(Bloomberg) -- Sweden’s major banks pose a vulnerability to the financial system due to their exposure to “highly-indebted property companies,” according to minutes from the Riksbank’s policy meeting earlier this month.
The property risks are mainly operational, for example from elevated and still rising levels of vacancies in the office segment, as well as a high rate of bankruptcies in the near term, Olof Sandstedt, the bank’s head of financial stability, said in the statement.
“This means that there is still a risk that the banks’ loan losses may increase,” Standstedt said. Still, he noted that financing conditions have improved with more real estate firms issuing bonds.
Companies such as Heimstaden Bostad AB and Samhallsbyggnadsbolaget i Norden AB, or SSB, were caught wrong-footed by last year’s sharp jump in borrowing costs at a time of falling property valuations. That put business models under strain, having previously relied on borrowing cheaply on the Swedish and European bond markets to fund their operations.
Swedish property companies have sold about $5.6 billion worth of bonds so far this year. That supply tally compares with the $4 billion issued in the whole of 2023, according to data compiled by Bloomberg.
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