IMF Staff Country Reports

This paper highlights the technical note on Macroprudential Policy for the Sweden financial sector assessment program. The increase in market-based finance challenges macroprudential policy. Tools are not yet well developed for borrower-based measures beyond those applying to lending to households, and many market based finance participants are outside national regulatory perimeters. The authorities should make more use of ‘soft power’ and joint communication, especially when risks become more systemic, as with market-based finance. There are still data gaps for almost all sectors. Finansinspektionen and the Riksbank need to better model tail risk, spillovers, and interconnectedness. As the financial system becomes increasingly complex and interlinked with the risk of market-based finance, the need for these models will increase. Short of introducing new borrower-based measures to curb market funding, Commercial Real Estate firms should be made to improve their disclosures, including on contingency plans when market funding dries up.