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The situation on financial markets has improved since last year, but a deepened sovereign debt crisis in Europe is still the greatest risk to the Swedish financial system. A low interest rate environment in Sweden has been putting pressure on life insurance undertakings for some time. Finansinspektionen (FI) now sees a risk of consumers ending up in a squeeze when life insurance undertakings review their business models. FI is also concerned about developments on the financial advice market, where customers are at risk of making unsuitable investments.
During 2012, unease on financial markets has subsided slightly, mainly due to central bank measures but the underlying structural problems remain in some of the European countries.
Swedish banks are well-capitalised today with robust resilience. At the same time, they are reliant on market funding, making the banking system vulnerable in the event of the debt crisis intensifying. However, the banks have built up buffers and Swedish authorities have tools to manage poorer conditions.
The low interest rate environment was a reason for FI introducing in the summer a temporary floor for life insurance undertakings’ calculation of the discount rate. This was to avoid short-term actions that could have long-term consequences. Now that the firms are reviewing their commitments, FI sees a risk of the firms taking advantage of consumers’ deficient knowledge by not offering market terms.
FI remains concerned about the financial advice market, in which consumers are being offered complex products and given unsuitable advice. Certain products are very difficult to understand, for example how the fees are charged, the risks are taken and how the expected return is generated.
