Financial StabilityDecember 2007

Financial stability in Sweden is sound at present

However, the banks’ resilience to unexpected, negative events has declined somewhat

Surrounding risks have grown

Financial stability is sound

The Swedish banks are financially

strong

Profitability is favourable

Borrowers are financially strong, this includes companies as well as households

Substantial profitability and low loan losses

Totalled over four quarters, all four major banks, SEK billion

Sources: Bank reports and the RiksbankChart 3:1

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Profit before loan lossesLoan lossesProfit before loan losses according to IFRS (International financial reporting standards)

Somewhat lower resilience

Credit risks have increased Increased lending to the Baltic

countries Margins on lending have fallen

Stress tests confirm the assessment

Associated risks have increased

Risks in financial markets have grown

Risk of a sudden slowdown in the Baltic countries

Risk of price adjustment in commercial property

Risk that house prices and household indebtedness will increase more quickly than incomes

Shocks in the interbank marketThe difference between the interbank rate and treasury bills in

2007, basis points

Source: Reuters EcoWin

Chart 1:2Note. The differential is calculated as the difference between the three-month interbank rate and the three-month treasury

bill rate in the respective country

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Sweden Euro area USA UK

Investors demand higher compensation for risk

Credit spreads for corporate bonds in Europe, percentage points

Source: Reuters EcoWinChart 1:5

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AAA BBB High-yield

Note. Definition by Moody’s and Merrill Lynch. High-yield is classified by Moody’s/Standard & Poor’s as Ba/BB or

lower.

Large deficits in the Baltic countries’ current accounts

Current account as percentage of GDP, per cent, totalled over four quarters

Source: Reuters EcoWinChart 2:25

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Estonia Latvia Lithuania

Substantial rise in inflation in the Baltic countries

Harmonised index for consumer prices, annual percentage change

Source: Reuters EcoWinChart 2:26

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Estonia Latvia Lithuania

High levels of credit growth in the Baltic countries

Household borrowing in the Baltic countries, annual percentage change

Sources: National central banks

Chart 2:28

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Estonia Latvia Lithuania

Household indebtedness and house prices increasing at a

high rate in SwedenAnnual percentage change

Sources: Statistics Sweden and the Riksbank

Chart 2:10

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Loans from mortgage institutions House price

Household debts and interest expenditure

in relation to disposable incomePer cent

Sources: Statistics Sweden and the RiksbankChart 2:8

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Debt ratio (left scale) Interest expenditure ratio (right scale)

Low required rate of return on property

Direct earnings requirement for office premises in city centres, per cent

Sources: Newsec AB and Reuters EcoWin

Chart 2:20

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Stockholm Göteborg Malmö Five-year government bond

Financial stability in Sweden is sound at present

However, the banks’ resilience to unexpected, negative events has declined somewhat

Surrounding risks have grown