Swedish banks’ commitments in the Baltic The Swedish banks’ total lending to the Baltic countries currently amounts to around SEK 400 billion. There are mainly two Swedish banks that have had a large presence in this region; SEB and Swedbank. These banks, their subsidiaries and branches dominate the markets in the Baltic and comprise 80 per cent of the Estonian market, 55 per cent of the Lithuanian market and 60 per cent of the Latvian market. Around 16 per cent of Swedbank’s total lending is to the Baltic countries. The corresponding figure for SEB is 13 per cent and the figure for Nordea is 3 per cent. Swedbank’s loan losses for the three first quarters of 2009 total SEK 19 billion, and 60 per cent of this stems from the Baltic countries. SEB’s loan losses total SEK 9 billion, with 75 per cent stemming from the Baltic region. According to the Riksbank’s own estimates, the three banks’ total loan losses in the Baltic region will be SEK 27 billion for the whole year 2009, and roughly the same in 2010, with around 80 per cent, or SEK 50 billion, falling to the lot of Swedbank and SEB. This figure of SEK 50 billion should be regarded in the light of the two bank groups’ total primary capital, which is SEK 185 billion, or the capital held in their Baltic subsidiaries which amounts to SEK 27 billion. It will be necessary for the parent banks to continue transferring capital to their subsidiaries to maintain their creditworthiness.
When foreign market participants assess the situation and risks for Sweden and Swedish financial institutions, they also take into account to a large degree what is happening in the other Nordic countries and in the Baltic countries. The global financial crisis has affected financial stability in Sweden, although financial institutions here have coped better than those in many other countries. At the end of 2008 and the beginning of 2009 there was considerable international uncertainty and the market was particularly sensitive to consequences for Swedish banks resulting from the crisis in the Baltic. There was thus good reason for the Riksbank to take measures to stabilise the situation among the major Swedish banks in accordance with its task "to promote a safe and efficient payment system”. As the problems of the Swedish banks concerned mainly lay in the Baltic region, there was even greater justification for aiming the measures at strengthening these countries and thereby the banks there. The costs of these measures would probably be much lower if the problem could be dealt with at source rather than waiting until it had spread to the parent banks in Sweden, for instance through a dead stop in the liquidity supply from international markets. When the Riksbank made an assessment of the resources required to manage a widespread Swedish bank crisis, we took into account the fact that the Swedish banks’ balance sheets nowadays amount in total to 3.7 times Sweden’s GDP (which can be compared to 1.2 times GDP during the bank crisis in the 1990s).