Loans and other debts are of significance to repayment problems. This analysis focuses on the significance of loans to individual’s repayment problems.
This FI analysis describes the funding structure of the major Swedish banks in the period 2002–2019. Consequently, the period analysed does not cover the ongoing pandemic and its impact on the financial markets through central banks’ and supervisory authorities’ various monetary policy and supervision measures.
To reach the climate goals in the Paris Agreement, carbon emissions must go down. The most efficient way to achieve this is by raising the cost of emissions compared to today.
Young borrowers and borrowers with low income have a higher risk of experiencing payment problems when taking non-mortgage loans. The risk decreases if the credit providers conduct more thorough credit assessments. These are the conclusions drawn in a new report from Finansinspektionen (FI).
Aggregate statistics indicate that Swedish households are holding significant assets in the form of cash, bank savings, fund shares and securities. The overall value corresponds today to an average of SEK 1 million per household. However, because these economic buffers are unevenly distributed between households, the average is a poor measure for assessing the risk of a significant drop in consumption following an economic shock.
This FI Analysis describes how vulnerabilities from lending to non-financial firms arise and why FI needs to follow them to fulfil its assignment to safeguard financial stability.
Large credit losses can result in otherwise profitable banks reporting a loss. This FI Analysis describes a methodology for estimating how large credit losses can be in a stressed macroeconomic scenario.
The tax rebate for interest expenses – the interest deduction – means that households borrow more, and can and want to pay more for homes. This means that the households experience an increase in both their liabilities and assets, which in turn could have an impact on the stability of the financial system. In this FI Analysis, we calculate the impact of a change to the interest deduction. The reason for this analysis is the direct link between interest deductions and households’ loans.
Commercial real estate firms are sensitive to changes in interest rate expenses and income. Following a shock, vulnerable commercial real estate firms could lead to credit losses for the banks.
The access of non-financial firms to credit is central for financial stability, particularly during financial crises. In recent years, the market for corporate bonds has grown steadily and currently plays an important role in firms’ financing. This analysis shows that it has not been easier to issue corporate bonds in Swedish krona during financial crises than to take a bank loan. This pattern deviates from previous research on the USA and the euro zone.
After the provisions regarding high-cost short-term credits were changed in 2018 – in part by introducing an interest rate ceiling and cost ceiling – these types of loans decreased sharply. It is probable that the reform has led to a decrease in the supply of high-cost short-term credits. It is also evident that several companies have stopped offering such loans.
The Swedish fixed-income market – which consists of the bond market, the money market and interest rate derivatives – is important for the government, municipalities, banks and firms to be able to finance their operations and manage risks. It is therefore of central importance to understand how these markets function and, more specifically, how liquid they are. This FI Analysis presents a new method for measuring market liquidity that focuses on government bonds and covered bonds.
This FI Analysis shows that households’ tendency to use mortgages for purchases other than buying a home decreased following the amortisation requirements.
This FI Analysis shows that the the increase in house prices is the primary reason it has become more difficult for young adults to buy a home.
A disorderly and abrupt increase in international market rates could lead to significantly higher term and equity risk premia. This is the conclusion of an analysis conducted by FI.