. the idea with the new rules is that the risk weighting will better reflect the actual credit risk. this means that the banks will become more thorough in assessing the relationship between the risk in the credit and its yield. an increased risk will therefore be marked in the banks ’ pricing of loans, i. e. the interest rate. there are both advantages and disadvantages with the proposed capital adequacy rules. the proposed rules mean that the banks must hold more capital if the risks in their given loans increase. if they do not have more capital than the rules require, they must either acquire more capital or reduce the risks in their lending. in this type of situation, the bank may choose not to renew loans, which could have extremely negative consequences for the borrowers. the new rules thus risk reinforcing the sequence of events. however, there are many positive consequences ; a more sound and individual risk assessment, which will better protect savings and reduce the risk that taxpayers, through the central government, will have to step in, opportunities for cheaper loans to borrowers who constitute a low risk but also increased interest rate costs for companies that are high risk. a fairer pricing of loans, in other words. unlike shares, where it may be considered exciting to take risks and hope for a high return, boring loans are cheap loans for borrowers. by this i do not mean that loans for apartment blocks are boring, but they are normally considered stable and durable. characteristic for loans is a small expected profit, but with the low risk of very large losses. loans that cost a low interest rate are therefore slightly boring loans with stable cash flows that generate stable interest payments and regular repayments, in other words, low risk. so how will the new capital adequacy rules affect loans and credit granting to public utilities companies? a first reflection is that the banks will study credit objects and the companies concerned in a more individual manner than before. a second thought is that the banks, when pricing loans, will look at the cash flow from the loan, which in this case can be equated with the company ’ s cash flow. in most cases, your companies have a large value in their properties as collateral and this will continue to be a positive thing for you, but as i said earlier, the banks today focus firstly on the customer ’ s ability to repay and then on the collateral offered. what is important to a company that has loans? • meticulous balance sheets and

eva srejber : future issues for the housing market in sweden against the background of basel ii speech by ms eva srejber, second deputy governor of the sveriges riksbank, at the annual meeting of the swedish association of municipal housing companies ( sabo ), taeby, 8 january 2002. * * * introduction i should like to begin by thanking you for the invitation to come here and the opportunity to discuss this evening ’ s theme of future issues for the housing market. at the beginning of may 2001 i gave a talk to sabo byggnadsforsakrings ab on the property market and economic trends in sweden. i then took up the question of why and how the riksbank monitors the property market. the focus for this evening will be on what the future may hold for the property market and granting of credit for the purchase of property and housing. my talk should therefore be seen ( and heard ) as a complement to, or continuation of, my earlier talk. my talk this evening will primarily deal with our view of the housing market and the role it plays with regard to financial stability and potential growth. i will then go on to describe the credit granting process and current changes that will affect this process. i will conclude with a look towards future developments. the role of the housing market for financial stability and potential growth let me begin, however, with brief description of the housing market from the riksbank ’ s perspective. those who wish to go into this subject in more depth can read our most recent financial stability report. as we know, the property sector consists of two parts : the housing market and the commercial property market. the riksbank studies the property sector for two main reasons. one reason is that property companies comprise the largest individual borrowers from the banking groups approximately 15 per cent of the banks ’ lending is to property companies. properties are also the dominant form of collateral for loans. loans with property as collateral comprise almost 50 per cent of the bank ’ s lending against collateral. the health of the companies in the property sector therefore has repercussions for financial stability. the growth rate for credit has remained at an average level of just over 6 per cent a year for the past four years, which exceeds annual gdp growth by a few percentage points. it could be considered cause for concern to have a higher growth in credit than in fundamentals, i. e. gdp, and it is easy to recall developments at the beginning of the