## Sweden’s Corporate Vulnerabilities: A Focus on Commercial Real Estate: SWEDEN

_Selected Issues Papers, March 21, 2023_

## Source details

**Canonical URL:** [Sweden’s Corporate Vulnerabilities: A Focus on Commercial Real Estate: SWEDEN](https://www.imf.org/en/publications/selected-issues-papers/issues/2023/03/21/swedens-corporate-vulnerabilities-a-focus-on-commercial-real-estate-sweden-531199)

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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

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### 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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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2023/03/21/swedens-corporate-vulnerabilities-a-focus-on-commercial-real-estate-sweden-531199_