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Political Economy

Swedish financial system is strong but the weak Europe still leave the system vulnerable

Thursday, 08 November 2012
The situation on the financial markets has improved since last year, but a persistent European sovereign-debt saga still present itself as one of the biggest destabilising risk to Sweden's financial system, the country's Financial Supervisory Authority (FI) said Thursday.

According to Dow Jones news report, underlying structural problems remain in some European countries, although the unease on financial markets subsided somewhat during 2012 thanks to support measures from central bank, the regulator said in a report.

Sweden's banks are well-capitalized with strong buffers and robust resilience, the Swedish FSA said, according to Down Jones news but however, the report hold that they are reliant on market finding and this makes the banking system vulnerable if the debt crisis should intensify.
On Thursday the Swedish central bank, the Riksbank's governor, Stefan Ingves and Deputy Governor Per Jansson, were invited to the Parliamentary Committee of Finance. Stefan Ingves defended the decision in October to leave the policy policy rate unchanged at 1.25 percent.

"We see before us a normal economic cycle, not a return to what happened in 2008-2009, rather, to the years of the early 2000s, "said the Governor.

Swedish economic growth is expected to gradually return to normal and Stefan Ingves referred particularly to the economic cooperation organization, the OECD's assessment of world trade, a broad indicator that the global economy will grow.

He also reiterated his concerns about Swedish household debt, which are on average stands at 170 to 175 per cent of disposable income.
"A high debt level makes the economy fragile and it can lead to pretty serious consequences, "said Stefan Ingves, citing examples in the U.S. and the UK.
By Scancomark.com Tea,

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