Swedish Court Rejects Second Proposal for New Amortization Rules

A Swedish court rejected the government’s proposal for a law change that would allow the financial regulator to force households to pay down their mortgages faster, the second time the plan has met resistance in court.

It’s doubtful whether you can delegate decisions that would allow an authority to introduce rules that will be applied between banks and their customers, Stefan Holgersson, the president of the Swedish Administrative Court of Appeal of Jönköping, said by phone on Monday.  

Parliament can’t even delegate the decision to the government, it has to introduce the law itself. “It needs to directly be stated in a law what should apply,” he said.

The response marks yet another set-back for Sweden’s fight against household indebtedness and soaring housing prices, and looks set to delay any legislation further. The government had planned to get the new rules in place in the first half of next year. 

But according to Per Bolund, Sweden’s financial markets minister, the court’s view by no means spells the end of government efforts to empower the regulator in its debt battle.

“The consultation period for the proposal has not expired and we are awaiting further comments,” he said in an e-mailed response to questions. “As stated in the memorandum on amortization requirements, we have a legal basis for the proposal but will of course take note of all respondents’ opinions.”

The FSA has previously noted that another option exists. If household debt growth reaches such a critical level that it threatens financial stability, the regulator can use its current mandate to introduce measures to stem indebtedness, including an amortization requirement for mortgages, Henrik Braconier, the FSA’s chief economist, said on Sept. 2.

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