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STOCKHOLM May 8 Sweden's financial watchdog outlined its "road map" for building up resilience among banks ahead of any future crisis, confirming it would introduce a systemic risk buffer and force banks to put more capital aside to cover risks in their mortgage portfolios.
The Financial Supervisory Authority (FSA) said on Thursday it would give details of a planned "countercyclical" capital buffer for banks in the autumn.
"On the whole, the information provided today describes a clear tightening of capital requirements for Swedish banks," the FSA said in a statement.
The watchdog said Swedbank, Nordea, SEB and Handelsbanken will have to hold a systemic risk buffer of 3 percent in core Tier 1 capital from the start of 2015, along with a further 2 percent as part of the so-called Pillar 2 requirement of new international rules.
"It's another tightening of the screw," said Nick Davey, an analyst at UBS. "The new news is the additional 2 percentage points capital requirement for Pillar 2 risks, and that's basically in line with what we had laid out as our base case."
Sweden's financial regulator is viewed as one of the toughest in Europe, but its banks have also benefited from low funding costs thanks to their low-risk profiles and healthy capital buffers.
Most of them fared well through the financial crisis and have emerged as among the most profitable in Europe.
Still, fears of a housing bubble have prompted Sweden's regulator to further tighten rules in the face of rising property prices throughout the financial crisis. Prices have almost tripled in the last 20 years.
Swedish households are also among the most heavily indebted in Europe, with debts of around 174 percent of disposable income, prompting the central bank to keep monetary policy relatively tight, despite low inflation pressure.
Sweden has taken several measures to cool the housing market. The financial watchdog introduced a cap on mortgage borrowing of 85 percent of the value of a home in 2010.
It confirmed on Thursday that the mortgage risk-weight floor - regulating how much money a bank has to set aside for mortgage lending - will rise to 25 percent from 15 percent, bringing it more in line with the rest of Europe. (Reporting by Johan Ahlander and Mia Shanley; Editing by David Holmes)