Up to 70 pct of the 240 financecompanies operating in Sweden are likely to be squeezed out
over the next few years by the deregulation of financial
markets, the Association of Swedish Finance Companies said.
    Association chairman Arne Ogren told a news conference that
a major restructuring of the sector was inevitable.
    Central Bank governor Bengt Dennis said when announcing the
deregulation in November 1985 that one of his main aims was to
give commercial banks a chance to compete on equal terms with
finance companies and so undermine Sweden's "grey market."
    Total credit granted by the Swedish finance companies rose
to 77 billion crowns in 1986 from 64.7 billion in 1985. This
includes leasing and is the equivalent of 19 pct of all
outstanding loans by the banking sector at end-1986.
    Ogren said that if proposals now being discussed by a
government-appointed inquiry into the credit market to license
finance companies and make them increase their share capital
were pushed through, up to 70 pct would disappear.
    But he said this would in fact have little effect on credit
volumes as the 42 biggest finance companies accounted for 70
pct of lending by the entire sector.
    The explosive growth of Swedish finance companies began in
the early 1970s and commercial banks even started their own to
get around the tight restrictions then imposed on banking
activities and particularly on the growth of lending.
    Now that they were on an equal footing with their parent
companies, many bank-owned finance companies faced an identity
crisis, Ogren said. He predicted there would be mergers and
individual firms would carve out specialised niches to ensure
their survival in a deregulated climate.
    Ogren said the sector's losses on bad loans were bound to
rise steeply in 1989-1990 due to the rush to increase credit.
 REUTER
