financial stability report june 2009. increased loan losses are the greatest risk swedish banks can...
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Financial Stability Report
June 2009
Increased loan losses are the greatest risk
Swedish banks can cope with increased loan losses and are well-capitalised in an international comparison
Measures taken by the authorities are still an important condition for ensuring that the Swedish financial system is stable
There is great uncertainty and the external risks have increased
Financial Stability Report 2009:1
Results before loan losses and loan losses, net, in the major
Swedish banks Totalled over four quarters, SEK billion, fixed prices, 31
March 2009
Chart 3:13 Sources: The banks’ reports and the Riksbank
-20
0
20
40
60
80
100
The Riksbank’s main scenario Loan losses during the years 2009-2010
Based on publicly-available statistics at sector level in the banks
The real economic developments stated are the Riksbank’s forecasts and consensus
All industries and countries are affected, but credit quality is affected to different extents
Results before loan losses and loan losses, net, in the major Swedish banksTotalled over four quarters, SEK billion, fixed prices, 31 March 2009
Chart 3:13 Sources: The banks’ reports and the Riksbank
-20
0
20
40
60
80
100
120
Increased loan losses
Breakdown of loan losses per region
in the Riksbank’s main scenarioPer cent
Sources: The banks’ reportsChart 3:14
Sweden27%
Nordic countries excl Sweden
27%
Baltic countries32%
Other Eastern Europe
6%
Other8%
Assessment of stability Increased loan losses…
…but good resilience
The banks can withstand higher losses than in the main scenario
Measures are an important condition for financial stability
External risks have increased
Developments in the financial markets
The effects of a poorer development in the real economy
Developments in the Baltic countries
External risks have increased
Developments in the financial markets
The effects of a poorer development in the real economy
Developments in the Baltic countries
Note. In Sweden refers to the difference between 3-month Stibor and T/N swap (STINA)
Chart 1.2 Source: Bloomberg
Developments in the financial markets
Basis spread
0
50
100
150
200
250
300
350
400
jan-07 jul-07 jan-08 jul-08 jan-09 jul-09
0
50
100
150
200
250
300
350
400
USA Euroområdet Storbritannien Sverige
External risks have increased
Developments in the financial markets
The effects of a poorer development in the real economy
Developments in the Baltic countries
The effects of a poorer development in the economy Recessions reinforced by and in
conjunction with financial crises can become more protracted and the recovery can be both weaker and more long drawn out
In such a scenario there is a risk that credit granting and loan losses will be affected
External risks have increased
Developments in the financial markets
The effects of a poorer development in the real economy
Developments in the Baltic countries
Swedish banks in the Baltic countries March 2009
The Baltic countries’ share of the banks’ lending and results before tax
Lending
SEB 12%
Swedbank16%
Nordea 3%
Operating profit, last four quarters (previous report)SEB Neg (20%)
Swedbank 1% (27%)
Nordea 2% (2%)
Market shares of lending in per cent and number of inhabitants per
country
Source: The banks’ reports and the Riksbank
No. inhabitants 1.3 million.
No. inhabitants 2.3 million
No. inhabitants 3.4 million.
