“Could have dramatic impact on economy”

The Swedish government has proposed that certain companies in the financial sector, such as banks and insurers, will not be able to deduct interest expenses on some subordinated debt.

The country’s central bank, the Riksbank, welcomes the proposal, saying it will probably improve the quality of the capital base, which will in turn improve financial stability.

The Swedish Bankers’ Association (Bankföreningen) disagrees, saying it will be harder to safeguard financial stability, and tougher and more expensive for companies to borrow money.

Added to this, there are plans to levy a new bank tax, a new crisis management directive is in the pipeline as is Basel IV. “If you add all of this together, it could have a quite dramatic impact on the Swedish economy,” warns Bankföreningen’s MD Hans Lindberg.