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Interest rate cuts by Swedish banks at the close of the year was instead an increase
Sunday, 01 January 2012
January 2 will be the first day of the New Year sin which the new mortgage rates for many bank customers will become effective. Many customers feel that their rates were really cut as most of the banks announced towards the end of the year. But reports from analysis presented on Swedish television show that major Swedish commercial banks instead increased their interest rates.

In the last weeks of 2011, Swedish commercial banks lowered their mortgage rates, at most by something like half a percentage point.

This came after the Minister for Financial Markets, Peter Norman and minister of Finance, Anders Borg, had threatened action against the banks when it appeared at first that they did not wants to lower their interest rates after the Riksbank or the central bank lowered the so-called federal funds rate by 0.25 percent. The problem here was that the banks were not passing the gains to the customers and the ministers were realty livid.

But according to an analysis carried out by Swedish television, all the Swedish leading banks raised their interest rates shortly before the Riksbank expected drop its rates in December.

The new three-month interbank rates are now higher than they did a month ago.
In mid-November, SEB for example lowered its three-month interest rate of 4.37 percent. A month later, a few days before December 20 when the Riksbank raised its expected rate cut, SEB had raised its rate to 4.62.


When the central bank then cut the repo rate by 0.19 percentage points, SEB’s rate now stood on  4.43 point that is, 0.06 percentage points higher compared with the centrals Bank's interest rate cut before the Governor made the announcement

Handelsbanken's behavior is even more remarkable according to Swedish television.  Large reductions were instead small increases. Days before Christmas Eve, the bank lowered its short-term rates by as much as 0.47 percentage points, which was widely reported.

Back shortly before the fall season, the bank had raised its interest rate by 0.5 percentage points – that was not as much noticed. This meant that the so-called big reduction instead was an increase of 0.04 percentage points.

For Nordea and Swedbank, the pattern is exactly the same. An increase in a short time before the fall and then a reduction after the rates cuts.

According to the banks the increases were due to increased borrowing costs. But that's not the whole truth.

The interest rates that largely govern the banks' borrowing costs are called Stibor in Sweden or what is known in full as Stockholm Interbank Offered Rate. This is the rate in Swedish Krona in which banks pay each other in terms of interest on what is known as interbank rates. That rate was certainly somewhat up in early December. But this was not to the same extent as the rate at which the banks increased their mortgage rates.

Looking instead at the four major banks' quarterly reports in 2011, it clearly shows that all have increased their profits from increased interest margins, i.e. the profit on the loans.

According to several bank representatives, the EU's so new, so-called capital adequacy requirements also meant that banks have to earn more. But that is not the case. The major Swedish banks are now among the European banks that have the best capital.
According to the Minister for Financial Markets, Peter Norman, Swedes should switch banks if they are not happy with the interest rates that the banks offer

But today, all major banks have chosen to lie in almost exactly the same interest rates manner on their list prices. This means that it does not matter which bank ones chooses, things will remain the same or may even be worse. In reality there is no competition in the Swedish banking sector.
By Scancomark.se Team

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