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Banks’ lending to commercial real estate firms requires more capital

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Finansinspektionen (FI) considers the firms in the Swedish financial system to have sufficient resilience for withstanding a weaker economy. However, commercial real estate firms are vulnerable to shocks. FI therefore makes the assessment that the banks need more capital for these exposures. This is one of the conclusions in FI’s first stability report for the year, which is being presented today.

FI has noted that the economy in both Sweden and the rest of the world is starting to slow down, and the low interest rates are expected to remain low for a prolonged period of time. The risks associated with rising interest rates have therefore subsided. However, prolonged low interest rates could lead to greater risk-taking among investors.

“The resilience of the Swedish financial sector is satisfactory, but we are seeing a need for more capital with regard to the banks’ exposures to commercial real estate firms,” says FI’s Director General Erik Thedéen.

The capital the banks hold to cover the risks in commercial real estate lending would not cover the losses FI estimates could arise following a shock. Even if the total capital held by the banks is sufficient, FI takes the position that more capital is needed for the banks’ lending to commercial real estate firms.

FI is also publishing a report today about the commercial real estate market and financial stability.

FI’s report Stability in the Financial System and the report on commercial real estate will be presented by Director General Erik Thedéen and Chief Economist Henrik Braconier at a press conference today.

Time and date: Tuesday, 28 May, 10:00 a.m.

Locat ion: FI’s premises at Brunnsgatan 3, Stockholm.

The press conference is only for representatives from the media, but will be broadcast live on FI’s website, fi.se.

Regulator Information

Abbreviation: FI
Jurisdiction: Sweden

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