Additional Policies Needed to Address Vulnerabilities in the Real Estate Sector in Nordic Countries
A recent European Systemic Risk Board (ESRB) announcement on vulnerabilities in the residential real estate sector highlights all four Nordic countries as needing to put in place additional policies or provide adequate justification for inaction.Key highlights from DBRS’ commentary discussing the conclusions of the ESRB:
• ESRB has sent specific recommendations on medium term vulnerabilities in the residential real estate sector to Denmark, Finland and Sweden. Warnings were sent to Norway.
• Given the potential for the real estate sector to be a source of systemic risk to financial stability, DBRS views these developments as positive.
• Banks rated by DBRS have had strict underwriting standards, and capital cushions over regulatory minimums, but DBRS expects residential real estate to remain a large exposure for most banks.
“While there are challenges ahead with regards to regulatory capital and risk-weighted asset requirements or potential fines , DBRS considers the large Nordic banks as well placed to absorb potential shocks, given current capital cushions over regulatory minimums , good track records of internal capital generation and flexibility to access the capital markets.” said Vitaline Yeterian from DBRS’ EU Financial Institutions team.
This commentary “Additional Policies Needed to Address Vulnerabilities in the Real Estate Sector in Nordic Countries” is available at
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