Transcript Slides from the press conference

Financial
Stability
November 2008
Financial Stability 2008:2

The Swedish financial system has been
tangibly affected by the global financial
crisis

Authority measures are now a
precondition for satisfactory stability in
Sweden

Prevailing risks have increased
Profit before loan losses and loan
losses (net) in the major banks
Summed up over four quarters, SEK billion, fixed prices, 2008-09-30
100
80
60
40
20
0
-20
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Profit before loan losses
Chart 3:1
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Loan losses
Sources: Bank reports and the Riksbank
Stability assessment



The resilience of the Swedish banks is
good
Global lack of confidence and liquidity
Measures from Swedish authorities a
precondition for satisfactory stability in
Sweden
Prevailing risks have
increased
 Risks on the financial markets
 Effects of weaker development of the real
economy
 Developments in the Baltic countries
Prevailing risks have
increased
 Risks on the financial markets
 Effects of weaker development of the real
economy
 Developments in the Baltic countries
Difference between interbank rate and
expected policy rate
Basis points
400
350
300
250
200
150
100
50
0
Jan-07
Jul-07
Sweden
Euro area
Jan-09
Jul-08
Jan-08
USA
UK
Note. In Sweden the spread is represented by the difference between
3 month Stibor and overnight index swap (STINA) rate
Chart 1.2
Source: Bloomberg
Premiums in CDS for a selection of
banks
basis points
1400
1200
1000
800
600
400
200
0
Jan-07
Chart 1.12
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Deutsche Bank
SEB
M errill Lynch
Citibank
M organ Stanley
UBS
Oct-08
Jan-09
Source: Bloomberg
Prevailing risks have
increased
 Risks on the financial markets
 Effects of weaker development of the
real economy
 Developments in the Baltic countries
Effects of weaker economic
development

Economic prospects may decline even more




banks affected by fall in earnings and weaker ability
of borrowers to pay
if the banks further tighten the provision of credit
or due to other factors (really difficult to assess the
effects of the financial crisis on the real economy).
Weaker prospects may lead the banks to be
even more cautious in provision of credit
 This in turn may further weaken prospects
 Negative spiral of declining economic activity
and reduced credit supply
Difference between interbank rate and
expected policy rate
Basis points
400
350
300
250
200
150
100
50
0
Jan-07
Jul-07
Sweden
Euro area
Jan-09
Jul-08
Jan-08
USA
UK
Note. In Sweden the spread is represented by the difference between
3 month Stibor and overnight index swap (STINA) rate
Chart 1.2
Source: Bloomberg
Premiums in CDS index
basis points
240
200
160
120
80
40
0
Jan-06
M ay-06
Sep-06
Jan-07
M ay-07
North America - CDX
Chart 1.11
Sep-07
Jan-08
M ay-08
Sep-08
Jan-09
Europe - iTraxx
Source: Reuters Ecowin & Bloomberg
Prevailing risks have
increased
 Risks on the financial markets
 Effects of weaker development of the real
economy
 Developments in the Baltic countries
Swedish banks in the Baltic
countries
September 2008
Baltic countries’ share of
lending and operating profit
Market share lending
Lending
100%
18
12 %
Swedbank
16 %
36
80%
60%
SEB
47
Nordea
45
3%
25
40%
27
9,3
11,7
12,1
20%
Operating profit,
latest four-quarter
period
30
25
14
SEB
20 %
Swedbank
27 %
Nordea
2%
0%
Estonia
Latvia
SEB
Nordea
Swedbank
Lithuania
Other
GDP growth
Annual percentage change
14
12
10
8
6
4
2
0
-2
-4
-6
dec-99
dec-00
dec-01
dec-02
Estonia
Chart 2:34
dec-03
Latvia
dec-04
dec-05
dec-06
dec-07
dec-08
Lithuania
Source: Reuters Ecowin
Corporate borrowing in the Baltic
countries
Annual percentage change
60
60
50
50
40
40
30
30
20
20
10
10
0
0
-10
-10
01
02
03
Estonia
Chart 2:41
04
05
Latvia
06
07
08
Lithuania
Sources: Reuters Ecowin and national central banks
The stress tests show…

Buffers sufficient to cope with



This report also contains a test entailing a more
extensive crisis scenario



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a negative development in the Baltic countries
a dramatic economic decline
Scenario in line with crisis of 1990s
Negative development in Baltic countries
Negative development in global economy
But, in the current situation with ineffective financial
markets globally, the effects would be serious
Financial Stability 2008:2

The Swedish financial system has been
tangibly affected by the global financial
crisis

Authority measures are now a
precondition for satisfactory stability in
Sweden

Prevailing risks have increased
Article

From local to global – today's crisis in the
light of yesterday's

Highlights differences and similarities
between the ongoing crisis and the Swedish
bank crisis in the early 1990s