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Swedbank CEO demands amortization law

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Swedbank CEO demands amortization law
15:00 CEST+02:00
Swedbank CEO Michael Wolf has proposed that Sweden adopts a law requiring mortgage amortization to ward off the threat of spiralling household debt to the Swedish economy, according to a report in the Dagens Industri (DI) daily.

"It is important to do something about this while we still can," said Swedbank spokesperson Thomas Backteman to DI.

In a letter to the department of finance, the Swedbank CEO has argued that the existing voluntary commitment, which requires amortization on mortgages in excess of 75 percent of the property value, does not work particularly well.

The bank has thus called for legislation to force banks to act to encourage especially highly-leveraged customers to pay off their loans.

"We thus believe that the way towards a more robust system is via legislation as opposed to self-regulation," Backteman explained.

In his letter to the finance department, the Swedbank CEO has however stopped short of stipulating an exact level at which amortization would be legally required.

Wolf argued that if nothing is done and Swedish property prices declined by as little as 10 percent then Swedish banks would run into difficulties financing their stocks of mortgage loans.

This would in turn increase the cost of bank borrowing and thus threaten the broader Swedish economy, Wolf argued.

The bank pointed out that Swedish banking culture differs somewhat from the remainder of Europe.

"A normal European mortgage is paid off in 20-25 years. This is a structure we have previously had in Sweden and which we must now return to," Backteman told Dagens Industri.

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