FinancialStabilityReport2007:2
4 December 2007
CHAPTER 1Financial markets
Three month treasury bills interest
Procent
Chart 1:1
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08
Euro area USA
Source: Reuters EcoWin
Difference between interbank rates
and treasury bills in 2007 Basis points
Chart 1:2 Note. The differential is calculated as the difference between the three-month interbank rate and threemonth treasury bill
interest rate in respective countries.
0
50
100
150
200
250
jan feb mar apr maj jun jul aug sep okt nov dec
Sweden Euro area USA UK
Source: Reuters EcoWin
10-year government bond yieldPer cent
Chart 1:3
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08
Sweden Euro area USA
Source: Reuters EcoWin
Corporate bond spreads in the United States
Percentage points
Chart 1:4
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08
Aaa Baa High-yield
Source: Reuters EcoWin
Corporate bond spreads in Europe
Percentage points
Chart 1:5 Source: Reuters EcoWin
0
2
4
6
8
10
12
14
16
18
00 01 02 03 04 05 06 07 08
AAA BBB High-yield
Global level of bankruptciesPercentage of all companies
Source: Reuters EcoWinChart 1:6
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08
Credit spreads for bonds issued by
emerging market economiesPercentage points
Chart 1:7 Source: Bloomberg
0
2
4
6
8
10
12
01 02 03 04 05 06 07 08
Europe Asia EMBI+
T/N rate and repo ratePer cent
Chart 1:8 Source: Bloomberg
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
T/N rate Repo rate
Swedish government bond yieldsPer cent
Chart 1:9 Source: Reuters EcoWin
0
1
2
3
4
5
6
7
00 01 02 03 04 05 06 07 08
Duration 2 years Duration 5 years Duration 10 years
Stock market developmentsIndex, January 2006 = 100
Source: Reuters EcoWinChart 1:10
80
90
100
110
120
130
140
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
Sweden - OMXS30 Europe - Stoxx USA - S&P 500
Developments in the bank sector
in different stock marketsIndex, January 2006=100
Source: Reuters EcoWinChart 1:11
80
90
100
110
120
130
140
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
Sweden - OMX Europe - Stoxx USA - S&P 500
Implied stock market volatility
Per cent
Chart 1:12 Source: Bloomberg
0
10
20
30
40
50
60
00 01 02 03 04 05 06 07 08
Sweden - OMXS30 Europe - StoxxUSA - S&P 500 Historical average - OMXS30
Interest on US commercial papers and treasury bills
Per cent, duration 3 months
Chart B1 Source: Federal Reserve Bank
3
4
5
6
7
May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07
Financial commercial papers Asset-backed commercial papersTreasury bills
Outstanding stock of UScommercial papersBillion dollars, seasonally-adjusted
Chart B2 Source: Federal Reserve Bank
700
800
900
1,000
1,100
1,200
Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07
Asset-backed commercial papers Non asset-backed commercial papers
Chapter 2The Swedish banks’
borrowers
The banks’ lending broken down into Swedish and foreign households and companies for the
second quarter of 2007Per cent
Chart 2:1 Source: the Riksbank
Swedish households 27%
Swedish companies 22%Foreign households
18%
Foreign companies 33%
Households’ real disposable income and saving ratioAnnual percentage change and per cent of
disposable income
Chart 2:2 Sources: Statistics Sweden and the Riksbank
-1
0
1
2
3
4
5
6
7
94 96 98 00 02 04 06 08 10
Ann
ual p
erce
ntag
e ch
ange
-2
0
2
4
6
8
10
12
14
Per cent of disposable incom
e
Disposable income (left scale) Saving ratio (right scale)
Households’ new saving in deposit accounts
SEK billion
Chart 2:3 Source: Statistics Sweden
0
5
10
15
20
25
30
35
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Household borrowingAnnual percentage change
Chart 2:4 Source: the Riksbank
-3
0
3
6
9
12
15
18
96 97 98 99 00 01 02 03 04 05 06 07 08
Total Mortgage institutions
Households’ loan-to-value ratioPer cent
