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Financial Stability December 2007

Financial Stability December 2007. Financial stability in Sweden is sound at present However, the banks’ resilience to unexpected, negative events has declined somewhat Surrounding risks have grown. Financial stability is sound. The Swedish banks are financially strong

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Financial Stability December 2007

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  1. Financial StabilityDecember 2007

  2. Financial stability in Sweden is sound at present • However, the banks’ resilience to unexpected, negative events has declined somewhat • Surrounding risks have grown

  3. Financial stability is sound • The Swedish banks are financially strong • Profitability is favourable • Borrowers are financially strong, this includes companies as well as households

  4. Substantial profitability and low loan losses Totalled over four quarters, all four major banks, SEK billion (International financial reporting standards) Sources: Bank reports and the Riksbank Chart 3:1

  5. Somewhat lower resilience • Credit risks have increased • Increased lending to the Baltic countries • Margins on lending have fallen • Stress tests confirm the assessment

  6. Associated risks have increased • Risks in financial markets have grown • Risk of a sudden slowdown in the Baltic countries • Risk of price adjustment in commercial property • Risk that house prices and household indebtedness will increase more quickly than incomes

  7. Shocks in the interbank marketThe difference between the interbank rate and treasury bills in 2007, basis points Note. The differential is calculated as the difference between the three-month interbank rate and the three-month treasury bill rate in the respective country Source: Reuters EcoWin Chart 1:2

  8. Investors demand higher compensation for riskCredit spreads for corporate bonds in Europe, percentage points Note. Definition by Moody’s and Merrill Lynch. High-yield is classified by Moody’s/Standard & Poor’s as Ba/BB or lower. Source: Reuters EcoWin Chart 1:5

  9. Large deficits in the Baltic countries’ current accountsCurrent account as percentage of GDP, per cent, totalled over four quarters Source: Reuters EcoWin Chart 2:25

  10. Substantial rise in inflation in the Baltic countries Harmonised index for consumer prices, annual percentage change Source: Reuters EcoWin Chart 2:26

  11. High levels of credit growth in the Baltic countries Household borrowing in the Baltic countries, annual percentage change Sources: National central banks Chart 2:28

  12. Household indebtedness and house prices increasing at a high rate in SwedenAnnual percentage change Sources: Statistics Sweden and the Riksbank Chart 2:10

  13. Household debts and interest expenditure in relation to disposable incomePer cent Sources: Statistics Sweden and the Riksbank Chart 2:8

  14. Low required rate of returnon property Direct earnings requirement for office premises in city centres, per cent Sources: Newsec AB and Reuters EcoWin Chart 2:20

  15. Financial stability in Sweden is sound at present • However, the banks’ resilience to unexpected, negative events has declined somewhat • Surrounding risks have grown

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