The outbreak of the coronavirus crisis in the spring of 2020 caused enormous financial turbulence, including the biggest stock market fall in one day so far in Sweden.3 All bond rates rose to a varying extent. The new motto for investors was ‘dash for cash’, as they abandoned unsafe assets in favour of safer ones with high liquidity.4 During the crisis, the Riksbank's monetary policy focused as far as possible on maintaining interest rates at a low level and maintaining the supply of credit so that the real economy could function. A key element in our response to the crisis was extensive purchases of bonds (see Figure 2).5 The very fact that all bond yields rose to varying degrees made a broad palette of asset purchases necessary to hold interest rates at a low level. The Riksbank purchased government bonds, covered bonds, municipal bonds and corporate bonds. 6 We took framework decisions for the total asset purchases, which we then distributed over the different asset classes through regular decisions at the monetary policy meetings held. Initially, the framework was set at SEK 300 billion in March 2020 and then expanded to SEK 500 billion in June and to SEK 700 billion in November of the same year. In connection with the decisions in June and November 2020, we extended the purchases from the end of 2020 to first the middle, and then the end, of 2021.
With respect to bank capitalisation, the situation remained largely unchanged in 2014. First, the domestically focused commercial banks’ leverage ratios remained stable at high levels by historical standards. Second, these banks’ risk-weighted capital ratios increased slightly and are significantly above regulatory minimum requirements overall. Furthermore, stress test results suggest that most domestically focused banks should be able to absorb estimated losses without seeing their capitalisation fall below the regulatory minimum. Nevertheless, under the most relevant adverse scenarios for these banks, the losses would deplete a large proportion of their surplus capital. Experience in Switzerland in the 1990s, as in other countries, suggests that this would lead to a general weakening of the banking sector and significantly affect banks’ ability to lend, with negative and lasting repercussions for the real economy. The stress test results highlight the importance of banks holding significant capital surpluses relative to the regulatory minimum requirements. The activation of the countercyclical capital buffer in 2013 and its increase in 2014 has made a significant contribution in this respect. 2  BIS central bankers’ speeches  Risk of renewed increase in imbalances on mortgage and real estate markets Overall, imbalances on the mortgage and residential real estate markets have remained broadly unchanged since the last Financial Stability Report. From a financial stability perspective, this is a positive development. However, it is still too early to give the all-clear. On the one hand, imbalances remain at a high level and have not yet started to decline.