Swedish Crisis Committee Recommends Council to Oversee Risks

Sweden should set up a macro-prudential council to better spot risks and prevent future financial crises, a government-appointed committee said.

The council should be established by law to help cooperation between the Financial Supervisory Authority and the Riksbank, the Financial Crisis Committee said in a report today in Stockholm.

“The council should promote increased expertise about systemic risks and the development of macroprudential tools and analyse risks in the financial system and discuss appropriate measures for counteracting these risks,” the committee said.

Sweden managed to avoid meltdown during the 2008 crisis as the central bank provided liquidity and the government guaranteed as much as 1.5 trillion kronor ($230 billion) in bank borrowing. It also doubled deposit guarantees up to 500,000 kronor and provided loans to Latvia, where a burst property bubble triggered losses at Swedish banks.

The Swedish National Audit Office in 2011 complained about a lack of a formalized division of responsibility between the country’s authorities to ensure stability. It attributed part of the successful handling of the crisis to personal relationships between civil servants dating back to Sweden’s domestic banking crisis in the early 1990s.

The committee, whose recommendations were originally supposed to be published in August, was appointed by the government in February last year to review the regulatory framework for dealing with financial crises. It will publish a complete report in May.

Before it's here, it's on the Bloomberg Terminal.