UPDATE 2-Sweden cbank takes ECB loan; banks pass stress test

* Swedish cbank to take 3 bln euro loan from ECB

* Swedish watchdog: banks can handle worst-case scenario

* Says banks can absorb 150 bln SEK of losses in Baltics

* Sees no need for capital strengthening by top banks

STOCKHOLM, June 10 - Sweden's central bank said on Wednesday it was taking out a hefty loan from the ECB to safeguard financial stability, although the country's financial watchdog said Swedish banks could cope with "extreme" pressures.

The Riksbank said it would borrow 3 billion euros ($4.23 billion) from the European Central Bank, drawing on an existing 10 billion euro swap agreement, to tide it over while it built up its foreign currency reserves.

"As I see it, this is a further step by the Riksbank in order to be as prepared as possible if the situation worsens rapidly in the Baltics," SEB analyst Elisabet Kopelman said.

Sweden's financial watchdog said separately the country's main banks would all be able to manage the "extreme" pressures created by a severe recession at home and abroad.

Swedish banking stocks, which had been under pressure from worries regarding their exposure in the Baltic region, shot up on the news. Swedbank climbed 9.2 percent while SEB gained 5.2 percent.

Swedish banks stayed clear of the risky assets that laid waste to many of their peers on both sides of the Atlantic, but worries have grown regarding billions of euros of loans in the Baltic countries, which are in the clutches of a deep recession.

The Swedish Financial Supervisory Authority said its stress tests of the four top banks -- Nordea, Handelsbanken, SEB and Swedbank -- showed they could absorb losses of more than 150 billion Swedish crowns ($19.7 billion) in the Baltics over three years.

WORST-CASE SCENARIO

This was the worst-case scenario in the stress tests.

"There is currently no need for any of the big banks to strengthen their capital adequacy based on the regulatory requirements," it said in a statement.

"However, in extreme scenarios the market will most likely require a higher level of capital, which can place pressure on financing possibilities for banks that are most affected."

The watchdog tested three scenarios for 2009-2011, ranging from credit losses of about 200 billion crowns to 350 billion.

Worries that Latvia might abandon its peg to the euro, effectively devaluing the currency, have weighed on Swedish banking stocks as well as the crown.

Any currency devaluation is seen hitting the banks since much of the loans are in euros, leaving borrowers with incomes in the Baltic currencies with a mounting debt burden to service.

"Given Swedish banks' exposure to Latvia, I see it (the ECB loan) as more preparation for safeguarding the stability of the financial system. They are doing what they can to be well prepared in case they get any problems," said Gizem Kara, Scandinavian economist at BNP Paribas in London.

"The bottom line is that the Riksbank is quite concerned and wants to boost its reserves in case there is a problem."

The ECB has reciprocal swap lines with central banks including the Swiss National Bank and the U.S. Federal Reserve, which are used to provide liquidity to banks.