Finansinspektionen chief economist warns on interbank market risks

A blunt warning by Lars Frisell, Chief economist of Swedish Financial Supervisory Authority, to Swedish banks was credited with much of the sharp early decline in banking and financial sector stocks across Europe this morning. One of Mr. Frisell’s focus areas is the study of banking sector and he is also a member of Basel Committee for Banking Supervision. His stern warning was for Swedish banks to prepare for deterioration in European credit crisis, the collapse of interbank market and disappearance of funding opportunities.

While Fridell said that the situations is not so serious currently, Swedish banks need to do more to raise the maturity of their financing. Most of the Nordic regions banks were already showing high single digits losses before weak macro data also hit cyclical stocks hard. There were also reports that some banks have already had to tap into ECB funds and withdraw some reserves from overseas to be able to get financing, although the levels are nowhere near 2008 situations as of now.