Swedish central bank will take ECB loan

Swedish central bank announced it would borrow 3.0 billion euros from the European Central Bank to bolster Swedish finances as lenders suffer from exposure to the crisis-stricken Baltics. The statement said: "The Riksbank is now borrowing three billion euros (4.24 billion dollars) from the ECB to ensure that the Riksbank will have a sufficiently large foreign currency reserve during the period the borrowing takes place.” "As a substantial part of the Swedish banks' funding is in foreign currency, the Riksbank needs to have a sufficiently large foreign exchange reserve to be able to meet a potential need from the banks." The Riksbank had earlier asked to borrow the equivalent of 100 billion kronor (9.2 billion euros, 13 billion dollars) in foreign currency from the Swedish National Debt Office to restore its foreign currency reserve. It said 65 billion kronor would be borrowed before the summer and the remaining 35 billion kronor in the autumn. The European Central Bank (ECB) credit is a form of bridge loan until the full 100 billion is borrowed. Sweden, a European Union member, borrowed the money from the ECB even though it is not part of the eurozone. Public support in Sweden for the euro has however increased since the start of the financial crisis, polls have suggested, as the Swedish krona has lost almost a quarter of its value against the euro in recent months. According to a report by the central bank earlier this month, Swedish banks will lose 16 billion euros (22.5 billion dollars) this year and next because of the credit crisis. The losses are expected to occur mainly in activities in the crisis-stricken Baltic countries and eastern Europe, where Swedish banks are heavily exposed. Sweden's Financial Supervisory Authority (FI) said Wednesday that its so-called "stress tests" showed the four banks would be able to withstand "extreme pressure." It said the banks were well-placed to cope with the FI's worst-case scenario, which foresees total credit losses of 350 billion kronor in the period 2009-2011.