The Swedish Capital Market: Prospects for Borrowers and

The Swedish Capital Market: Prospects for Borrowers and Investors – an ICMA Seminar

9 December 2013

Opening Remarks Tim Skeet, Managing Director, Markets, RBS

Johan Wijkström, Senior Vice President, Head of Bank Relations, Swedbank

Keynote Presentation Olof Sandstedt, Head of Banking Analysis Division, Financial Stability Department,

Sveriges Riksbank

ICMA - Swedish Capital Market

9 December 2013

Olof Sandstedt

Financial Stability in Sweden

The views expressed in this presentation should not be

attributed to the Board of Governors of the Riksbank

Agenda

The large Swedish banks & financial markets

The Swedish household sector & house prices

The Riksbank’s recommendations

Financial stability good at present -

but risks need to be managed

Swedish stress index Ranking

Sources: Bloomberg, Reuters EcoWin and the Riksbank Chart 2:3

Five-year CDS premia for European banks Basis points

0

100

200

300

400

500

600

700

11 12 13

Germany Spain France Italy Netherlands Sweden

Sources: Bloomberg and the Riksbank Chart 2:10

Profitability high at the major Swedish banks

Note. Rolling four quarters, SEK billion, fixed prices, September 2013. The broken lines refer to the Riksbank's main scenario in the current assessment.

Sources: Bank reports and the Riksbank

-20

0

20

40

60

80

100

120

91 93 95 97 99 01 03 05 07 09 11 13 15

Profit before loan losses Loan losses

The four Basel III measures December 2012, per cent

LCR

CET 1

NSFR

Leverage ratio

Swedish major banks European banks Minimum level

3 7

100

100

Sources: Bank reports, EBA, Finansinspektionen and the Riksbank Chart 1:4

Swedish banks well-capitalised - but have small percentage of equity to total assets Per cent

Sources: Bank reports and the Riksbank Chart 4:16

House prices continue to rise in Sweden – especially tenant-owned

Note. Index, January 2005=100. Nominal housing prices, seasonally-adjusted. Sources: Valueguard and the Riksbank

100

120

140

160

180

200

220

05 06 07 08 09 10 11 12 13

Tenant-owned apartment Single-family houses

Real house prices Index, 1980 = 100

Source: Statistics Sweden and the Riksbank Note: Nominal house prices deflated by CPI

The Swedish households’ assets and debt Percentage of disposable income

0

100

200

300

400

500

600

700

72 75 78 81 84 87 90 93 96 99 02 05 08 11

Total assets excluding collective insurance Real assets

Liquid assets Debt

Cash and bank deposits

Sources: Statistics Sweden and the Riksbank Chart 3:4

Households expect continued low interest rates

Note. Households’ expectations of the variable mortgage rate, one, two and five years ahead. The interval is a normal interest rate level based on a repo rate of 3.5-4.5 per cent, plus a markup. Per cent.

Sources: The NIER and the Riksbank

0

1

2

3

4

5

6

7

13 14 15 16 17 18

Estimated mortgage interest rates given a repo rate of 3.5-4.5 per cent

Households’ expectations of the variable mortgage rate

Fixed-rate periods for new mortgages Per cent

0

10

20

30

40

50

60

70

80

90

100

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Adjustable rate <5 year >5 year

Source: Statistics Sweden Chart 3:9

New interest-only mortgages in Sweden Per cent

0

10

20

30

40

50

60

70

80

07 08 09 10 11 12

First mortgage Second mortgage

Source: Finansinspektionen Chart 1:12

Financial stability good at present -

but risks need to be managed

The Riksbank recommends

That the risk weight floor for Swedish mortgages be raised

That the major Swedish banks

Continue to ensure they have sufficient capital

Continue to increase the proportion of stable funding

That the major Swedish banks

Disclose NSFR, leverage ratios & LCR in SEK

Olof.Sandstedt@Riksbank.se

Thank you!

Panel Session: Resolve and Rubbish; Bail and Bin/The Fate of Senior Creditors under the proposed new rules for dealing with failing banks – The implication of Bail-in, the resolution regime

» Moderator: Tim Skeet, Managing Director, Markets, RBS

» Panellist: Henry Cooke, European Head of Secured Credit, Threadneedle Asset Management

» Panellist: Georg Grodzki, Head of Credit Research, Legal & General Investment Management

» Panellist: Johan Molin, Adviser at the Financial Stability Department, Sveriges Riksbank

» Panellist: Gerry Rawcliffe, Analyst, Western Asset Management

»

Panel Session: The Ingredients of Market Liquidity

» Moderator: Moderator: Rickard Skogsfors, Head of Credit Trading, Swedbank

» Panellist: Ulf Erlandsson, Senior Portfolio Manager, AP4

» Panellist: Kimmy Samuelsson, Head of LT Funding, Swedbank

Panel Session: Public sector funding and the Swedish profile in the

international markets – what are the challenges today and tomorrow

» Moderator: Tim Skeet, Managing Director, Markets, RBS

» Panellist: Per Åkerlind, Executive Director, COO and Head of Lending & Funding, Svensk Exportkredit/Swedish Export Credit Corporation

» Panellist: Carl-Henrik Arosenius, Head of Investor Relations, Kommuninvest i Sverige AB

» Panellist: Thomas Olofsson, Director and Head of Debt Management, Swedish National Debt Office

Closing Remarks

Tim Skeet, Managing Director, Markets, RBS