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
- 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
- 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.
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.
- 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
- 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.
Kit Ling Yeung
+44 20 3530 1527
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+44 20 3530 1536
+44 20 3530 1444
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:
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.
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