(Corrects date in dateline)
STOCKHOLM, Nov 28(Reuters) - Low interest rates, which have driven up asset prices and the willingness to take on risk, pose a challenge for Sweden’s financial system in the longer run, Sweden’s financial watchdog said on Thursday.
“If the willingness to take risk should suddenly decline, that could lead to large falls in prices on the financial markets,” the FSA said in its bi-annual Stability Report.
On Wednesday, the FSA put forward a proposal to raise capital buffers against the risk of loss from banks’ lending to the commercial real-estate sector.
The benchmark repo rate has been negative since early 2015 and while the central bank plans to hike to zero in December, rates are expected to remain at a very low level for several years. (Reporting by Simon Johnson; Editing by Jon Boyle)