UPDATE 1-Swedish banks pass "extreme" stress test -watchdog

* Swedish watchdog: banks can handle worst-case scenario

* Says banks can absorb 150 bln SEK of losses in Baltics

* Sees no need for capital strengthening by top banks

(Adds detail, background)

STOCKHOLM, June 10 (Reuters) - Sweden’s financial watchdog said on Wednesday the Nordic country’s main banks would all be able to manage the “extreme” pressures created by a severe recession in Sweden and the Baltic region.

The Swedish Financial Supervisory Authority said its stress tests of the four top banks -- Nordea NDA.ST, SEB SEBa.ST, Handelsbanken SHBa.ST and Swedbank SWEDa.ST -- showed they could absorb losses of more than 150 billion Swedish crowns ($19.7 billion) in the Baltics over three years.

This was the worst-case scenario in the stress tests.

“There is currently no need for any of the big banks to strengthen their capital adequacy based on the regulatory requirements,” it said in a statement.

“However, in extreme scenarios the market will most likely require a higher level of capital, which can place pressure on financing possibilities for banks that are most affected.”

The Financial Supervisory said it had tested three scenarios for the 2009-2011 period, ranging from total credit losses of around 200 billion crowns to about 350 billion, implying huge losses in the banks’ overseas businesses.

Swedish banks stayed clear of the risky assets that laid waste many of their peers on both sides of the Atlantic, but worries have grown regarding the billions of dollars of loans extended by mainly Swedbank and SEB in the Baltics, which are in the clutches of a withering recession.

For a factbox on Nordic bank exposure in the Baltic region, click on [ID:nLS339434]

For a poll on Nordic bank loan losses, click on [ID:nL41028605] (Editing by Will Waterman)