Sweden to push banks to cut financing risk -finance minister

STOCKHOLM Thu Dec 27, 2012 2:54am EST

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STOCKHOLM Dec 27 (Reuters) - Swedish regulators will take new measures to get banks to reduce their financing risks, Finance Minister Anders Borg was quoted on Thursday as saying.

Sweden has already introduced tougher capital requirements for its banks than elsewhere in Europe. It is worried that the size of the country's banking system, about four times as big as national output, makes it vulnerable to a downturn.

"We will not take the pressure off the banks and the next step will be to press them over their foreign currency financing," Borg told Dagens Nyheter newspaper in an interview. Borg was referring to heavy borrowing in foreign currencies by Sweden's banks to finance their lending.

"We have to be clear with the banks: we will take measures and steps to force them to have more secure financing," he said.

The Swedish banking system is dominated by Nordea, Handelsbanken, SEB and Swedbank.

Borg said one measure could be to have banks deposit money with the central bank as a guarantee for their financing in foreign currency, or pay a fee to the central bank.

The central bank recently said it wanted to increase its foreign currency reserves by 100 billion Swedish crowns ($15.35 billion) to give it more firepower if it ever had to rescue a bank.

Borg has said the banks should bear some of the cost of this increase. ($1 = 6.5155 Swedish crowns) (Reporting by Patrick Lannin. Editing by Jane Merriman)

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