A stable, well-functioning financial market for allA stable, well-functioning financial market for allThe stability of the Swedish financial sector (2005:10) - a summary
Looking at the official reports, the Swedish life-insurers, previously severely hit by declining equity prices and interest rates, have improved their financial performance during the last two years. How-ever, if one looks at the figures that emerge if realistic interest rates are applied, the outcome is clearly more negative - in fact, solvency har decreased for six years.
Still, the sector as a whole remains financially strong, although some companies do have problems with their solvency ratios. But the sector is vulnerable; should interest rates go down further or if equity prices should fall, a growing number of insurers will get into problems. Finansinspektionen (FI) is closely monitoring this and also developing new supervisory tools, such as the so called Traffic-light model.
The large banking groups are financially strong with virtually no credit losses and with a modest growth when it comes to risk expo-sures. This, coupled with a likely further improvement of general economic growth, means that risks to systemic stability are low for the foreseeable future. In a longer perspective, however, the expan-sion of their business abroad and in countries like the Baltic states and Russia may imply increasing risks. FI will follow these devel-opments, and in collaboration with the supervisors in these countries.
A number of new regulatory complexes has been implemented during the last years, and there are a lot more to follow. The major part of the regulatory changes are parts of EU's Financial Services Action plan, aiming at an integrated financial market within the EU. Although there are goods reasons for regulatory reforms, it also raises problems. It is difficult to foresee all the effects and implications these changes may lead to, and even more so the possible effects they may give rise to in combination. Therefore the implemen-tation and the possible adverse effects that may come out of these changes has to be monitored closely by Finansinspektionen.
