{
  "title": "Sweden: Financial Sector Assessment Program–Technical Note on Stress Testing of the Financial Sector",
  "publication": "IMF Staff Country Reports, May 25, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2023/05/25/sweden-financial-sector-assessment-programtechnical-note-on-stress-testing-of-the-financial-533817",
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  "summary": "This paper presents the technical note on risk analysis and stress testing for the Sweden financial sector assessment program. Sweden’s financial system has weathered the coronavirus disease 2019 pandemic well. Tighter monetary conditions will test the financial system.",
  "sections": [
    {
      "heading": "Overview and key findings",
      "content": "- The technical note presents risk analysis and stress testing for the Sweden financial sector assessment program.\n- Sweden’s financial system \"has weathered the coronavirus disease 2019 pandemic well.\"\n- \"Tighter monetary conditions will test the financial system.\"\n- \"High corporate advantage and household debt create structural and cyclical risks to the financial system.\"\n- Corporate sector and banking system solvency stress tests based on the adverse scenario indicate \"pockets of vulnerabilities due to exposure to CREs and low risk weight density of banks.\"\n- The liquidity stress test performed on investment funds \"points to significant pressures.\""
    },
    {
      "heading": "Vulnerabilities identified",
      "content": "- Exposure to CREs (commercial real estate) as a driver of pockets of vulnerability in corporate and banking solvency tests.\n- Low risk weight density of banks increases sensitivity in solvency stress tests.\n- Investment funds face \"significant pressures\" under liquidity stress testing.\n- Structural and cyclical risks arising from \"High corporate advantage and household debt.\""
    },
    {
      "heading": "Policy recommendations and supervisory actions",
      "content": "- \"Several adjustments are recommended to improve monitoring, quantification, and mitigation of risks.\"\n- Deploy price- and quantity-based measures \"as a second line of defense.\"\n- Finansinspektionen should:\n  - \"Provide guidance on liquidity stress tests for the fund industry.\"\n  - \"Develop and adapt the stress-testing framework and monitoring tools to conduct market wide liquidity risk analysis.\""
    },
    {
      "heading": "Subject areas and keywords (as provided)",
      "content": "- Subject: Asset and liability management, Corporate bonds, Financial institutions, Financial sector policy and analysis, International organization, Liquidity, Liquidity stress testing, Monetary policy, Mutual funds, Stress testing\n- Keywords: Corporate bonds, Global, Liquidity, liquidity profile, liquidity shock, liquidity shortfall, Liquidity stress testing, liquidity tracking, Mutual funds, risk analysis, Stress testing\n\n---\n\n Content in this bundle\n\n- 1sweea2023010\n  - 1sweea2023010 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1sweea2023010 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: May 25, 2023",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400243103.002",
    "The technical note presents risk analysis and stress testing for the Sweden financial sector assessment program.",
    "Sweden’s financial system \"has weathered the coronavirus disease 2019 pandemic well.\"",
    "\"Tighter monetary conditions will test the financial system.\"",
    "\"High corporate advantage and household debt create structural and cyclical risks to the financial system.\"",
    "Corporate sector and banking system solvency stress tests based on the adverse scenario indicate \"pockets of vulnerabilities due to exposure to CREs and low risk weight density of banks.\"",
    "The liquidity stress test performed on investment funds \"points to significant pressures.\"",
    "Exposure to CREs (commercial real estate) as a driver of pockets of vulnerability in corporate and banking solvency tests.",
    "Low risk weight density of banks increases sensitivity in solvency stress tests.",
    "Investment funds face \"significant pressures\" under liquidity stress testing.",
    "Structural and cyclical risks arising from \"High corporate advantage and household debt.\"",
    "\"Several adjustments are recommended to improve monitoring, quantification, and mitigation of risks.\"",
    "Deploy price- and quantity-based measures \"as a second line of defense.\"",
    "Finansinspektionen should:",
    "Subject: Asset and liability management, Corporate bonds, Financial institutions, Financial sector policy and analysis, International organization, Liquidity, Liquidity stress testing, Monetary policy, Mutual funds, Stress testing",
    "Keywords: Corporate bonds, Global, Liquidity, liquidity profile, liquidity shock, liquidity shortfall, Liquidity stress testing, liquidity tracking, Mutual funds, risk analysis, Stress testing",
    "**1sweea2023010**"
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