Calls for better protection

The number of funds in Sweden’s pension system will be reduced by between 200 and 400, if a Swedish Pensions Agency (Pensionsmyndigheten) proposal is approved by the parliamentary pension group, reports Dagens Nyheter.

Concerns over the recent scandals with Falcon Funds and Allra have led the Pensions Agency to propose that a company must be able to prove that it has had assets of at least 100 million kronor under management for three years before it will be accepted on its platform. During the second half of last year just four of 31 new funds met such a requirement.

Another proposal is that a fund must be able to show it has been trading on other regulated markets during a set number of years, while a third is that a cap will be set on the level of assets each fund has in the pension system.

The parliamentary group is expected to make a decision by the summer.

Criticism of plans to give watchdog extra powers

The Ministry of Finance wants the Swedish Financial Supervisory Authority (Finansinspektionen) to be given additional macroprudential tools, but a number of bodies are critical of the plans.

The Trade Union Confederation, LO, believes a review of interest rate deductions needs to be made before the watchdog further restricts household borrowing, while the Swedish Construction Federation warns that a debt-to-income ceiling will make it harder for the young and immigrants to get a first step on the property ladder; a view which is shared by the Association of Swedish Real Estate Agents.

The Swedish Bankers’ Association believes Finansinspektionen’s proposed mandate is too broad and far-reaching but Sweden’s central bank, the Riksbank, welcomes the proposal, given that current regulation does not correct financial imbalances.

Economists: Cautious budget

Economists are describing Tuesday’s spring budget as cautious and selective. Annika Winsth, Nordea’s chief economist, believes the government is gradually paving a way for an election budget while SEB’s Håkan Frisén would have liked to see reform on the housing and labour markets. However, he acknowledges that it is too late in the business cycle for stimulus.

Anna Öster, chief economist at Länsförsäkringar, agrees with Finance Minister Magdalena Andersson that the Swedish economy remains strong but is disappointed that the government made no mention of the challenges facing the economy. “Put bluntly, there was no holistic approach,” she says.

Vattenfall demands compensation

Dutch energy company Vandebron, the Triodos bank and the City of Amsterdam are behind an initiative to buy Hemweg 8, an old and inefficient coal-fired plant in the city (ed.). They have offered Vattenfall subsidiary Nuon the equivalent of some SKr 50 million for the plant, which they want to close as soon as possible.

Vattenfall has rejected the bid, and has instead demanded 55 million euros of the Netherlands to close the plant ahead of time.

Growth in danger zone

After several years of dramatic price rises, Sweden is now one of the countries at risk of a collapse in house prices, resulting in GDP growth slowing down.

House prices have risen, in real terms, by over 30% in Sweden and New Zealand in the past three years, accompanied by rising household debt. Now, according to credit rating institute, Moody’s, the two countries are most exposed to falling house prices.

Jens Magnusson, from SEB, says the warnings are correct but that the conclusions can be qualified. He points out that price increases in Sweden do not mainly come from speculation and that lending is distributed so that those with the highest incomes borrow the most.

Moody’s report also points out that Sweden’s social safety net provides a cushion for households but means greater economic exposure if things begin to get shaky.

Riksbank critical of bank fees

In its response to the government’s proposal to raise bank fees for the resolution reserve (which could be used in the event of a financial crisis – ed.), the Riksbank has said that it is uncertain whether the increase in the fee would really boost resources for handling a crisis. The Swedish reserve does not consist of an actual fund and there are no liquid assets earmarked for bank crisis management, the central bank points out. The bank believes the government ought to consider whether there are better alternatives for strengthening financial stability.

Finance Minister Magdalena Andersson does not want to comment on the responses until they are analysed.

Green light for Gazprom

Russian Gazprom says it now has the go-ahead to build the controversial gas pipeline Nord Stream 2.

Anna Kaisa Itkonen, the European Commission’s spokesperson on energy, says, “We do not like Nord Stream 2 from a political aspect. However, saying that, there are no legal grounds on which the Commission can oppose it.”

A new route to Europe has long been the goal of the Russian state gas company, something that has met widespread opposition. A new pipeline will enable Russia to bypass Ukraine and Eastern Europe, increasing its control over the countries. Martin Kragh, from the Swedish Institute for International Affairs, points out that Russia wants to cut Ukraine out of the European energy equation and tie up Europe as a long-term export market.

Nonetheless, Chloé Le Coq, doctoral student at Stockholm School of Economics, says there are positive factors, for example the opportunity to diversify transport routes for gas to Europe.

All cleared in Saab case

The verdict of Vänersborg district court was a success for all seven accused in the Saab trial into financial crimes. All, including chair of the board of Saab Victor Muller and CEO Jan Åke Jonsson, were acquitted of all charges.

Lawyer defending head lawyer Kristina Geers, Per E Samuelsson, says that the verdict is not a surprise and he is strongly critical of the process. “It is not rational to spend so much time and resources on something that interferes so much with so many individuals when there is no crime,” he says and assesses that it cost taxpayers over 10 million kronor.

Head prosecutor Olof Sahlgren says that he did not expect this outcome.

Elevated risk

In a report presented on Thursday, Sweden’s financial supervisory authority Finansinspektion (FI) said that new rules introduced in June last year, forcing new mortgage borrowers to pay down their loans, had helped make households more resilient, but the full effect would take years to realise (ed.). FI’s chief economist, Henrik Braconier, warned of an elevated risk that house prices could fall sharply, as could income, and of the likelihood of rising interest rates.

Bank proposal “a rush job”

Professor Ulf Berritz, whose field of expertise is European law, has studied the government’s proposal to raise bank resolution fund fees, that is to say the reserve to shield Sweden from the next financial crisis. At a seminar organised by the Swedish Bank Association (Bankföreningen) on Wednesday, Professor Berritz concluded that the proposal is incompatible with EU law. He also criticised the memorandum sent out by the Ministry of Finance, which failed to analyse the impact of the proposed raise in industry payments, describing it as “a rush job” with insufficient preparation.