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Political Economy

Governor of Swedish central Riksbank, Stefan Ingves calls for change in Mortgage payment models

Tuesday, 15 January 2013
The Governor of the Swedish central bank, the Riksbank, Stefan Ingves (pictured below) has called for the consideration of considers mandatory amortization requirements on the mortgage if banks do not take responsibility. The aim is to call for a rule change in the down payment of mortgages.

In a rare interview to the Swedish daily, Dagens Nyheter, he said, "consideration should be given to some sort of regulatory requirements for the amortization of the mortgage. It is not good that loans have eternal life because there are excessive risks associated," said Stefan Ingves to the Dagens Nyheter.

He believes that it is up to the banks to implement such requirements and to make sure that they are inserted in their policies.

"The best would be if they did this task themselves, without coercion from the authorities. But I believe that one should impose mandatory rules if there does not happen to be enough action in that direction," he told the paper.

The Governor could have been driven by a year in which there has been criticism of the Riksbank for tardiness with rate cuts and disagreement on the Executive Board.
Other lines of thought have to do with the ballooning Swedish household debt caused by the intense house prices hikes and high cost of interest payments and fears that mortgages have to be paid.

But the Governor seems to have been listening to the various voices that have shown concern about the level of Swedish household borrowing and believe that lowering interest rates might fuel more borrowing than expected thus adding t the already large household debt. on the other businesses are fuming at the governor for not making it cheaper for them to borrow and invest thereby educing the growing rate of unemployment.

However, the Governor is positive for the question of the requirements on capital adequacy, which allows banks to build larger buffers in good times. He also expresses sympathy for the two proposals that Finance Minister, Anders Borg presented: a levy on banks borrowing in foreign currency and reserve requirements.
By Scancomark.com Team

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