Analysis: "The Swedish debt bubble is kept under arms"

Nordea has already promised virus-hit households and companies an exemption with amortization. It is a matter of time before more banks are now following when the Swedish Financial Supervisory Authority openly stated that the new corona virus is a fully legitimate reason for not having to pay off amortization.

Both the Riksbank and the Swedish Financial Supervisory Authority have detailed what is needed to lubricate the financial system during an ongoing crisis, but are also clear that the banks have to do their part to ensure that the slowdown in the economy is not more severe than necessary. One of the biggest vulnerabilities in the Swedish economy is the housing market.

In addition to making 500 billion available to the banks so that they can continue to lend money, yesterday another large package of SEK 300 billion came from the Riksbank to prevent interest rates on the housing bond market from gaining momentum and that the banks stop lending money to each other, something that happened during the 2008 financial crisis

Previously, the Riksbank, with Governor Stefan Ingves at the head, has stayed far, far away from housing bonds. It is obvious that the corona crisis has led Ingves to rethink.

The mortgage bond market rates greatly set mortgage rates and if they rise, banks must raise the interest rate on mortgages. In a turbulent economic era, now nothing is needed by Swedish households. Add that the four major banks in Sweden own each other's mortgage bonds and are very dependent on each other. The banks may or may not want to lend to each other, it is also difficult for companies to obtain loans.

Swedish households are more indebted than ever. The biggest explanation for households' increased debt is rising housing prices. This has long worried the Riksbank, especially since many loans are borrowed at variable interest rates. This means that any interest rate hike will directly affect many households and many are vulnerable to loss of income or unemployment.

But the companies have also benefited in the new low interest rate environment. They have issued corporate bonds and should that market dry up in the wake of the turbulence currently on the markets, they may have to turn to banks for more traditional bank loans.

Since 2008, Swedes' debts have doubled and no banking crisis has been served. Through the actions of the Swedish Financial Supervisory Authority and the Riksbank, the eventual Swedish debt bubble is now kept under arms.