Sweden’s Corporate Vulnerabilities: A Focus on Commercial Real Estate: SWEDEN
Selected Issues Papers, March 21, 2023
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- Sweden’s Corporate Vulnerabilities: A Focus on Commercial Real Estate: SWEDEN
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Bibliographic details
- Authors: Svetlana Vtyurina, Rhiannon Sowerbutts
- Published: March 21, 2023
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798400235962.018
Key findings
- Commercial Real Estate (CRE) debt constitute a large portion of corporate debt.
- The CRE funding structure creates substantial risks for the financial system and the real economy due to broader spillover effects.
- CRE sector’s concentration, interconnectedness and insufficient disclosure of liabilities calls for close monitoring of liabilities structure and adjusting banks’ capital levels to better reflect current risks.
Stress-test outcomes
- Stress tests conducted to assess the resilience of CRE sector show that the median interest rate coverage would drop below one in a severe scenario.
- The severe scenario would result in ¾ of firms with debt-at-risk.
Risks and vulnerabilities
- Large CRE share of corporate debt amplifies systemic risk.
- Funding structure of CRE firms increases vulnerability to interest-rate and liquidity shocks.
- High concentration and interconnectedness within the CRE sector raise risks of contagion to the broader financial system.
- Insufficient disclosure of liabilities limits transparency and hampers timely risk assessment.
Policy recommendations and monitoring priorities
- Close monitoring of CRE liabilities structure is warranted.
- Adjust banks’ capital levels to better reflect current risks arising from CRE exposures.
Keywords and thematic focus
- Bank credit; Commercial Real Estate; Corporate sector; Corporate Vulnerabilities; CRE; CRE firm; CRE indicator; CRE sector; CRE stress test result; credit line maturity; Global; Lines of credit; Macroprudential Policy; Real Estate Economics; Securities markets; Stress Test; Stress testing; Sweden
Selected Issues Paper by Svetlana Vtyurina and Rhiannon Sowerbutts, March 21, 2023 (IMF).
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- Sweden’s Corporate Vulnerabilities: A Focus on Commercial Real Estate