Sweden’s Financial Regulator Says the Storm May Not Pass Anytime Soon

Key Takeaways

• Prolonged Uncertainty Expected: Sweden’s financial regulator warns that geopolitical and economic risks remain elevated, with the potential for prolonged instability throughout 2025.
• System Resilience Holding Steady: Despite the turbulent outlook, Swedish banks remain well-capitalized and profitable, providing a strong buffer against future shocks.
• Households Growing More Cautious: Rising interest rates and inflation have weakened household finances, leading to reduced borrowing and spending as many Swedes adopt a more risk-averse stance.
• Commercial Real Estate Still Vulnerable: While real estate firms are slowly reducing debt, weak demand and flat rental growth continue to pose structural risks.
• DORA Now in Force: With the EU’s Digital Operational Resilience Act fully in effect, incident reporting will give regulators deeper visibility into operational risks, making resilience, not just compliance, a core supervisory focus.

Deep Dive

If 2024 taught us anything, it’s that stability is fragile, and in 2025, it’s still up for negotiation. In its latest Stability in the Financial System report, Sweden’s financial watchdog, Finansinspektionen (FI), doesn’t hold back. The risks on the horizon, from geopolitical tensions to economic headwinds, are piling up. In fact, FI says the likelihood of negative shocks is higher now than it was just a few months ago. Still, there's a quiet confidence in the report’s tone. Swedish banks are well-capitalized, profitable, and, crucially, resilient.

“The current state of affairs is highly unpredictable,” said Jon Thor Sturluson, FI’s chief economist. “There is a risk that geopolitical and economic conflicts will escalate further... this uncertainty could persist for a while.”

At the start of 2025, the global uncertainty index hit a record high. That kind of volatility doesn’t stay on paper. It shapes behavior. Households are pulling back on consumption. Companies are delaying investments. Everyone’s watching and waiting—which, ironically, can deepen the very downturn they fear.

Sweden is already in the midst of a slowdown, and FI doesn’t rule out more turbulence. But it’s not all doom and gloom. The financial system has weathered recent market shocks, like the volatility in April, without major cracks.

FI’s takeaway: the structure is holding. For now.

Households Are Playing Defense

Swedes may have seen some financial relief last year, but early 2025 hasn’t been kind. Inflation and interest rate pressure are still echoing through household budgets. That’s led to less borrowing, less spending, and a noticeable shift toward caution.

It’s not a collapse, but it’s a retrenchment—and for many, there’s not much margin left.

Commercial real estate companies are slowly deleveraging, which FI sees as a positive sign. But the weak economy is holding them back. Lower demand and stagnant rents are keeping some firms in a vulnerable position. Resilience is building, but unevenly.

Meanwhile, the big banks are keeping the system anchored. They remain well-capitalized and profitable, with solid access to financing. In a risk-heavy environment, that’s not just good news, it’s essential.

Operational Resilience Moves to the Forefront

Beyond the balance sheets, FI is turning its attention to operational risks, especially those tied to geopolitics and cybersecurity. The implementation of the EU’s Digital Operational Resilience Act (DORA) at the end of 2024 has sharpened that focus.

Firms are now required to report major incidents, giving FI a clearer view of what’s really happening under the hood. How well they adapt to DORA, and how seriously they take resilience beyond compliance, is now a top supervisory priority.

There’s no illusion of certainty in this report. FI is clear that the coming months could bring more financial stress. But they’re equally clear that Sweden’s financial system is in a good place to face it.

The resilience is real. So is the risk. What matters now is whether financial firms, households, and businesses can keep steady, not just through another shock, but through an extended period of instability.

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