Swedish central bank wants financial regulation review

By Reuters Staff
February 15, 2010

STOCKHOLM, Feb 15 (Reuters) – Sweden’s central bank said on Monday the country was in urgent need of new banking regulation and authorities needed new tools to help them manage future markets crises and ensure financial stability.

Swedish Financial Markets Minister Mats Odell told Reuters the centre-right government would appoint a commission to review the handling of the financial crisis and the effectiveness of current regulations.

“It is high time to take a coherent approach to everything from the winding-up and reconstruction of financial undertakings in distress to the responsibilities, division of roles and tools relating to the maintenance of financial stability in Sweden,” Riksbank General Council Chairman Johan Gernandt and Governor Stefan Ingves said in a joint statement.

“The regulation of the banks is inadequate and the options available to the government and the authorities to handle problem banks need to be strengthened.”

A review should also look at the division of responsibilities between the Riksbank and the country’s financial services watchdog and how Sweden handles borrowing for the currency reserve, the central bank said.

The Riksbank has repeatedly stressed the need for a new regulatory framework that takes on board the lessons from the recent credit crunch and ensuing global downturn.

It has also expressed concerns about a possible housing market bubble in Sweden and earlier this month appointed its own panel to examine the relationship between the commercial property and housing markets and the Riksbank’s mandate.

The findings of that body are expected in January 2011.

Sweden’s major banks made it through the recent financial crisis in relatively good shape.

At the height of the credit crunch, the central bank provided cheap money for financial firms and the government launched a scheme guaranteeing new loans, easing liquidity bottlenecks.

Although loan losses in the Baltics have hurt earnings — most markedly at Swedbank <SWEDa.ST> and SEB <SEBa.ST> — none of Sweden’s major banks collapsed or had to be propped up by the authorities.

Financial Markets Minister Odell said directives for a commission to review the handling of the financial crisis were being drawn up by the government, which had been in contact with several authorities, including the Riksbank, during the process.

“Is there is reason to tighten the regulatory framework in some way and how can we improve our ability to handle crisis,” he said of the issues to be examined by the commission.

“We will take note of the Riksbank’s proposal in this process going forward,” he said. (Reporting by Simon Johnson and Love Liman, editing by Mike Peacock) ((Stockholm Newsroom, +46-8-700 1017, e-mail: stockholm.newsroom@reuters.com))

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[...] Gernandt, J. (2010). Swedish central bank wants financial regulation review. Thomson Reuters. Retrieved from http://blogs.reuters.com/financial-regul atory-forum/2010/02/15/swedish-central-b ank-wants-financial-… [...]