## Sweden: Financial Sector Assessment Program–Technical Note on Stress Testing of the Financial Sector

_IMF Staff Country Reports, May 25, 2023_

## Source details

**Canonical URL:** [Sweden: Financial Sector Assessment Program–Technical Note on Stress Testing of the Financial Sector](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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## Bibliographic details
- Published: May 25, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400243103.002

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### Overview and key findings
- 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."

### Vulnerabilities identified
- 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."

### Policy recommendations and supervisory actions
- "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:
  - "Provide guidance on liquidity stress tests for the fund industry."
  - "Develop and adapt the stress-testing framework and monitoring tools to conduct market wide liquidity risk analysis."

### Subject areas and keywords (as provided)
- 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

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- **1sweea2023010**
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_Source: https://www.imf.org/en/publications/cr/issues/2023/05/25/sweden-financial-sector-assessment-programtechnical-note-on-stress-testing-of-the-financial-533817_