SWEDEN Law and Practice Contributed by: Niklas Sinander, Elin Carlsson, Axel Schelén and Björn Wendleby, Harvest Advokatbyrå
1. Loan Market Overview 1.1 The Regulatory Environment and
high-cost short-term loans. Until recently, the Swed- ish consumer credit market was subject to less strict regulation than that applicable to banks and other credit institutions. Under the current legislative amendment, companies engaged in consumer credit activities must comply with the same regulatory requirements as banks and/ or other credit institutions in order to continue such consumer credit operations. Among other measures, the legislative amendment restricts the terms and con- ditions for consumer loans by introducing cost caps, and makes all loans without collateral – including con- sumer loans – less beneficial for borrowers from a tax perspective. The legislative amendment entered into force on 1 July 2025, with a grace period until 31 July 2026. The changes are expected to reduce volumes in the consumer credit market. 1.2 Impact of Global Conflicts Geopolitical conflicts and increased uncertainty have dampened risk appetite in the Swedish loan market. Both banks and alternative lenders have adopted a more cautious approach towards borrowers in gen- eral. While the Swedish krona recovered somewhat during the first half of 2025, it remains at a relatively low exchange rate compared to the US dollar and the euro, following current global conflicts. The weak Swedish krona has led to increased import costs and higher inflation, leading to sharp interest rate hikes and stricter credit terms. Despite the Riksbank’s decision to lower its policy rate to 2.00% in June 2025, financ- ing costs remain above pre-inflation levels. These events have resulted in many companies struggling to refinance existing loans and raise new financing. Global trade uncertainty is causing many companies to postpone investments, which risks putting pres- sure on earnings and weakening the financial position of highly leveraged companies. Given the subdued economy, lending growth remains low, and banks continue to be selective, focusing on companies with predictable cash flows. As a result, high-risk projects are finding it difficult to raise loan financing. After many years of covenant-light loan financings with low interest rates and borrower-friendly terms and condi- tions, the market has continued to be characterised by
Economic Background Recent Economic Cycles
Recent economic cycles have significantly affected the Swedish loan market. The slight upturn observed in the latter part of 2024 has subsided, and the Swed- ish economy remains in a protracted recession. This has led banks and other lenders to adopt a more restrictive stance towards borrowers in general. Inflation has slowed somewhat over the past year, leading the Riksbank (Sweden’s central bank) to lower its policy rate to 2.00% in June 2025. Despite this measure, lending rates and credit growth remain low. Many borrowers are struggling to meet their financial covenants, resulting in workouts and restructurings. Leveraged borrowers tend to seek alternative financ- ing sources when refinancing in light of the more care- ful approach from lenders. The markets for high-yield bonds and leveraged loans have weakened, affected by a combination of infla- tion, the ongoing war in Ukraine, escalating conflict in the Middle East and increased financial volatility. Overall, these factors are expected to heighten the risk of rising financing costs. During the first half of 2025, geopolitical and trade tensions also contributed to falling stock markets and higher yields on US gov- ernment bonds, further reducing market risk appetite. Despite the challenging market situation, there are some signs of stabilisation and the overall prediction is that a clearer improvement in the economic cycle Apart from the EU’s Digital Operational Resilience Act (DORA) entering into force on 17 January 2024 – which imposes requirements on financial institutions and certain service providers regarding ICT risk man- agement, etc – there have been no major changes in legislation regarding credit institutions. is likely only in 2026–2027. Regulatory Environment However, the consumer credit market has been sub- ject to changes, as the Swedish government has increased its focus on this sector in light of rising over-indebtedness and the growing prevalence of
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