Finansinspektionen [FI], the Swedish Financial Supervisory Authority, has warned that it wants borrowers to be hit by higher levels of amortisation to reduce systemic risks to the Swedish economy – following a 40% rise in residential property prices in the past three years.
FI director general Erik Thedéen confirmed the Authority will be putting forward its proposals through a consultation period; new mortgagees who want to borrow more than 4.5x pre-tax income would be required to amortise 1% more per year than is currently required.
“This applies in addition to the existing amortisation rules,” Thedéen notes.
“As a result, the most vulnerable households, ie, those with a high level of debt in relation to both their income and the value of their home, will amortise at least 3% of their mortgage a year.”
FI has not drawn a directly line, via correlations to fund flows, of the impact of amortisation rules – which effectively reduce the discretionary savings opportunities of Swedes – but total fund industry assets increased to SEK3.826trn (€391bn) as of April 2017, versus SEK2.617trn (€267bn) in April 2014, figures published by the Swedish Investment Fund Association show.
Additionally, the Association notes that while 25 years ago some 86% of all fund investments went to Sweden funds, today the proportion is down to 27%. This suggests that fund investors have continued to diversify their risk exposure away from reliance on the performance of Swedish companies and the Swedish economy.
Meanwhile, FI’s approach overall to applying regulation has come in for criticism by the Fund Association, Insurance Sweden, the Swedish Bankers’ Association and the Swedish Securities Dealers Association, in a joint letter addressed to Thedéen, in which the trade associations stress that any new regulation must rest on quality and clarity of legislation.
This is a key demand because of the amount of European law that is being written into Swedish law, the trade associations note.
“We have concluded that the rules must be clear, effective and predictable for all those who must follow them,” the joint letter states.
“Another viewpoint is that everyone in Sweden should have reasonable opportunity to [understand] the rules that apply. Today, it is a very encompassing and complex task to go through the EU institutions’ websites and other sources to obtain knowledge of applicable law as there is no single place where all regulation is collated. It is obvious to us that FI as the regulatory authority should publish applicable EU rules in the area of financial markets.”
The trade associations argue that FI should enter into more concrete dialogue on EU matters as they are experienced via the Swedish implementation of EU law.
In particular, they argue that there should be more involvement in balancing Swedish views on solutions and outcomes when FI is involved in the development of EU-level regulation; that there should be a reference group that engages interested parties at the point that draft legislation is established at the EU level; that those companies affected by any new EU law should have reasonable time to adjust before the regulations are implemented; and that FI should publish an easily accessible list of applicable EU regulations in the area of financial markets.