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Sweden: Staff Report for the 2016 Article IV Consultation–Supplementary Information

Author(s):
International Monetary Fund. European Dept.
Published Date:
November 2016
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1. The Swedish authorities recently announced a political agreement on expanding the ability of Finansinspektionen (FI) to take macroprudential measures. The Government, together with a number of other political parties, agreed on October 26, 2016 to expand the ability of FI to counteract financial imbalances in the credit market. In particular, the government will introduce new legislation to provide the FI with a formal mandate to propose new measures for the government’s approval. A legislative proposal will be sent for public consultation by the Ministry of Finance, with the aim for it to become effective from 2018.

2. This agreement is a promising step toward enabling timely macroprudential policy action, a key recommendation of the Financial System Stability Assessment and the Article IV Staff Report. Although details are not yet available, the agreement would appear to enable the adoption of new tools without specific authorizing legislation, as was necessary recently in the case of the requirement for minimum amortization of new mortgage loans. The resulting clearer and shorter process for implementing possible new requirements on the credit market would enable FI to act more quickly should there be a sharp increase in credit market risks. Staff notes that this welcome strengthening of FI’s macroprudential authority should not itself delay measures to contain vulnerabilities, such as those related to a further rise in the share of households with high debt-to-disposable income ratios.

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