Top executives at Swedish banks are demanding their government to take action to prevent any asset price changes that could threaten their AAA-rated economy.
According to Reuters, many economists believe that Sweden’s strong economy will result in household debt, property prices and the stock market to reach critical levels, despite the country having negative interest rates in order to confront the danger of deflation.
Michael Wolf, Swedbank Chief Executive, explained how the government must move towards changing how assets are handled. “It is clear that the risks of an unsustainable development in various asset classes is increasing with each day in the absence of powerful political reforms,” Wolf told Reuters reporters.
While many Swedish banks have already reformed, others are sceptical as they may not be viewed as viable competitors when they are complying to all regulations put in place. In addition to this, there is concern surrounding low interest rates as CEO of Handelsbanken, Frank Vang-Jensen highlights. “It is quite obvious that if we keep this up for long, there is a clear risk that we run up bubbles and some has to take care of that,” Vang-Jensen says.
Reuters also focuses on how politicians are hesitant to enforce regulations as they are unpopular, but this is being seen as indecisive. “It is incredibly cowardly and incredibly strange that the politicians cannot reach across the aisle and take a decision. If there is any time when there should be acceptance (for new regulation) it is now” says chief economist at Danske Bank, Roger Josefsson.
The European Central Bank and financial watchdogs have been concentrating on tightening borrowing due to deflation fears, but Swedish banks expect a bubble to occur in the near future and remain threatened by what could happen when that bubble bursts.
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