1. BANK SUPERVISION
The Swedish Financial Supervisory Authority
(Finansinspektionen, SFSA) is in charge of supervising
credit institutions in the context of Basel III/CRD IV. Sweden
is not a member of the European monetary union or the Single
Supervisory Mechanism (SSM) and consequently the ECB does not
have direct supervision over Swedish significant credit
institutions. As of November 20 2014 Sweden has not opted to
become a SSM member.
If the proposed Swedish BRRD implementation comes into force
as currently drafted, the Swedish National Debt Office
(Riksgäldskontoret) will become the competent
national resolution authority and be responsible for resolution
2. BANK RECOVERY/BAIL-IN
The BRRD has not yet been transposed into Swedish law. The
final report of the Financial Crisis Committee (a government
appointed commission of inquiry), published in June 2014,
includes draft BRRD implementing regulation, but so far no
subsequent legislative proposal has been presented. The
official position of the Ministry of Finance is that the BRRD
shall be fully implemented and that implementing legislation
will come into force on January 1 2015. However, as no bill has
been presented to date or any indication given of when this
might happen our assessment is that the implementing
legislation will not come into force as expected and that the
implementation most likely will be delayed.
Under the BRRD, the Swedish government shall designate one
or more authorities responsible for resolution, and empower
such authorities to apply the resolution tools and exercise the
resolution powers under the BRRD. According to the current
draft implementing regulation, the Swedish government will
designate the Swedish National Debt Office as the Swedish
resolution authority, but delegation of some resolution powers
to the SFSA is also proposed (the latter primarily with regard
to crisis prevention). As Sweden is not a member of the SSM,
the responsibility for resolution under Swedish law will not
subsequently be taken over by the European resolution
Prior to implementation of the BRRD Swedish law does not
provide for a unilateral bail-in tool. Following transposition
of the BRRD into Swedish law, institutions will need to meet
minimum requirements for own funds and eligible liabilities to
ensure feasibility of a bail-in.
Swedish authorities have not issued guidance on the
valuation of banks and their assets at PONV.
The SFSA is the supervisory authority with regard to the rules
on the various capital buffers.
Capital conservation buffer
The capital conservation buffer has been implemented in
accordance with the CRD IV framework. The buffer is set at
There is no phase-in with regard to the capital conservation
buffer and the obligation to hold a capital conservation buffer
has been in force since August 2 2014.
The countercyclical buffer has been implemented in
accordance with the CRD IV framework. The buffer is currently
set at 1% and shall be applied by the institutions as from
September 13 2015. The SFSA publishes the countercyclical
buffer rate used to calculate the countercyclical buffer on a
Small and mid-cap investment firms, fund companies and AIF
managers (with up to 250 employees and a balance sheet total
not exceeding €43 million) are exempt from the
countercyclical buffer requirement.
The G-SII buffer has been implemented in accordance with the
CRD IV framework. The buffer will be phased-in from 2016 to
2019 and will be set between 1% and 3.5% on an individual
In 2016, G-SIIs only need to fulfil 25% of their individual
G-SII buffer requirement. This increases to 50% in 2017, 75% in
2018 and 100% from 2019.
The SFSA has not yet published which banks have been
identified as G-SIIs.
The O-SII buffer has been implemented in accordance with the
CRD IV framework. The buffer is capped at 2% and will be set on
an individual, consolidated or sub-consolidated basis. The
O-SII buffer applies from January 1 2016.
The SFSA has not yet published which banks have been
identified as O-SIIs.
Systemic risk buffer
The systemic risk buffer has been implemented in accordance
with the CRD IV framework. The buffer of at least 1% is
applicable today already. The buffer is not capped, although
the EU needs to get involved in the decision-making process if
the SFSA intends to raise the buffer above 3%.
In line with the so-called November Accord (an agreement
dated November 2011 between the Ministry of Finance, the
Swedish Central Bank (Riksbank) and the SFSA regarding
higher capital requirements for systemically important banks)
the four major Swedish banks Nordea, Svenska Handelsbanken,
Skandinaviska Enskilda Banken, and Swedbank are required to
hold a systemic risk buffer of 3% CET1 from January 1 2015.
4. CALL OPTIONS
Sweden has not issued any additional national rules with regard
to regulatory or tax calls in addition to article 78 of the
5. COUPON PAYMENT
The rules on maximum distributable amount (MDA) calculation in
case of buffer breaches follow CRD IV and are implemented in
the Capital Buffers Act (2014:966) and Regulations FFFS 2014:12
on supervision requirements and capital buffers issued by the
In case of a breach of MDAs the SFSA can use its
intervention powers set forth in each legal framework governing
the credit institutions' business, such as the Banking and
Financing Business Act (2004:297). The interventions available
to the SFSA include to issue an order to limit or preclude the
full payment of dividends or interest, issue an injunction
against executing resolutions, or issue an adverse remark.
Where the infringement is serious, the credit institution's
licence can be revoked or, where sufficient, a warning can be
The SFSA also has intervention powers when it is likely
that, within 12 months, a credit institution will no longer be
able to fulfil its obligations under the relevant act or other
statutory instruments which govern the institution's
6. CREDIT DEFAULT SWAP CONTRACTS
Sweden has not issued any additional rules with regard to the
use of credit default swaps or other tools to mitigate credit
risk in addition to CRR.
7. DISCLOSURE & REPORTING
CRR disclosure and reporting rules apply. Banks are required to
quarterly disclose information on their capital ratio and
capital buffers, until December 31 2017 in accordance with
column (A), rows 61-68 of annex VI of Commission Implementing
Regulation (EU) No 1423/2013. As of January 1 2018, disclosure
follows annex IV of Commission Implementing Regulation (EU) No
1423/2013. The information must be published on the credit
8. LEVERAGE RATIO AND LIQUIDITY COVERAGE RATIO
There are no leverage ratio requirements under Swedish law.
