Swedish banks plead for tougher regulations to avert bubble

July 24, 2015 09:35
Swedish bankers are warning of asset price bubbles amid negative interest rates. Credit: wikipedia.org

Some top Swedish bankers are calling for government action to head off a potential asset price bubble that threatens the nation's economy, Reuters reported.

"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," Swedbank CEO Michael Wolf was quoted as saying.

Sweden has negative interest rates to tackle the risk of deflation. But with the economy growing strongly, this is fuellng household debt, property prices and the stock market to levels many economists think could become dangerous, the report said.

While most Swedish banks have already tightened lending practices, they fear doing more could hurt their ability to compete if the rules don't apply to all.

So they are calling on politicians to step in by, for example, making it mandatory for borrowers to pay down the principal of their mortgages and encouraging house building, the report said.

"It is quite obvious that if we keep this up for long, there is a clear risk that we run up bubbles and someone has to take care of that," Handelsbanken CEO Frank Vang-Jensen was quoted as saying, referring to ultra-low interest rates.

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