Minister uncertain about FSA requirements

Housing Minister Peter Eriksson is doubtful about the new amortisation requirement and believes other alternatives ought to be considered.

On Monday the Financial Supervisory Authority (FSA) is expected to make a decision about whether to introduce new tougher amortisation requirements. The issue is a difficult decision for the government as giving the go-ahead could entail risks, but stopping the proposal would undermine the FSA.

On Wednesday Financial Markets Minister Per Bolund (Green) criticised the opposition, calling its stance against the proposal “irresponsible”. However, party colleague Peter Eriksson expressed his uncertainty. “I think the amortisation requirement that was brought in recently has had mainly a positive effect. In the situation we have now it is more uncertain. I think that other possible measures ought to be considered,” he says. His main concern is that it would slow down housing construction.

Crisis of confidence threatening FSA chief

While property brokers are warning prices in Stockholm have already fallen by 15%, the issue of new tougher mortgage requirements is to be decided. On Monday the board of the Financial Supervisory Authority (FSA) is to make a decision, although director general Erik Thedéen has already said that he is prepared to go ahead with the proposal.

He has not only defended the proposal but accused critics of representing special interests and exploiting the uncertain market situation to postpone it.

The opposition has already stood against the proposal, so the government is alone. However, although formal approval from the Riksdag is not needed, it is not a good option for the government to make a decision that changes the rules of play on a rocky property market ten months before an election.

Annika Winsth, chief economist at Nordea, says that if the government opposes the new amortisation requirements, the judgement of the FSA is being put in question and Erik Thedéen ought to seriously consider whether he should remain in post.

Nordea demand still applies

The Financial Supervisory Authority (FSA) intends to ensure that Nordea’s capital requirement remains as high as it is currently, even after the bank moves its headquarters to Finland.

In an interview with Dagens Industri (DI), the head of the FSA, Erik Thedéen, says that the Finland is move is “completely unique”. “It is also the first time a large bank, with exposure to the whole of the Nordic region comes under the jurisdiction of the European Central Bank (ECB),” he adds.

He does not believe Nordea’s move is a sign that Swedish regulation has gone too far. “When you say that our requirements are too demanding, then you are forgetting that these requirements are made in an environment typical to Sweden, which is concentrated and interlinked.”

When the move is made, the FSA no longer has responsibility for supervising Nordea and it could mean a lower capital requirement for Nordea. The FSA has already started talks with the ECB and Erik Thedéen wants to push for the ECB to ensure the current capital levels are maintained.

FSA inquiry continues

The Financial Supervisory Authority’s (FSA) massive investigation into money laundering and terror financing in the wake of the Panama Papers leak has taken an important step forward, reveals director general Erik Thedéen in an interview. He tells SvD business that he has sent a verification letter to the four main banks asking them to check the information the FSA has found and add any comments. The authority will then decide whether to take it further.

Furthermore on Tuesday the FSA, together with the Police’s Financial Intelligence Unit, announced new efforts to stop money laundering and the financing of terrorism. This time the focus is on smaller players and the spotlight is being turned on companies that send money abroad and quick loan companies.

FSA warns banks

The Swedish Financial Supervisory Authority (FSA) has warned of the growing number of indebted households and now FSA boss Erik Thedéen is calling in the banks to stop growth in lending. “The intention of the discussions is that they will together lead to a more restrictive position for high debt ratio lending,” says Erik Thedéen.

Harry Flam, professor in international economics, soon to be chair of the Swedish Fiscal Policy Council, agrees. However he disagrees that the introduction of a debt ratio ceiling, a maximum loan in relation to disposable income, is the right way to go. Instead he wants to see a cautious lowering of interest rate deductions.

Watchdog bites back

In a recent poll of the financial services industry, just 63% of respondents believed that Sweden’s Financial Supervisory Authority made any contribution to the smooth running of the market. Martin Noréus, acting director general of the watchdog, believes the low rating has to do with the introduction of new rules and tougher supervision.

Meanwhile, Stefan Ingves, the governor of the Riksbank, has criticised the authority for doing too little to curb consumer debt in Sweden. In response, Noréus says: “We share the same view as the Riksbank, that there is a risk when consumer debt escalates.   However, we hold slightly different views on how great the risk is. We believe this is more of a risk that builds up over time, so we feel it is reasonable to implement measures gradually”.

Noréus rejects Ingves’ proposal to impose stricter capital requirements on banks, saying the watchdog has found that the banks are practising sound credit risk management and have more than enough capital to cover their risks.