Sweden: Financial System Stability Assessment

International Monetary Fund

No 2023/113, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper discusses Sweden’s Financial System Stability Assessment. Sweden recovered rapidly from the coronavirus disease 2019 crisis, and gross domestic product reached its pre-pandemic level in mid-2021. In the context of a robust supervision and regulation framework, the financial sector exited the crisis with substantial capital and liquidity buffers. Going forward, growth is expected to slow amid higher energy prices, tighter financial conditions, and reduced confidence following sharply lower house prices. Stress tests indicate that banks are broadly resilient to simulated shocks, as their capital should remain above minimum requirements. The rapid digitalization of the Swedish payment system raises risks of cyber-attacks and of supervision falling behind. Authorities should consider higher capital requirements for banks given commercial real estate and residential real estate risks. They should also address resource constraints to strengthen supervision of banks and fintech firms. The macroprudential policy toolkit should be expanded and institutions should better coordinate. The materiality of Central Bank Digital Currency risks on the financial system should be further evaluated.

Keywords: FSAP bank solvency stress tests; derivative markets activity; coverage ratio; bank resolution plan; liquidity shock; bank stress tests; risk dashboard; commercial real estate; Stress testing; Systemic risk; Fintech; Crisis management; Financial Sector Assessment Program; Global; Baltics (search for similar items in EconPapers)
Pages: 56
Date: 2023-03-16
New Economics Papers: this item is included in nep-fdg
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