Sweden’s Handelsbanken is an exemplar of prudence, barely touched by the 2008 financial crisis. It operates globally like a small community bank, to the point that it has just fired the chief executive, reportedly for attempting to centralise power. Branches lend as they see fit but are required to scrutinise creditworthiness and shun dodgy borrowers. The target loan loss ratio is zero; low loan losses, in turn, allow the bank to offer competitively priced loans and personalised service to creditworthy customers.
Since it is better placed than lenders that rely on rule books or statistical models to assess the creditworthiness of entrepreneurs, Handelsbanken is also well positioned to satisfy the credit needs of small businesses. What is good for Handelsbanken is therefore good for long-term economic growth as well as for financial stability.
However, prudent case-by-case lending also undermines the stimulative effect of the loose money unleashed by central bankers. Experienced financiers with their fingers on the local pulse will not lend more to less worthy borrowers simply because of low or negative interest rate policies. If anything, easy money — for all the grand theories of its macroeconomic benefits — worries them.