Eva Srejber: Future scenarios for housing finance Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at the Institute for Housing and Urban Research, Gävle, 19 March 2003. *  *  *  Introduction Housing finance in Sweden constitutes a significant part of the Swedish financial system. At the beginning of this year, total lending from banks and mortgage institutions amounted to approximately SEK 2200 billion, which was fractionally higher than Sweden's GDP. Mortgage institutions account for just over 50 per cent of this lending, which is why it is vital that financial market players understand the housing finance market, its participants and how it affects and is affected by the Swedish economy. For this reason the seminar today can play an important role in advancing knowledge within the field. There are several factors that affect housing finance. These include demand factors, supply factors and structural factors. I will not be mentioning all of these but will instead be focusing on three important factors, namely internationalisation, changed regulations and adjustments of household and corporate balance sheets. I will also be attempting to make a connection to how changes in these three broad areas influence the financing of housing. Allow me to begin by outlining the developments of recent years as a point of departure for future prospects. A process of internationalisation has been ongoing for many years now and is driven by several factors. The process is particularly evident in the capital and financial markets.
Deposit insurance, like other forms of insurance, is there to deal with low probability events that have a major impact if they occur. To make an obvious analogy, you still take out fire insurance even if you do not expect your house to burn down. Hong Kong stands out as one of the few developed banking centres which does not have a DIS. There is of course no reason why we should follow the rest of the world just for the sake of it. But we should at least keep our safety net arrangements under regular review to ensure that they are still appropriate to changing market circumstances. This is what we did last year when we engaged an external consultant to consider whether the existing deposit protection arrangements in Hong Kong were sufficient, and if not how they should be changed. The conclusion was that an explicit and limited form of deposit insurance should be introduced. We subsequently undertook a public consultation on this proposition and on the detailed design features of the proposed scheme. This consultation generated a heated, albeit civilised, debate. Not surprisingly, some of the large banks vehemently opposed the scheme. Opinion in the community as a whole was however generally supportive.