RPT-Fitch affirms Sweden at 'AAA'; outlook stable

Wed Jul 17, 2013 12:57pm EDT

July 17 - Fitch Ratings has affirmed Sweden's Long-term foreign and local
currency Issuer Default Ratings (IDRs) at 'AAA'. The Outlook on both ratings is
Stable. Fitch has also affirmed Sweden's Short-term rating at 'F1+' and Country
Ceiling at 'AAA'.

KEY RATING DRIVERS 

Sweden's 'AAA' foreign-currency IDR reflects the following key rating drivers:

- Sweden is an advanced, well diversified and wealthy economy. There is a track 
record of sound macroeconomic and fiscal management, reflected by a strong 
recovery from recession, low inflation and solid public finances.

- Governance and institutions are strong. Sweden's institutional strengths give 
confidence in the country's ability and willingness to honour its public debt 
commitments.

- Public finances are a rating strength. Low deficits and debt have allowed 
Sweden to engage in expansionary fiscal policy, with temporarily increased 
fiscal deficits of 1.4% and 0.9% of GDP in 2013 and 2014 respectively. Existence
of fiscal space allows for this counter-cyclical fiscal policy and supports the 
rating. 

- High levels of household indebtedness and a sizeable stock of non-amortising 
mortgages are potential risks in the event of a weaker macro back drop. Large 
household assets provide mitigation.  

- By international standards, Swedish banks' level of profitability and 
capitalisation are solid. Core Tier 1 ratios exceed Basel III minimum 
requirements and Fitch expects Swedish banks will meet the higher minima being 
introduced by Swedish regulators. However, a large dependence on wholesale 
funding does leave the banking sector sensitive to funding shocks. The higher 
level of foreign reserves accumulated by the Riksbank provides some mitigation. 


RATING SENSITIVITIES 

A Stable Outlook reflects Fitch's assessment that downside risks to the rating 
are currently not significant. Nonetheless, the following risk factors 
individually, or collectively, could trigger negative rating action:

- If macroeconomic imbalances were to increase, most likely through a property 
bubble, this would increase policy challenges and risks to economic and 
financial stability, placing downward pressure on the rating through the impact 
on contingent liabilities. 

- The large size of the banking sector and reliance on wholesale funding leaves 
the sovereign rating relatively sensitive to adverse funding shocks. 

KEY ASSUMPTIONS

- Fitch's forecasts for the general government balance and debt level are based 
on the assumption that the government remains committed to its current fiscal 
strategy. 

- Swedish exports are highly reliant on developments in the eurozone. Fitch 
assumes there will be progress in deepening fiscal and financial integration at 
the eurozone level in line with commitments by eurozone policy makers. It also 
assumes that the risk of fragmentation of the eurozone remains low.

Contact: 

Primary Analyst

Kit Ling Yeung

Analyst

+44 20 3530 1527

Fitch Ratings Limited

30 North Colonnade

London E14 5GN

Secondary Analyst

Michele Napolitano

Director

+44 20 3530 1536

Committee Chairperson

Richard Fox

+44 20 3530 1444

Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: 
peter.fitzpatrick@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable criteria, 'Sovereign Rating Criteria' and 'Country Ceilings' dated 13
August 2012, are available at www.fitchratings.com.

Applicable Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
here. IN ADDITION, RATING 
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE 
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF 
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS 
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED 
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH 
WEBSITE.
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