Bankföreningen tightens amortisation guides

Mar 20th, 2014

The Swedish Bankers’ Association is lowering guidance on the LTV threshold above which new mortgages need to be amortised from 75% to 70%, while Riksbank governor Stefan Ingves said there is a case for increasing the mortgage risk weight floor to 25%.

Riksbank Thomas Östros, managing director at the Swedish Bankers’ Association, outlined the industry body’s position in an opinion piece yesterday (Wednesday) for Swedish newspaper Dagens Nyheter.

The recommendation from the Swedish Bankers’ Association (Svenska Bankföreningen) was welcomed by Swedish finance minister Anders Borg, according to Bloomberg, although he said that the new guidelines would not affect government plans to tighten regulation.

The government has previously charged the Swedish FSA (Finansinspektionen) with examining how to tackle the amortisation issue.

The change in the LTV limit from 75% to 70% comes in the context of an absolute 85% limit on LTVs from the FSA.

“Sweden had been tightening its standards for quite some time already,” noted Florian Eichert, senior covered bond analyst at Crédit Agricole CIB. “All these efforts aim to calm down the Swedish housing and mortgage market, which has been going up in recent years.

“Yet, when looking at cover pool stats, we’re still talking about some of the best metrics out there in the market in an international context.”

Riksbank governor Ingves, who chairs the Basel Committee on Banking Supervision, made his comments on the Swedish market in a speech in Stockholm yesterday.

“At present, we have a risk-weight floor of 15 per cent in Sweden,” he said. “As long as household indebtedness increases, there are good reasons for raising this floor to at least 25 per cent.”

Eichert said that Ingves’s position reflects that of finance minister Borg.

The FSA implemented the 15% risk weight floor for mortgages in May 2013 and in November raised the prospect of this being increased to 25%.


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