“Consumer credit was largely handled by finance companies which were not as tightly regulated”, debt collector Perth says. Finance companies had grown strong during 1970s by providing credits to customers; before that banks were incapable of giving due to regulation. This was mainly by leasing and factoring. “In the late 1970 – and the beginning of the 1980s the emergence of this gray area of unregulated credit was so strong that it threatened the banks dominating position of what was lending to private customers”, debt collector Sydney said. With the legislation of 1980 the State tried to limit the market for finance companies, but it did add when lending to the public grew sharply by mid-1980 century. The regulatory system emerged in the 1980s as obsolete and non-functional in relation to its purpose, partly because not all credit institutions were regulated in a similar way. To include stimulating both equity and bank market were considered necessary to give banks more freedom, thereby increasing competition in the financial sector.

In May 1, 1985 they abolished interest controls and in December the same year the ceiling was away as the first step towards a renewal of the credit market. This meant that banks were free to choose both the volume and rate for their lending. The effects of changing the legislation was not long up and bank credit grew rapidly. Why credit grew so strong can be explained using several factors. One of the most important reasons were the decades of pent-up demand for credit that has got to make themselves known at the same time that the Swedish economy was entering a boom period. This upward pointing trend in economic activity was initiated by two devaluations 1981 and 1982. Sweden’s economic rise was also helped by a general upsurge in international activity. A large part of the explanation for banks’ credit expansion during the 1980s can be found in the real and financial economy. Sweden, through the two devaluations in the early 1980’s created a favorable cost position for the export industry. The devaluation creates inflationary impulses according to standard macro theory. Then there was already a significant inflation at that time, contributed devaluations to reinforce the price increase tendencies that already existed in society. In Sweden, between 1985 and 1990, the inflation per year than other OECD countries an average of two and a half percent higher.