However, similar legislation has been introduced in several European countries, and mortgage bonds regulated according to this legislation on secured bonds have come in various ways to be viewed as more creditworthy than mortgage bonds that are not. It can therefore be claimed that Swedish mortgage institutions should be given the same opportunities to issue secured bonds as mortgage institutions in other countries, which is also the view held by the Riksbank. Swedish mortgage institutions today already observe such strict legislation that they can be viewed as a kind of special company in a securitisation. The potential effects of introducing particular legislation for secured bonds are therefore possibly less in Sweden than in other countries, and it is difficult to see that the legislation regarding secured bonds would entail any dramatic change in the activities of Swedish mortgage institutions. However, there are advantages involved in introducing such legislation. Having legislation that is in line with that of other European countries will contribute to reducing any uncertainty, particularly from foreign investors, regarding the terms connected with owning securities issued by Swedish mortgage institutions. This should reasonably result in a broader circle of investors that are willing to invest in securities issued by Swedish mortgage institutions, and hopefully also  BIS Review 35/2004  1  reduce their borrowing costs. In addition, European central banks currently regard this type of mortgage bond as more creditworthy than mortgage bonds not covered by legislation on secured bonds, when market participants pledge collateral with them.

With regard to the outlook for Sweden, the Riksbank foresees an average annual growth rate of almost 3 per cent in the coming years. Looking at inflation prospects, the rate of price increases is expected to rise in the period ahead as resource utilisation increases in Sweden and abroad. However, a continuation of relatively weak labour market conditions and a favourable cost situation mean that the rise in inflation is expected to be relatively moderate in Sweden. Our forecast in the Report is for a risk-adjusted inflation rate of 1.1 per cent one year ahead and 1.8 per cent two years ahead, measured as UND1X inflation. Swedish housing finance On 1 July this year the Act on issuing secured bonds (2003:1223) will come into force. One of the main incentives behind the new Act is to offer Swedish mortgage institutions the same favourable financing opportunities that these institutions face in European countries that have already introduced similar legislation. So will this new legislation result in a new financing structure for Swedish mortgage institutions and in large issue volumes in the international markets? This remains to be seen. The Riksbank has, for reasons of principle, been hesitant towards the introduction of the legislation on secured bonds, primarily because the supervisory task charged to Finansinspektionen (the Swedish Financial Supervisory Authority) could be perceived as an implied government guarantee, but also because the legislation in this field entails a return to regulation in the credit market, which in itself can be questioned.