Financial Stability Report 2024:2

Stability risks have declined in the short term but there is considerable uncertainty abroad. Short market interest rates in particular have fallen, while long market rates have been volatile. Risk premiums have continued to fall and the credit market has developed strongly. However, unexpected events may cause market turbulence. Periods of optimism and low pricing of risk can also lead to a renewed buildup of risk. In addition, geopolitical uncertainty is high and public finances are weak in many countries.

Macroprudential measures safeguard household resilience. Without these measures, households would not have been as resilient and systemic risks associated with household mortgages would have been greater. With interest rates now falling, there is a risk that household indebtedness will increase rapidly again. Improving the functioning of the housing market will primarily require fiscal and structural policy measures. In the absence of such measures, however, it is particularly important to have appropriate macroprudential measures in place to counteract unhealthy developments going forward.

The property companies’ funding situation has improved but the rental market poses a risk. The funding situation is more favourable partly because bond funds have increased their purchases of property companies’ bonds. However, rising vacancies and weak rental growth continue to challenge some property companies. Vulnerable property companies therefore need to continue to strengthen their balance sheets. To strengthen confidence, the transparency of transactions and property valuations should also be improved.

Corporate bond funds should implement liquidity management measures. Funds are increasingly important for the supply of capital to companies. However, many of them lack sufficient liquidity to handle large redemptions from their unit holders. This could impair the functioning of the bond market, as happened in 2020, which could have negative consequences for financial stability. Therefore, among other things, funds need to introduce liquidity management tools such as adjusted sale and redemption prices (swing pricing). The Riksbank also welcomes the European Commission’s consultation on a macroprudential framework for non-banks.

The resilience of the major Swedish banks is good but there are risks for consumer credit banks. The major banks remain highly dependent on other countries and have large exposures to commercial property. But their profitability is good and loan losses are small. In contrast, consumer credit banks continue to have high levels of loan losses, which may partly be due to the inadequacy of their credit assessments. These should be strengthened to ensure the debt-servicing ability of new borrowers. Similarly, there is a need for better information on all loans of borrowers.

An uncertain world entails cyber risks, which places demands on market participants. The cyber threat remains significant and is amplified by the heightened geopolitical risks. Cyberattacks, as well as technical errors, can give rise to risks associated with third-party dependencies. It is important that market participants subject to the Digital Operational Resilience Act (DORA) comply with the requirements swiftly and that important participants not subject to the act strive for the same level of resilience.