UPDATE 2-Swedish banks could face big loan losses if pandemic continues – c.bank


* Credit losses could reach 3% of loans if the economy plunges-c.bank

* Says more economic policy measures may be needed

* Says the financial system is functioning “satisfactorily” at the moment (adds comments from Riksbank Governor Ingves)

STOCKHOLM, May 20 (Reuters) – Swedish banks could suffer credit losses of up to 3% on loans if the central bank scenario of an almost 10% decline in GDP this year occurs, said Riksbank Governor Stefan Ingves on Wednesday.

The Riksbank has forecast the economy to contract between 6.9% and 9.7% this year due to the novel coronavirus and measures to counter it, although the figures are highly uncertain.

“If there are economic concerns in the global economy and in the Swedish economy, it seems likely that sooner or later it will lead to credit losses,” Ingves told reporters after the Riksbank released a report. regular on financial stability.

“The big question is how long is this going to last and how deep is it going to be.”

In the most negative scenario – a nearly 10% drop in GDP – credit losses could reach around 3% of bank loans, according to the Riksbank’s stress tests. In the scenario of a less severe downturn, credit losses could be in the order of 1% of loans.

Ingves said much of the success will come from real estate.

“We have said … many times before that Swedish banks have become … a kind of real estate or real estate bank because a very, very large proportion of bank loans are for goods – commercial goods or, for the ‘essential, houses – as collateral,’ he said.

The Riksbank said the financial system was stable for now, but the risks of growing the longer the pandemic would last.

The central bank, although it has not cut rates, has launched a series of measures, including dollar and kroon loans and an expanded asset purchase program to support the supply of credit and liquidity in the banking system. ($ 1 = SEK 9.6719)

Reporting by Simon Johnson; edited by Johannes Hellstrom, William Maclean

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