Sources: Statistics Sweden and the RiksbankChart 2:5
0
20
40
60
80
100
2000 2005
First-time house buyers Other house owners
SBAB 3-month variable rate, 3-month
interbank rate and the repo ratePer cent
Source: Reuters EcowinChart 2:6
0
1
2
3
4
5
6
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Repo rate SBAB 3-month rate 3-month interbank rate
Duration of fixed interest periods
for new house mortgage loansPer cent of new loan stock
Chart 2:7 Source: The Riksbank
0%
20%
40%
60%
80%
100%
97 98 99 00 01 02 03 04 05 06 07
Variable rate Fixed rate > 3 month Fixed rate > 5 years
Household debt and post-tax interest
expenditure in relation to disposable income
Per cent
Sources: Statistics Sweden and the RiksbankChart 2:8
0
40
80
120
160
200
82 86 90 94 98 02 06 10
0
4
8
12
16
20
Debt ratio (left scale) Interest expenditure ratio (right scale)
House prices and household debt
Index 1986=100
Sources: Statistics Sweden and the RiksbankChart 2:9
0
100
200
300
400
500
86 89 92 95 98 01 04 07
House prices Household debt
House mortgage debt and house prices
Annual percentage change
Sources: Statistics Sweden and the Riksbank
Chart 2:10
0
3
6
9
12
15
18
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Loans from mortgage institutions House price
Tenant-owned apartment prices
SEK per square metre
Sources: Statistics Sweden and the Riksbank
Chart 2:11
0
10,000
20,000
30,000
40,000
02 03 04 05 06 07 08
Sweden Sweden excluding metropolitan areasStockholm region Göteborg regionMalmö region
House pricesAnnual percentage change
Chart B3 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
87 90 93 96 99 02 05 08
Sweden Netherlands Germany
House pricesAnnual percentage change
Chart B4 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
87 90 93 96 99 02 05 08
Australia New Zealand United Kingdom
House pricesAnnual percentage change
Chart R5 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
87 90 93 96 99 02 05 08
USA Ireland Denmark
House pricesAnnual percentage change
Chart R6 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
87 90 93 96 99 02 05 08
Spain France
US house pricesAnnual percentage change
Chart R7 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
88 90 92 94 96 98 00 02 04 06 08
Composite index Min/Max Min
Companies’ borrowing from credit institutions
Annual percentage change
Chart 2:12 Source: The Riksbank
-10
-5
0
5
10
15
92 94 96 98 00 02 04 06 08
Profitability in Swedish listed companies
Per cent
Chart 2:13 Sources: Bloomberg and the Riksbank
0
1
2
3
4
5
6
7
8
9
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Debt/equity ratio in Swedish listed companies
Ratio
Chart 2:14 Sources: Bloomberg and the Riksbank
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Number of company defaults broken down by company size
Twelve-month moving average
Chart 2:15 Source: Statistics Sweden
0
100
200
300
400
500
600
700
800
82 84 86 88 90 92 94 96 98 00 02 04 06 08
All companies 1-9 employees 10-49 employees
The average cost of capital for the public listed companies
Per cent
Chart 2:16 Sources: Bloomberg and the Riksbank
0
2
4
6
8
10
12
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Capital cost Forecast
Expected default frequency, historical outcome and forecasts according to the
Riksbank’s main scenarioPer cent
Chart 2:17 Sources: Moody´s KMV and the Riksbank
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Real prices for office premises in city centres
Index 1981 = 100
Chart 2:18 Sources: Newsec AB and the Riksbank
0
100
200
300
400
500
81 83 85 87 89 91 93 95 97 99 01 03 05 07
Stockholm Göteborg Malmö
Vacancy rate for office premises in city centres
Per cent
Chart 2:19 Sources: NewSec AB and the Riksbank
0
5
10
15
20
25
90 92 94 96 98 00 02 04 06
Stockholm Göteborg Malmö
Average direct earnings requirements
