Title page
Contents
GLOSSARY 5
EXECUTIVE SUMMARY 6
INTRODUCTION 8
A. Financial System Structure 8
B. Macro-Financial Conditions and Risks 14
C. Scope of the Financial Stability Analysis in the FSAP 17
D. Macro-Financial Scenarios 19
COMMERCIAL REAL ESTATE 21
BANKS 25
A. Solvency Stress Test 25
B. Liquidity Stress Tests 32
C. Conclusions and Recommendations 36
INVESTMENT FUNDS 36
A. Objective and Scope of the Liquidity Stress Test 36
B. Methodology 37
C. Results 38
D. Conclusions and Recommendations 41
SYSTEMIC RISK, INTERCONNECTEDNESS AND CONTAGION ANALYSIS 42
A. Overview 42
B. Analysis 42
C. Conclusions and Recommendations 46
Appendix I. Stress Testing Matrix 47
Appendix II. Risk Assessment Matrix 50
Appendix III. Projections of Probability of Default by Segment 52
Appendix IV. Data and Sample of Funds Used in Stress Tests 57
Table 1. Sweden: 2022 FSAP-Key Recommendations 7
Table 2. Sweden: Funds Suspended in March 2020 11
Table 3. Sweden: Investment Funds Stress Test-Sample and Approach 38
Table 4. Sweden: Results of the Liquidity Stress Test for the Historical Approach 40
Figure 1. Total Assets of Financial Sector 8
Figure 2. Selected Banking Indicators 12
Figure 3. Bond Market Indicators and Investment Funds 13
Figure 4. SRA Approach 17
Figure 5. Selected CRE Indicators 18
Figure 6. Macroeconomic Scenarios for Stress Tests 20
Figure 7. Selected CRE Financial Ratios 23
Figure 8. CRE Stress Test Results 24
Figure 9. Results of Scenario-Based Solvency Stress and Sensitivity Tests 31
Figure 10. Bank Liquidity Indicators 33
Figure 11. Results of Bank Liquidity Stress Test 35
Figure 12. Assets Held by Swedish Fixed Income and Mixed Funds 39
Figure 13. Liquidity Shortfall 40
Figure 14. Interconnectedness via Securities Holdings 44
Figure 15. Market Impact and Asset Liquidation 45
Boxes
Box 1. Risk Weighted Assets 16
Table 1. Sweden: Variables for BMA 52
Appendix IV. Data and Sample of Funds Used in Stress Tests 59
Table 1. Sweden: Calibration of Redemption Shocks 59
Table 2. Sweden: Liquidity Weights 60
Table 3. Sweden: Indices for Market Impact Calibration 61
Table 4. Sweden: Investment Fund Stress Tests Results: Resilience 62
Figure 1. Probability of Default Projections Corporates and Long-Run Multipliers for Nordic-Baltic 53
Figure 2. Retail Mortgages Metrics 56