Competition in the Swedish Banking Sector 2026 (October)

Executive summary

Banking products differ from most others. Customer relationships are long-lasting, products are complex and often bought as a bundle, and the market is heavily regulated. Competition therefore works differently than in, say, retail goods, and assessing it requires metrics designed for this sector.

We assess competition along four dimensions: market structure, efficiency, prices and pass-through, and profitability. In our assessment, none of these four indicates weak competitive pressure in the Swedish banking sector, as outlined in the following:

1. Market structure: the Swedish banking market is dynamic and shows high consumer mobility compared to other banking markets

Market shares shift over time, and small banks are gaining ground on the larger ones. From 2015 to 2025, small banks accounted for 30 per cent of credit growth and increased their market share from 14 per cent to 20 per cent. The same is true in mortgages, where banks outside the seven largest took 20 per cent of new lending against an 11 per cent market share.

Concentration is lower than in comparable countries. In Sweden, the four largest banks have a combined market share of 64 per cent. In Denmark, Norway, Finland, France and the Netherlands, the market shares range from 75 to 89 per cent.

A growing non-bank sector adds further pressure. Non-MFI loan assets increased by 110 per cent from 2015 to 2026, lifting their share of total loan assets from 6.5 to 8.6 per cent.Sweden has the highest consumer mobility among the countries compared, measured as the share of customers who changed provider between 2017 and 2022. 

2. Efficiency: Swedish banks operate at low cost and with low credit losses

Swedish banks have lower operational costs than banks in several comparable European countries. Widespread digital banking keeps costs down.

Loss rates from 2015 to 2025 were close to zero, the lowest among benchmark countries. Efficient courts and quick foreclosure keep losses low when borrowers default.

3. Prices and pass-through: low costs reach customers

Swedish mortgage rates have historically been among the lowest in Europe, and are the lowest among the benchmark countries in 2025 and the first quarter of 2026.

Swedish banks pass on more of central bank rate changes to depositors than euro area banks: 60 per cent of the increases from 2022 to 2024, against 26 per cent in the euro area. High pass-through is consistent with price competition for deposits.

Mortgage margins are now thin. The margin has more than halved since 2018, from 1.3 to 0.6 per cent, and we expect it to rise again towards its 2007–2025 average of around 0.9 per cent. The fall came mainly in 2022 and 2023, when funding costs rose faster than lending rates, and it did not recover when rates fell again. We estimate that return on equity for mortgage lending is now around 3 per cent, well below what shareholders typically require. 

Looking ahead, Final Basel III will likely change competitive dynamics. We find that the output floor will increase capital requirements by 14 per cent on average, driven by an increase in capital cost for corporate lending. 

However, the average hides large differences. We find that some banks will not be bound by the floor and face no increase, while others will see a considerably larger one. Banks competing for the same corporate customers will therefore face different capital costs, which is likely to change what they charge and which customers they target. 

4. Profitability: profits give no sign of weak competition

Swedish banks earn a high return on equity in an international comparison – around 13 per cent between 2020 and 2025, the highest among the countries we compare. Two things explain it. The efficiency documented above feeds through to shareholders, and business cycle conditions have been more favourable in Sweden than elsewhere, with Germany, France and the Netherlands seeing considerably higher impairment levels over the period.

What matters for competition is not the level of return, but whether it exceeds what investors require for the risk they take. We find that Swedish banks’ risk-adjusted return is slightly below the average of the 30 largest listed Swedish companies, so banks earn no more above their required return than other large companies do.

Market valuations point the same way. Investors value each krona of bank equity at around 47 per cent of what they pay for the average large Swedish company, suggesting that they do not expect banks to earn unusually high profits