The shocks in the Swedish real estate market also threaten the ECB

The debt crisis at Swedish real estate group SBB exposed the European Central Bank (ECB) to the risk of losses and exposed its exposure to Europe's struggling real estate sector.

By buying real estate, including social housing, government offices, schools and hospitals, the Swedish group has accumulated more than nine billion dollars in debt, and the ECB has its bonds in its portfolio.

The ECB's SBB bond portfolio totals several hundred million euros, two familiar sources told Reuters. The ECB does not say how many bonds it bought at any price, nor details of the losses. Data from last week show that the ECB still held two bonds issued by a Swedish company as of November 24.

SBB's bonds are currently trading at roughly half their face value, indicating that investors are pricing in the risk that SBB may not be able to repay its debt.

In the meantime, the agencies lowered SBB's rating to non-investment grade, and the group recently bought bonds at a slightly lower price to stabilize its finances. Among the sellers was the ECB, one knowledgeable source added. The investment rating of the major agencies was one of the conditions for the ECB's purchase of corporate bonds, notes Reuters.

An ECB spokesman declined to comment on the case and potential losses. Although the ECB's exposure to the Swedish company is not large, it raises the question of how the eurozone's central bank has spent nearly 400 billion euros on corporate debt since 2016 as part of its massive asset purchases to prop up the economy and inflation.

On government debt papers, company bonds and other assets, which it usually holds until maturity, the ECB spent a total of about 5,000 billion euros. If the Swedish company is unable to service its debts, the central banks of the 20 eurozone members will have to jointly cover the loss, Reuters notes.

Magazin, 18. Dec. 2023.