Impose requirement on banks

The Swedish Competition Authority (Konkurrensverket) has rejected the government’s plans to introduce an amortisation requirement, saying that the lack of competition in the banking market would worsen further.

Instead the Competition Authority wants new and tougher lending requirements to be imposed on the banks. Not only would banks be able to offer a range of services designed to suit customers better, but customers would be less likely to stay loyal to one bank for years, instead switching to the bank that provides the best offer.

Riksbank expands quantitative easing

The Riksbank has held its benchmark repo rate unchanged at a negative 0.35% and has said it will expand its bond buying programme by SKr 65 billion to a total of SKr 200 billion.

The central bank expects to keep the repo rate low until 2017 even though inflation is showing a clear upward trend. However, there is still considerable uncertainty regarding the strength of the global economy and central banks abroad are expected to pursue an expansionary monetary policy for a longer time.

Negative interest rates will continue to have an impact on house prices, and Riksbank Governor Stefan Ingves yesterday reiterated that the Swedish housing market is “out of balance”, and that politicians must ensure that an amortisation requirement is put in place.

Economists wary of Ingves’ plan

As a means of curbing soaring house prices and household debt levels, Riksbank Governor Stefan Ingves has proposed the introduction of a debt ratio ceiling, limiting the size of loans an individual household may take in relation to income.

A debt-to-income limit of 400%, tighter rules on mortgage repayment and a 50% cut in the interest deduction would slow the increase in the debt ratio, according to Mr Ingves.

Tor Borg, chief economist at SBAB, sees a risk in introducing all three measures at once, saying that such a move could trigger a recession.

Anna Öster, chief economist at Länsförsäkring, is also critical. She believes it is “unfortunate” that the focus is on trying to reduce the housing demand. Caution is vital since such a move could trigger a housing market crash and have a serious impact on the Swedish economy, she says.

Both Tor Borg and Anna Öster would instead like to see an increase in housing construction.

Second blow for government

For the second time this year, an appeals court in Jönköping has challenged a proposal that would require households to pay off more than interest on their mortgages – a measure designed to counteract soaring house prices and the high level of household debt.

Earlier this year, the court ruled that the Swedish Financial Supervisory Authority (FSA) did not have the powers to set an amortisation requirement. In September, the government reached an agreement with the Left Party and the centre-right opposition to grant the FSA the necessary powers. But, in a statement released yesterday afternoon, the court ruled that any requirement to pay down mortgages should be regulated by law as such a move would have a significant impact on individual households’ finances. The court also stated that the change could be in breach of Sweden’s constitution.

Despite the court’s challenge, Minister for Financial Markets and Consumer Affairs, Per Bolund, has not given up, saying there is a legal basis for the proposal and that he is awaiting the comments of other bodies.

Delegation to Jordan

A delegation of 15 companies, accompanied by Minister for Public Administration Ardalan Shekarabi, will fly to Jordan today to visit the Azraq refugee camp and to take part in a conference on UN procurement in the Middle East.

In 2014, UN organisations purchased goods and services to a value of more than SKr 150 billion, according to the Government Offices. Sweden’s share was 0.16%, compared to Denmark’s share of more than 3%.

During the trip, Ardalan Shekarabi will also meet Jordan’s Prime Minister and Industry Minister to discuss humanitarian cooperation and support to the UN body in the country

Millicom corruption scandal

Telecom and media company Millicom, in which Kinnevik is a major shareholder, has reported its joint venture partner in Guatemala to Swedish and US anti-corruption authorities over suspected “improper payments”.
Mauricio Ramos, chief executive of Millicom, tells DI that the media company has zero tolerance for corruption and that transparency towards investors is key, which is why it reported the matter voluntarily.
Like its competitor TeliaSonera, the Stenbeck-owned telecom provider faces hefty fines in the United States, and a scandal that could grow. The provider has operations in several emerging markets in Latin America and Africa that rank low in Transparency International’s corruptions perceptions index.
SKr 5 billion was wiped off the value of Millicom yesterday, and Sajsa Beslik, head of responsible investment at Nordea, whose Fund unit (Nordea Funds AB) owns a 4.7% stake in Millicom, predicts Millicom will have to pay fines.

Falkengren on VW scandal

Annika Falkengren, who is a member of the supervisory board of Volkswagen (VW), commented for the first time yesterday on the scandal over VW rigged emissions tests.
She described her shock when she first heard the news, but emphasised that her position on the supervisory board would not affect SEB’s operations in Germany, and added, “So far it has not affected my position as CEO of SEB.”

Swedish companies eye Iran

The approaching end of economic sanctions on Iran will mean access to a huge new market not seen since Russia opened for trade after the Cold War. Swedish companies are among those eyeing the potential in Iran.
“We’re receiving a lot more visits from Swedish companies and more questions,” says Peter Tejler, Sweden’s ambassador to Iran.
Iran could “without doubt” become a major export market for Sweden, says Trita Parsi, president of the Iranian American Council in Washington, who is participating in Business Sweden’s annual conference for Swedish export promotion in the Middle East and Africa currently being held in Dubai.
Lars Erik Forsbergh, MD of Volvo Trucks in the Middle East, hopes to resume business in Iran as soon as the sanctions are lifted. The truck maker has kept relations with their Iranian partners alive since the early 2000s when Volvo Truck’s sales volume in Iran was upwards of 10,000 units per year.

Sweden and Saudi Arabia sign new agreement

On Monday Enterprise Minister Mikael Damberg and Saudi Finance Minister Ibrahim Al-Assaf signed an agreement to avoid double taxation.
In an interview with Dagens Industri (DI), Damberg says that cooperation between Sweden and Saudi Arabia will focus on civilian affairs and trade rather than on military matters, as was the case under the former alliance government. He emphasises that relations between the two countries are now back to normal, and that the newly signed agreement will enhance trade.
Both Damberg, and Dag Juhlin-Dannfelt, Sweden’s ambassador to Saudi Arabia, underline that Sweden has a good reputation as a traditional donor country and the fact that Sweden is taking its share of the current refugee burden is also looked upon favourably.

Agreement to enhance innovation

On Sunday, Mikael Damberg, the enterprise minister, who is visiting the Middle East, signed an agreement with Saed Al Mansouri, the United Arab Emirates (UAE) minister for economy, for cooperation in innovation and research, and to develop and strengthen small and medium-sized enterprises.
The UAE minister tells Dagens Industri (DI), that Swedish businesses need to sharpen their marketing skills, become more visible on the international arena, and team up with strategic friends like the UAE.