The Swedish FSA (Finansinspektionen) recently released a report on the Swedish market for consumer credit. Swedish House of Finance researcher Marieke Bos commented on the report and contributed with some interpretations during a recent seminar. Her two main conclusions from the report were:
– Even though consumption credit is relative small share of household total debt it can have implications on financial stability as it matters who owns this debt; since ‘nisch banks’ have less skin in the mortgage market game they have different incentives how far they should push consumers to repay their consumption loans.
– Banks can create business models that profit from identifying groups of consumers that will predictably overestimate their ability to repay their loans.
– By increasing the fees charged by the national debt enforcement agency (kronofogden) we can diminish the banks free riding on consumers incentives to repay in order to avoid an arrear (betalninganmärkning). This increase in cost will then create incentives for banks to tighten their lending standards.
The report and video from the seminar is available here.