Sweden and the Global Banking System: Links and Vulnerabilities

The links of both Swedish borrowers and Swedish banks with the global banking system are important but different in nature. While Swedish borrowers draw from a relatively large number of creditors, Swedish banks lend predominantly to Nordic and, to a smaller degree, Baltic borrowers. An important implication is that events triggering (large enough) credit losses in these key markets would come with significant pressures to deleverage and reduce lending in Sweden, with potentially severe real economic repercussions. At the same time, good policies that secure the soundness of Swedish international banking groups will benefit borrowers not only in Sweden but across the region.