Swedish central bank picks FSA’s Thedeen as new head as Ingves era ends

By Simon Johnson and Stine Jacobsen

STOCKHOLM (Reuters) -Sweden’s central bank said on Friday it had appointed the head of the national financial regulator Erik Thedeen as its new chief, ending speculation as to who would replace long-serving Governor Stefan Ingves when he leaves at the end of the year.

With the war in Ukraine dragging on and no sign of inflation easing, Thedeen will have a tricky job in balancing policy tightening against the risk of an economic slowdown.

Ingves has led the Riksbank since 2006, while Thedeen has worked at the Ministry of Finance, headed the Nasdaq Stockholm exchange, the government’s Debt Office and currently heads Sweden’s Financial Supervisory Authority (FSA).

“His experience in managing financial authorities and organisations make him well suited to become the new Governor of the Riksbank,” the central bank’s General Council said in a statement.

Thedeen and Ingves have clashed previously over the role of the central bank in financial stability, with Ingves believing the Riksbank should have major policy responsibility there instead of the FSA.

Thedeen’s appointment could see some formal supervisory powers transferred to the Riksbank, Capital Economics said in a note.

“At the margin, more active macroprudential policy in the future may limit the degree of required rate hikes in future tightening cycles,” David Oxley, Senior Europe Economist at Capital Economics said.

Thedeen declined all comments on monetary policy but told a news conference that the issue of responsibility for macroeconomic supervision had been discussed over time by the Riksbank and the financial watchdog.

“The FSA’s clear view has been that the structure we have today is right and reasonable. I’ve represented this and will continue to so,” he said.

“I’ve not changed opinion on this issue.”

A replacement for First Deputy Governor Cecilia Skingsley, who said earlier this month she would step down in August and was widely tipped to take over from Ingves, has yet to be announced.

New ground

Ingves, who led Sweden’s financial system overhaul after a crash in the early 90s, oversaw a turbulent time at the central bank.

The Riksbank slashed rates to below zero after the financial crisis of 2008-2009 – a previously untried measure – to get inflation moving toward the central bank’s 2% target.

Rates stayed negative for around five years and the central bank attracted widespread criticism for pursuing ultra-loose policy long after the economy had recovered from the crisis.

During the pandemic, Ingves was forced again to break new ground with the central bank launching a programme of asset purchases, loans and other measures to keep the economy afloat.

Many analysts disagreed with the decision to buy mortgage-backed bonds over worries it could add further fuel to an overheated housing market, as well as the purchases of corporate bonds.

While the measures helped stabilize the economy, household debt levels remain a concern, especially as the Riksbank embarks on what is likely to be a series of quick rate hikes.

Thedeen will serve a six-year term. He will take up his post on Jan. 1 and take part in the monetary policy meeting in February 2023.

(Additional reporting by Niklas Pollard; Editing by Chizu Nomiyama, Tomasz Janowski, William Maclean)