Sweden's central bank, Sveriges Riksbank, urged the government to implement stricter mortgage repayment rules, warning that rising household debt posted the greatest threat to the Swedish economy.
The central bank called Nov. 22 for more regulation in housing and taxation to continue the "slower rate of price increase for housing" and curb Sweden's accumulating household debt.
It supported proposals by the Finansinspektionen, the Swedish Financial Services Authority, for a stricter amortization requirement" saying it will affect "15% or fewer" of new borrowers.
According to the Financial Services Authority, borrowers with mortgages greater than 4.5 times their gross income must amortize at least 1% of the debt in addition to the existing amortization requirement.
Banks were asked to maintain minimum liquidity due to their exposure to the property sector. The central bank also proposed a "leverage ratio requirement of 5% for the major Swedish banks" along with risk-weighted capital requirements.
"High and rising household indebtedness currently poses the greatest risk to the Swedish economy," the central bank said.
"It is important that Nordea's move [to Finland] does not lead to increased financial stability risks, as a result, for example, of reduced capital and liquidity requirements for the bank," the central bank added.
Earlier, the International Monetary Fund in its report on Sweden also suggested that the government should introduce "policies to improve housing affordability."
