Well, there seems to be different opinions about that. The government and the financial agencies makes overall calming statements, at the same time do they take extraordinary actions. On the other hand are voices raised about a cover up, and the market is full of rumors. There is also heavy short sale with one of Sweden’s largest banks in the line of fire.
“Our assessment is that financial stability in Sweden is satisfactory and that the Swedish banks are profitable and solvent”, the Riksbank (the Swedish central bank) writes in a statement. This in relation to an announcement today of an agreement with the Federal Reserve on a USD 10 billion swap facility.
The American financial turmoil has made market actors to maintain their dollar deposition, not ready to lend it to others. The financial system therefore suffers from a lack of dollar liquidity. Something also noticed here in Sweden where interbank rates have risen sharply.
Another action taken by the Swedish financial authorities has been the auction in extra T-bills that started last Friday. The Swedish National Debt Office put a total of SEK 150 billion of treasury bills on the market. Also this action was wraparound calming comments by politicians and state officials.
In a TV program last Sunday on the public broadcasting channel SVT did both the Minister for Finance, Anders Borg, the Governor of the Riksbank, Stefan Ingves and the Director General of the National Debt Office, Bo Lundgren, appear and had only calming comments to make.
But why these somewhat extraordinary actions if there is no reason to worry? One who openly has stated his doubts is Jörgen Appelgren, chief economist at the bank Nordea. To news agency TT he says that “the Riksbank seems to cover up how the financial crisis affects Sweden”.
Even if Appelgren is pleased with how the crisis is handled, he can only see two opposing reasons why the Riksbank gives such a relatively positive image of the situation. Either do they have an incorrect view or it is simply a façade. “They may be aware of how problematic it has been here and there, but do not want to make that official”, he says.
At the same time has rumors and sharks started to circulate around one of Sweden’s biggest bank, Swedbank.
The rumors reached hurricane strength yesterday. The release of extra T-bills was said to be a special action aimed at saving Swedbank from a liquidity crises that would have put the bank out of business.
The stocks of Swedbank has fallen with 46 percent this year and has been under heavy pressure for a long time, but something of a record of short selling has been set during the last couple of days. Last Friday was 5.5 percent of the banks stock value lent to short sellers. All the extra activity and speculations around the stock share has made it highly volatile.
Swedbank is not the only Swedish bank that is under pressure, but apparently the one closest to the edge.
Today rumors hit the market about large interest among international investment banks to buy and take over Swedish banks, especially Swedbank. “In six months time there will be a merger. Such a low stock value and troubles with refinancing is worrying and makes a merger unavoidable”, an anonymous source says to business paper Dagens Industri.
A merger with a bank with a large international experience and network would be the best alternative. No one seems to believe in a bankruptcy, which would never be allowed by the Swedish state.
Swedish financial authorities would do almost anything to prevent a failing bank. An economic failure of one of the largest banks would be catastrophic for the Swedish financial system.
During the financial crisis Sweden underwent in the 1990’s, the state nationalized several banks and is still the largest owner of the bank Nordea. In line with the Swedish political tradition would it be suicide to let the market have its way with failing financial companies, at least if they are large banks with savings function.
Small signs of a bank run can now be seen affecting Swedbank, according to Dagens Industri today. However, the Swedish Financial Supervisory Authority states that all four big banks have a buffer far above that which is stipulated by law.
Also some analyst defendes the preassured bank. “There is no risk at all to keep your money in Swedbank”, says Rodney Alfvén at Cheuvreux Nordic.
Even if it is hard to know for sure about the state of health of the Swedish financial system, something is nonetheless clear, caution is to recommend. The best place to be now is at the gunwale, there could be icebergs ahead.
David Jonasson
david.jonasson@stockholmnews.com