A stable, well-functioning financial market for allA stable, well-functioning financial market for allStability in the Financial System (2024:2): Improved outlook, but risk of set-backs
The outlook for financial stability has improved somewhat in the past six months. Sweden continues to experience a mild economic downturn, but interest rate cuts are contributing to improved optimism about the future. At the same time, the uncertain global economic and geopolitical situation is leading to heightened risks, in part in the form of cyber attacks. These are the conclusions of FI’s second stability report for the year.
Sweden is experiencing a mild economic downturn, and unemployment is relatively high. The Riksbank's interest rate cuts are contributing to increased optimism about the future, primarily among households. The banks have high resilience, and credit growth in the financial system is dampened.
Household finances continue to be under pressure, and interest expenses are high. Many households are restrictive in their consumption. However, there is a clear expectation of lower interest rates going forward, and consumption will probably pick up again in the next year. Therefore, FI makes the overall assessment that stability in the financial system has improved somewhat.
At the same time, commercial real estate firms have continued to adapt to the higher interest rates. Recently, their access to financing has improved. Firms with high indebtedness need to continue to reduce their debt and strengthen their financial position.
"We see a slow recovery, but there is a risk of set-backs. The situation is vulnerable given the uncertain economic and geopolitical environment. The risk of a geopolitical deterioration leads to an adverse impact on global trade and energy prices," says Daniel Barr, Director General at FI.
Cyber attacks can increase further
A deterioration in global security increases the risk of attacks on the financial system. Such attacks can occur in different ways, for example as cyber attacks, disinformation, infiltration and sabotage.
"In our supervision of the financial market, we are seeing that the resilience of financial firms has not been built up at the same rate as the operations have been digitalised. It is quite simply time for firms to strengthen their ability to protect their operations. How firms are working with this is also something that we will prioritise in our supervision going forward", says Daniel Barr.
Since the financial system is both concentrated and interconnected, the impact of an attack on one actor can quickly spread to other actors and, in a worst-case scenario, lead to extensive interruptions. This, in turn, could have a major impact on financial stability.
New regulations pending
One key step in strengthening the resilience of financial firms is the DORA regulation, which enters into force in January next year. Under these EU regulations, the requirements on how financial firms handle cyber risks will be raised and harmonised.
