UPDATE 1-Swedish finmin sees tougher capital requirements for banks

Wed Mar 19, 2014 7:02am EDT

Related Topics

* Says bank capital requirements will be higher than 12 percent

* Swedish Bankers' Association proposes banks force bigger amortisation

* Borg welcomes proposal but says authorities will still impose tougher rules

STOCKHOLM, March 19 (Reuters) - Sweden's finance minister said on Wednesday the government would heap even greater pressure on its banks to ensure financial stability, forcing them to hold more capital than the 12 percent required from 2015.

Swedish banks are some of Europe's most well-capitalised lenders but authorities are worried about risks in the sector with the size of banking assets four times the size of Sweden's economy.

"We will end up with capital requirements over 12 percent... We will not stop when it comes to regulations. It will be tougher over time," Finance Minster Anders Borg said at a banking seminar, without providing further details.

Authorities are also concerned about high levels of household debt, at about about 170 percent of disposable income, among the highest in Europe.

The Swedish Bankers' Association proposed earlier on Wednesday that banks force Swedish home owners to pay down more of their mortgage debt.

It recommended that banks require customers amortise when debt exceeds 70 percent of the value of the home, so that debts are paid down to that level within 10-15 years. That is lower than a previous recommendation of 75 percent.

Borg welcomed the proposal but warned it would not deter regulators from putting forward tougher demand on banks.

"The government, the FSA and others must still act so that we tighten the requirements, particularly on capital adequacy. This is a good additional measure but it is not instead of other measures," Borg said.

The central bank has emphasised more is needed and several board members have said tighter regulation would let it focus more on inflation, well below the Riksbank's target, when setting rates.

At current amortisation levels, it would take Swedes on average 140 years to pay down their mortgage debts, the Financial Supervisory Authority has previously calculated. (Reporting by Johan Ahlander and Mia Shanley; editing by Niklas Pollard)

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