This forms a natural part of our work in the financial stability field, which also encompasses other countries where the Swedish banks have a significant presence. We analyse statistics and other information from these countries and we discuss developments with management and employees at  2  BIS Review 11/2010  their central banks, governments and financial supervisory authorities. We also follow the reports on these countries from other sources such as the IMF, the EU/ECB and market data. Representatives of the Riksbank have accompanied the IMF on several of their visits to the Baltic countries and have taken part in the discussions with governments and public authorities there. The purpose of this participation, which has been at the invitation of the countries concerned and of the IMF on each individual occasion, has been to acquire up-todate knowledge of the situation in the country and of the negotiations, so that the Riksbank could, if necessary, provide financial support at very short notice. The Riksbank’s Financial Stability Report, which is published twice a year, sounded a warning as early as 2005 regarding economic developments in the Baltic region and the tone has gradually sharpened in the reports published since then. The Financial Stability Report also publishes the results of stress tests, in which the banks’ resilience is tested in the light of improbable but nevertheless possible scenarios. Examples of some of the scenarios tested include the effects on the banks of various crisis situations in the Baltic region.
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.