Sweden: Selected Issues
IMF Staff Country Reports, March 16, 2023
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- Sweden: Selected Issues
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Bibliographic details
- Published: March 16, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400237522.002
Summary
- Examines Sweden’s corporate vulnerabilities with a focus on commercial real estate (CRE).
- Liquidity premia on funding costs will undermine CRE profits and lead to the increase in credit risk premia, amplifying the original shock.
- Stress tests indicate that CREs face debt servicing pressures even under a mild scenario.
Findings on CRE vulnerabilities and stress testing
- Liquidity premia on funding costs undermine CRE profits.
- Increase in credit risk premia amplifies the original shock.
- Stress tests show debt servicing pressures for CREs even under a mild scenario.
Disclosure and bond issuance
- The supervisory authorities and, potentially, the Securities Market Association should encourage better disclosure.
- The bond issuance template should include disclosure on liabilities, especially those in foreign currency, and contingency plans when market funding dries up.
Policy recommendations and preparedness
- Authorities should evaluate the need to raise capital requirements for banks for CRE exposures.
- Authorities should plan now for what a potential crisis intervention might be.
- Such intervention should be designed to limit moral hazard.
- Plans to restore market functioning should aim to incentivize participants to re-enter the market, while considering the costs and risks to the central bank and concerns about moral hazard.
Content in this bundle
- Sweden: Selected Issues; IMF Country Report No. 23/112; February 24, 2023