on office properties in city centres
Per cent
Chart 2:20 Sources: Newsec AB and EcoWin
0
2
4
6
8
10
12
14
81 83 85 87 89 91 93 95 97 99 01 03 05 07
Stockholm Göteborg Malmö Five-year government bond
Geographical breakdown of the major banks’ lending
2006
Chart 2:21 Sources: The banks’ reports and the Riksbank
Sweden 50%
Other Nordic countries 30%
Rest of the world 10%
Germany 4%
Baltic countries 5%
House prices in the Nordic countries
Annual percentage change
Chart 2:22 Sources: Statistics Sweden, the BIS and Reuters EcoWin
-5
0
5
10
15
20
25
30
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Sweden Finland Denmark Norway
Expected default frequency for listed non-financial companies in the Nordic
countries and GermanyPer cent
Chart 2:23 Source: Moody’s KMV
0.01
0.1
1
10
Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07
Sweden Norway Denmark Finland Germany
Proportions of lending to the private sector in foreign currency and domestic
currency respectivelyPer cent, September 2007
Chart 2:24 Sources: National central banks
0%
20%
40%
60%
80%
100%
Estonia Latvia Lithuania
Foreign currency Domestic currency
Current accountPer cent of GDP, totalled over four quarters
Chart 2:25 Source: Reuters Ecowin
-30
-25
-20
-15
-10
-5
0
00 01 02 03 04 05 06 07
Estonia Latvia Lithuania
Harmonised index for consumer pricesAnnual percentage change
Chart 2:26 Source: Reuters Ecowin
-3
0
3
6
9
12
15
00 01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
PopulationAnnual percentage change
Chart 2:27 Source: Reuters Ecowin
-3
-2
-1
0
1
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Sweden Estonia Latvia Lithuania
Household borrowing in the Baltic countries
Annual percentage change
Chart 2:28 Sources: National central banks
-20
0
20
40
60
80
100
120
140
01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
Household debts in relation to GDP
in Sweden and the Baltic countries
Per cent
Chart 2:29 Sources: National central banks
0
10
20
30
40
50
60
70
80
94 95 96 97 98 99 00 01 02 03 04 05 06 07
Sweden Estonia Latvia Lithuania
Companies’ borrowing from credit
institutions in the Baltic countries
Annual percentage change
Chart 2:30 Sources: National central banks
-10
0
10
20
30
40
50
60
01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
Companies’ outstanding credit volumes in the
Baltic countries and in Sweden in relation to GDP
Per cent
Chart 2:31 Sources: National central banks
0
10
20
30
40
50
60
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Sweden Estonia Latvia Lithuania
Chapter 3Developments in the
banks
Profit before loan losses and net
loan losses in the major banksTotalled over four quarters, SEK billion, 2007 prices
Chart 3:1 Sources: The banks’ reports and the Riksbank
-20
0
20
40
60
80
100
De
c-9
0
De
c-9
2
De
c-9
4
De
c-9
6
De
c-9
8
De
c-0
0
De
c-0
2
De
c-0
4
De
c-0
6
De
c-0
8
Profit before loan losses Loan losses Profit before loan losses according to IFRS
Bank shares’ implied volatility
10-day moving average, per cent
Chart 3:2 Sources: Bloomberg and the Riksbank
0
20
40
60
80
100
99 00 01 02 03 04 05 06 07 08
SEB Handelsbanken Nordea Swedbank
Share price development in the financial
sectors on various stock markets
Index: 1 July 2007 = 100
Chart 3:3 Source: Reuters Ecowin
80
90
100
110
Jul Aug Sep Oct Nov Dec
Sweden Europe USA
Swedish major banks’ share price developments
Index: 1 July 2007 = 100
Chart 3:4 Source: OMX
70
80
90
100
110
Jul Aug Sep Oct Nov Dec
SEB Handelsbanken Nordea Swedbank
The major banks’ interest rate differential
on Swedish bank and mortgage lending
Four-quarter moving average, per cent
Chart 3:5 Sources: The banks’ reports and the Riksbank
0.0
0.5
1.0
1.5
2.0
2.5
3.0
97 98 99 00 01 02 03 04 05 06 07
Bank lending Mortgage lending (new lending)
The major banks’ securities-related commission