45
26 24
24
14
30
13
13
10
18
47
36
0%
20%
40%
60%
80%
100%
Estland Lettland Litauen
Swedbank SEB Nordea Övriga
GDP in the Baltic countriesAnnual percentage change
-20
-15
-10
-5
0
5
10
15
mar-99 mar-00 mar-01 mar-02 mar-03 mar-04 mar-05 mar-06 mar-07 mar-08 mar-09
Estland Lettland Litauen
Source: Reuters EcoWin Chart 2:44
Unemployment in the Baltic countries
Per cent
0
4
8
12
16
20
jan-00 jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09 jan-10
Estland Lettland Litauen
Source: EurostatChart 2:48
Late payments in Estonia and Latvia
Per cent of outstanding lending
0
1
2
3
4
5
6
7
8
de
c-0
0
de
c-0
1
de
c-0
2
de
c-0
3
de
c-0
4
de
c-0
5
de
c-0
6
de
c-0
7
de
c-0
8
de
c-0
9
Estland (mer än 60 dagar) Lettland (mer än 90 dagar)
Sources: Eesti Pank and the Financial and Capital Market CommissionChart 2:55
Stress test To assess how less probable negative
events might affect the banks’ resilience
A much worse development than in the main scenario in the years 2009-2010
Based on publicly-available information The banks are passive and take no
measures
The stress test shows… The banks can cope with a much more
negative development than in the main scenario
The loan losses for the four major banks would amount to just over SEK 300 billion for those two years
All of the banks would manage to meet the statutory Tier 1 capital ratio of 4 per cent
The banks’ Tier 1 capital ratios in the stress test
Per cent
Source: The RiksbankChart 3:22
0
2
4
6
8
10
12
14
SEB Swedbank Nordea Handelsbanken
2008-12-31 (faktisk) 2009-12-31 (stresstest) 2010-12-31 (stresstest)
Article Global recession and financial stability
Illustrates a number of financial crises and the interplay between loan losses and real economic developments
The importance of measures for both loan losses and the length of time taken before the countries recovered from the crisis
Assessment of stability Increased loan losses…
…but good resilience
The banks can withstand higher losses than in the main scenario
Measures are an important condition for financial stability
The central banks’ balance sheets
Index, January 2000=100
0
50
100
150
200
250
300
350
400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0
50
100
150
200
250
300
350
400
Riksbanken ECB Federal Reserve00 01 02 050403 09080706
Sources: Reuters Ecowin and BloombergChart 1:1
Exposures to eastern Europe as a share of the home country’s GDP
2008Per cent
0
10
20
30
40
50
60
70
Österrike Belgien Sverige Grekland Holland Schweiz Italien Tyskland Frankrike
Source: The BIS and the IMFChart B5
Households’ liabilities and interest expenditure after tax
Per cent of disposable income
0
40
80
120
160
200
83 87 91 95 99 03 07 11
0
4
8
12
16
20
Skuldkvot (vänster skala) Räntekvot (höger skala)
Sources: Statistics Sweden and the RiksbankChart 2:8
Households below the margin, impaired loans and potential loan
losses Per cent
0
1
2
3
4
5
6
7
8
2004 2005 2006 2007 2008(prognos)
2009(prognos)
2010(prognos)
Hushåll under marginal Osäkra krediter Potentiella kreditförluster
Sources: Statistics Sweden and the RiksbankChart 2:9
Percentage of liabilities, financial assets and real assets held by
indebted households in different income groups
Per cent
0
10
20
30
40
50
60
Inkomstgrupp 1 Inkomstgrupp 2 Inkomstgrupp 3 Inkomstgrupp 4 Inkomstgrupp 5
Andel totala skulder Andel finansiella tillgångar Andel reala tillgångar
Chart 2:10 Sources: Statistics Sweden and the Riksbank
Breakdown of loan losses in 2009 and 2010 in the Riksbank’s main
scenarioPer cent
Nordea 37%
Swedbank 26%
Handelsbanken 15%
SEB22%
Sources: The banks’ reports and the RiksbankChart 3:15
Real wages in the Baltic countries
Annual percentage change
Sources: Reuters EcoWin and the RiksbankChart 2:49
-5
0
5
10
15
20
25
dec-
00
dec-
01
dec-
02
dec-
03
dec-
04
dec-
05
dec-
06
dec-
07
dec-
08
Estland Lettland Litauen
Households’ borrowing in the Baltic countries
Percentage change from the previous month, calculated on an annual rate
-20
0
20
40
60
80
100
jan-07 jul-07 jan-08 jul-08 jan-09
Estland Lettland Litauen
Sources: NCBs, Reuters EcoWin and the RiksbankChart 2:52
Corporate borrowing in the Baltic countries
Percentage change from the previous month, calculated on an annual rate
-20
0
20
40
60
80
jan-07 jul-07 jan-08 jul-08 jan-09
Estland Lettland Litauen
Sources: NCBs, Reuters EcoWin and the RiksbankChart 2:53
GDP growth during a number of crises
Annual percentage change
-20
-15
-10
-5
0
5
10
15
20
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Argentina 2001-02 Uruguay 2002 Sverige 1991-93
Finland 1990-93 Japan 1991-2001
4 kvartal innan krisen
Source: Reuters EcoWinChart 3
Percentage of problem loans and GDP falls internationally during a selection of earlier crises.Per cent
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10
Sämsta uppmätta BNP-utfallet
Hö
gst
a a
nd
ele
n p
rob
lem
kre
dite
r
Argentina
Finland
IndonesienJapanSydkorea
Malaysia
Filippinerna
Sverige
Thailand
Uruguay
Source: Laeven, Luc and Valencia (2008),”Systemic Banking Crises: A New Database” IMF Working PaperChart 5