Transcript Financial stability from a consumer perspective

Financial stability
from a consumer
perspective
Riksdag Committee on
Finance
Governor Stefan Ingves
15 March 2012
The regulation of the financial sector
affects the country’s citizens
Policy discussions
in Sweden, in the EU, globally
Behaviour of the
financial sector
Effects on the real economy
Swedish citizens
and consumers
Could be perceived as abstract
Often technical
Crises cost society enormous amounts
GDP growth in Sweden, 1960-2010, SEK billion
Source: The Riksbank
The real effects have a high social and
economic price
Unemployment in Sweden, 1985-2000, percentage of labour force
14
14
12
12
10
10
8
8
6
6
4
4
2
2
0
0
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
Source: The Riksbank
Problems in the banking sector impact the
country’s citizens in many ways
Via the real
economy
Problems in the
banking sector
Directly against
bank customers
Via the public sector
Weaker economic
development
Deposit guarantee
Need for capital
injections
Higher unemployment
Lower wages
Lower pensions
Higher taxes
Deterioration of
public welfare
Poorer economy
for households
Increased
uncertainty
Higher
interest
rates
New banking
relationships
New terms
A financial crisis will ultimately threaten
basic social functions
The financial system
is central in the society
Household
Who can pay whom
in a serious crisis?
Household’s
bank
Grocery
shop
Grocery shop’s
bank
?
Employer’s bank
Other financial market
participants
– in and outside
Sweden
Employer
The financial crisis of 2007-2009 impacted
borrowers in other countries hard
Source: Federal Reserve Boston
Problems in the housing sector could have
severe consequences for households
Distribution of new mortgage loans by amortisation period,
per cent
70
60
50
40
30
20
10
0
0 - 10
10 - 30
30 - 40
40 - 50
> 50
None
Amortisation period, years
Source: Finansinspektionen
The European Commission is concerned
about developments in Sweden
From Alert Mechanism Report 2011/2012
”Despite overall good macroeconomic performance some countries
display developments in assets markets, including in particular housing,
and a continuous build-up of indebtedness in the private sector,
which also warrant further analysis”

The European Commission would like a closer examination of
Swedish households’ indebtedness

Sweden’s mandate to handle the situation depends on how the
Basel III regulations are implemented in the EU
Source: European Commission
The Riksbank has an important role to play
in the prevention of financial crises
The Riksbank is responsible for means of
payment and can provide liquidity
The Riksbank monitors the financial
sector with a systemic perspective
The Riksbank represents Sweden in
International regulatory cooperation
But the
Riksbank
lacks sharp
preventive
tools
Preventing financial crises is of great
importance for Swedish households
Swedish households need functioning financial services and protection
from financial crises and their effects
Citizens have the right to expect that authorities will prevent and
manage financial crises to the best of their ability
Authorities need the right tools to prevent and manage crises