IMF Staff Completes 2016 Financial Sector Assessment Program (FSAP) Mission to Sweden
• Since previous FSAP, Swedish authorities strengthened the policy and regulatory framework and bolstered supervision
• Country’s financial system is among Europe’s largest relative to the size of the domestic economy, complex and highly interconnected
• Arrangements for cross-border supervision and crisis preparedness and resolution in a regional context were also examined
An IMF mission, headed by Martin Cihak, visited Sweden during April 18–29 and August 22–September 2, 2016, to conduct an assessment under the Financial Sector Assessment Program (FSAP). The mission held discussions with the Riksbank, Ministry of Finance, Finansinspektionen (Sweden's financial supervisory authority), Swedish National Debt Office, members of Parliament from leading and opposition parties, as well as representatives of banks and other financial services companies, financial market infrastructure providers, policy research organizations, think-tanks and other nongovernment organizations, professional associations, and auditors. The team also met officials from other countries in the Nordic-Baltic region.
The mission examined key macrofinancial issues, such as the legal and governance framework for systemic risk oversight and macroprudential policy. Stability analysis, including in-depth stress tests, concentrated on risks from household debt as well as structural liquidity risks from wholesale funding. Arrangements for cross-border supervision as well as crisis preparedness and resolution in a regional context were also key topics.
At the conclusion of the mission, Mr. Cihak issued the following statement:
“Since the previous FSAP in 2011, the Swedish authorities have strengthened the policy and regulatory framework. Important steps include creating the Financial Stability Council, bolstering Finansinspektionen’s resources, and introducing a new resolution framework for credit institutions and investment firms.
“At the same time, Sweden’s financial system is among Europe’s largest relative to the size of the domestic economy. It is also complex and highly interconnected domestically and internationally, reflecting Sweden’s role as a regional financial hub. The systemic nature of the Swedish financial sector raises expectations for the quality of the financial sector policy framework and financial safety nets.
“Macrofinancial risks have grown since 2011, as seen in the large increase in housing prices and the associated rising share of highly indebted households. The authorities have been responding to these developments, but more steps are warranted to further strengthen Sweden’s systemic risk oversight and macroprudential framework. Sweden’s financial safety nets rest on strong fundaments, but improvements are needed to ensure operational capacity to quickly deploy recovery and resolution tools.
“The mission has shared its preliminary findings and recommendations with the authorities. The FSAP findings will provide a key input to the upcoming Article IV consultation for Sweden. It is anticipated that a final report from the FSAP—the Financial System Stability Assessment—will be presented to the IMF’s Executive Board in November.”
The FSAP is a key instrument of the IMF’s surveillance and provides input to the Article IV consultation. It is a comprehensive and in-depth assessment of a country’s financial sector. FSAPs analyze the resilience of the financial sector, the quality of the regulatory and supervisory framework, and the capacity to manage and resolve financial crises. Based on its findings, FSAPs produce recommendations of a micro- and macro-prudential nature, tailored to country-specific circumstances.
In jurisdictions with financial sectors deemed by the IMF to be systemically important, including Sweden, financial stability assessments under the Financial Sector Assessment Program (FSAP) are a mandatory part of Article IV surveillance, and are supposed to take place every five years. Sweden’s, previous FSAP took place in 2011. For more information on the FSAP, please see http://www.imf.org/external/np/fsap/fssa.aspx.