May 21, 2014 / 8:47 AM / in 4 years

UPDATE 1-Sweden's FSA eyes 1 percent countercyclical buffer for banks

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STOCKHOLM, May 21 (Reuters) - Sweden’s Financial Supervisory Authority said on Wednesday a one percent countercyclical buffer for the country’s banks is reasonable and that such a capital demand could be activated from summer 2015.

Sweden’s financial watchdog, one of Europe’s toughest regulators, said total core tier one capital demands for the country’s four biggest banks, Nordea, Handelsbanken , Swedbank and SEB, would rise to between 14 and 19 percent, or on average 16.4 percent.

“The capital demand should be especially high for the big, systemically important banks since the consequences should they run into trouble could be very serious for the broader economy,” FSA chief Martin Andersson said in a statement.

“Our view is that the banks should be restrained with dividends and buybacks going forward in order to meet higher capital needs.”

Swedish banks, some of Europe’s most profitable lenders thanks to the Nordic region’s healthy economic backdrop and a strong focus cost cuts, have been busy raising dividend payouts.

Nordea, the region’s biggest bank by market capitalisation, has already said it will raise dividends over the next two years.

The FSA repeated its concerns about fast-rising household debt in Sweden and said such levels motivated a one percent countercyclical capital buffer. (Reporting by Mia Shanley and Daniel Dickson, editing by Simon Johnson and Niklas Pollard)

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