Sweden's biggest banks have been advised by their country's finance minister of a future of regulatory tightening. According to Swedish Finance Minister Anders Borg, this would be the norm as the government seeks to shore up the economy from an industry that has grown to a size four times its original.
In response to reporters inquiries in Stockholm, Borg said, "I think the level of household indebtedness is worrying and that the size of the banking sector is worrying and that foreign exposure is worrying. That indicates that we during quite a lot of years will need to sharpen the regulation for financial stability and that we will continue to do so from time to time."
The Swedish government had clamped down on an industry that can place its whole economy, all USD540 billion of it, in jeopardy. Sweden has already in place one of the world's strictest capital rules regimes. It had also tripled required risk weights on mortgage assets and capped mortgages at 85% of the property value. All these would help prevent funds from assuming debt loads that can exceed their capacities. This is what occurred in the last global recession which Sweden is trying mightily to avoid.
According to Borg, the Riksbank, together with the Swedish Financial Supervisory Authority and the Swedish government are in discussion to what Borg says is 'the need to adjust risk weights on mortgages or the capital requirements,'
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