A stable, well-functioning financial market for allA stable, well-functioning financial market for allResilience is needed as the risks in the commercial real estate sector increase
The economic recovery has been stronger than expected this year, in part due to strong support measures during the pandemic. At the same time, risks are building up, writes Finansinspektionen (FI) in its second stability report of the year. The report is being presented today by Director General Erik Thedéen and Chief Economist Henrik Braconier at a press conference.
The global economic recovery has been stronger than expected, in part as a result of powerful support measures. This also applies to the Swedish economy. The support measures contributed to limiting bankruptcies and credit losses, but they also encouraged high risk-taking and rising asset and housing prices. Households' and commercial real estate firms' debt has increased significantly, and commercial real estate firms have become more vulnerable during the pandemic.
"It is time to start building resilience again so we can withstand the next crisis. Risk-taking on the finance market continues to be high, and we are seeing that the commercial real estate firms are more vulnerable. It is therefore time to move the focus from support to risk management," says Director General Erik Thedéen.
At the start of the pandemic, FI took measures to counteract the economic downturn. Since then, the state of the economy has improved. Therefore, FI removed the general possibility to receive an exemption from the amortisation requirement and re-activated the countercyclical capital buffer for the banks. FI has set the buffer at one per cent, and it goes into effect as of September next year. The increase is a first step in a gradual increase towards what FI considers a normal level. FI is also continuing its efforts to strengthen the Swedish corporate bond and fund markets.