income and Stockholm Stock Exchange turnover
SEK million and index: 1997= 100
Chart 3:6 Sources: The banks’ reports, Reuters EcoWin and the Riksbank
0
1000
2000
3000
4000
5000
6000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
0
100
200
300
400
500
600
Brokerage incomeAsset management-related incomeTurnover Stockholm stock exchange (index, right scale)
2003 2004 2005 2006 2007
Cost efficiency at the major banksPer cent
Chart 3:7 Sources: The banks’ reports and the Riksbank
40
50
60
70
95 96 97 98 99 00 01 02 03 04 05 06 07
C/I ratio C/I ratio according to IFRS
Lending to the general public
in Sweden and abroadAnnual percentage change up to end of September 2007
Sources: The banks’ reports and the RiksbankChart 3:8
0
5
10
15
20
25
30
35
40
Swedbank Handelsbanken Nordea SEB
Total Sweden Abroad
Provisions for incurred and probable loan losses
Totalled over four quarters, per cent
Chart 3:9 Sources: The banks’ reports and the Riksbank
0,0
0,2
0,4
0,6
0,8
1,0
1,2
97 98 99 00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
Tier 1 capital ratiosPer cent
Chart 3:10 Sources: The banks’ reports and the Riksbank
4
6
8
10
12
97 98 99 00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
The banks’ issued securitiesPer cent of lending
Chart 3:11
20
30
40
50
60
70
97 98 99 00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
Sources: The banks’ reports and the Riksbank
The banks’ issued securities’
maturity structuresPer cent
Chart 3:12 Source: Bloomberg
0%
20%
40%
60%
80%
100%
00 01 02 03 04 05 06 07 08
0-6 months 6-12 months 1-3 years >3 years
Share of issued securities in different
currencies, November 2007SEK billion
Chart 3:13 Source: Bloomberg
0
50
100
150
200
250
300
Handelsbanken Nordea Swedbank SEB
SEK EUR USD Other currencies
European banks’ issued securities in relation to
lending and average time to maturity, October 2007Per cent and year
Chart 3:14 Sources: The banks’ reports and Bloomberg
Handelsbanken
Swedbank
Dexia
Intesa Sanpaolo
Natixis
Nordea
Danske Bank
DnB Nor
BBVA
SEB
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 2 4 6 8 10 12 14
Year
Dresdner Bank
Banks interbank market net borrowing
as share of lending portfolioPer cent
Chart 3:15 Sources: The banks’ reports and the Riksbank
-10
0
10
20
30
00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
The major bank with the lowest Tier 1 capital ratio after another Swedish major
bank defaulted on paymentsPer cent
Chart 3:16 Source: The Riksbank
2
3
4
5
6
99 00 01 02 03 04 05 06 07
Bank profits with the scenario for the Baltic countries
Expected profit minus change in expected loss, SEK million
Chart 3:17 Sources: The banks’ reports and the Riksbank
0
2000
4000
6000
8000
10000
12000
Year 0 Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3
SEB Swedbank
Cover for credit risk with the scenario for the Baltic
countriesPer cent
Chart 3:18 Sources: The banks’ reports and the Riksbank
0
50
100
150
200
250
Year 0 Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3
SEB Swedbank
Bank profits in the scenario with a turn in the credit cycle
Expected profit minus change in expected loss, SEK million
Chart 3:19 Sources: The banks’ reports and the Riksbank
0
5,000
10,000
15,000
20,000
25,000
30,000
Year 0 Year 0 Year 0 Year0 Year 0
SEB SwedbankNordeaHandelsbanken Danske Bank
Year1 2 30 1 2 30 1 2 30 1 2 30 1 2 30
Cover for credit risk in the scenario
with a turn in the credit cyclePer cent
Chart 3:20 Sources: The banks’ reports and the Riksbank
0
50
100
150
200
250
300
jan/00 jan/00 jan/00 jan/00 jan/00
SEB SwedbankNordeaHandelsbanken Danske Bank
Year1 2 30 1 2 30 1 2 30 1 2 30 1 2 30
Increased funding costs in a 3-month liquidity crisis
SEK million
Chart 3:21 Sources: The banks’ reports and Bloomberg
0
150
300
450
600
750
900
Nordea SEB SHB Swedbank