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Banks Set to Lose Risk Loophole in Sweden as FSA Strikes 

September 28, 2015

Frances Schwartzkopff, Bloomberg Business

Sweden’s financial watchdog wants to close a loophole that has allowed banks to understate the risk on their corporate loan books.

According to Uldis Cerps, executive director of banking at the Financial Supervisory Authority in Stockholm, Swedish banks routinely provide long-term corporate funding through a series of short-term loans. Because the transactions appear as short-term on the banks’ balance sheets, they’re assigned a lower risk weight. That means banks can hold less capital to guard against the threat of losses.

“Even if being legally accurate, this approach does not necessarily capture the actual risk, which both banks and the regulators should, in our view, address in their overall risk assessments,” Cerps said in an e-mailed response to questions.

Read more: Bloomberg Business

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