There are no announced plans to implement leverage ratio rules
earlier than what follows from Basel III/CRD IV. However, the
Swedish Central Bank stated in its most recent Financial
Stability Report that Sweden should consider imposing a
leverage ratio requirement on the four major Swedish banks of
4% from 2016 and 5% from 2018 at group level.
The SFSA allows for credit institutions to apply for
authorisation to calculate end-of-quarter leverage ratios
during the period from January 1 2014 to December 31 2017.
With regard to the liquidity coverage ratio, credit
institution's weighted liquid assets must never fall below the
institution's weighted net cash outflow in the next 30 calendar
days. This rule already existed prior to CRD IV implementation,
see Finansinspektionens Regulations FFFS 2012:6 regarding
requirements for a liquidity coverage ratio and reporting of
liquid assets and cash flows.
The SFSA is currently evaluating the national liquidity
coverage requirements as a result of the liquidity coverage
ratio regulations in the CRR/CRD IV. The SFSA has however
stated that no national regulations will be implemented prior
to the forthcoming final definition of the liquidity coverage
as implemented in the Commission Delegated Regulation as
published in the EU Official Journal.
9. LOSS ABSORPTION FEATURES
Loss absorbency features of AT1 and tier 2 follow the CRR. Only
AT1 provides for going-concern loss absorption while tier 2
provides for gone-concern loss absorption.
According to the BRRD draft implementing regulation,
shareholders and other instruments of ownership (including
preference shares, which is a national deviation from the BRRD)
shall bear the first losses and will be the first stakeholders
to contribute to the resolution by means of a mandatory
write-down/cancellation/conversion of their instruments, taking
account of the ranking of these instruments in an insolvency
proceeding. Creditors will bear losses after the
The 'no creditor worse-off than under normal insolvency
proceedings' principle will apply.
10. MINIMUM CAPITAL
Sweden complies with CRR requirements. With regard to the
period January 1 2014 to December 31 2014, Sweden has issued
supplemental rules in accordance with Article 465(2) CRR.
According to chapter 3, section 2 of Regulations FFFS 2014:12
the levels of CET1 and tier 1 capital ratios are at the highest
level within the explicit ranges set out in Article 465(1) CRR
and as follows:
Min CET1 ratio: 4.5%
Min tier 1 ratio: 6%
Sweden has chosen not to adopt any phase-in regulations
regarding own funds requirements. The set percentages will
continue to apply as from January 1 2015 and onwards.
11. PILLAR 2
Sweden had pillar 2 requirements regulations already prior to
CRD IV implementation and based on article 136.2 of Directive
2006/48/EC. The main rules on pillar 2 are set out in chapter 2
of the Credit Institutions and Investment Firms (Special
Supervision) Act. As of November 20 2014, the SFSA has imposed
a 2% CET1 capital requirement within the pillar 2 framework on
the four major Swedish banks.
The SFSA has issued guidance on certain areas pertaining to
pillar 2 requirements, such as types of capital. As a rule,
banks must fulfil pillar 2 basic requirements using the same
quality of capital used to meet pillar 1 capital requirements,
including static buffer requirements (capital conservation
buffer, systemic risk buffer and buffers for other and global
systemically important institutions). Divergences from the main
rule can be made for specific risk types. Where this is the
case the SFSA will state it when publishing the method for
assessing those types of risk.
Pillar 2 requirements are subject to the disclosure rules on
publishing quarterly reports on own funds and the institution's
internal capital adequacy assessment.
12. QUALIFYING CAPITAL
The SFSA is authorised to issue additional local rules
supplementing the CRR in relation to, for instance, the
calculation of own funds and own funds requirements. The SFSA
has no authority to issue local rules on what instruments
qualify as CET1, AT1 or tier 2. In this respect, standard CRR
rules apply. According to EBA's list of capital instruments
qualifying as CET1 instruments, any financial instrument
representing the share capital of a Swedish limited liability
company (i.e. shares) qualify as CET1 in Sweden, as well as
member certificates issued by so called membership banks.
Deferred tax assets
In chapter 3, sections 5-6 of Regulations FFFS 2014:12 the
SFSA has issued supplemental rules in accordance with article
478(3) CRR. The supplemental rules set out that no phase-out
will apply in relation to deferred tax assets (DTAs) in the
context of calculating CET1. This means that with regard to
article 478(1) and (2) CRR institutions have to apply a
percentage of 100% from August 2 2014 up to and including
December 31 2017.
In chapter 3, section 3 of Regulations FFFS 2014:12 the SFSA
has issued supplemental rules in line with article 467(3) CRR.
The supplemental rules set out that an institution shall apply
a percentage of 100% from August 2 2014 up to and including
December 31 2017.
Chapter 3, section 11 of Regulations FFFS 2014:12 deals with
supplemental rules as required under article 486(6) CRR on
grandfathering and phase-in provisions in relation to CRR rules
on own funds requirements. The following percentages have been
- 80% up to and including December 31 2014;
- 70% during the period from January 1 2015 to December 31
- 60% during the period from January 1 2016 to December 31
- 40% during the period from January 1 2017 to December 31
- 20% during the period from January 1 2018 to December 31
13. REGULATORY INTERVENTION
Regulatory intervention powers introduced in November 2008
under the Government Support to Credit Institutions Act
(2008:814) (lag (2008:814) om statligt stöd till
kreditinstitut) are untested. The intervention tools under
this act are fairly limited and consist solely of a right, in
certain cases, for the Swedish government for compulsory
redemption of shares in the credit institution.
In October 2008 the National Debt Office took over ownership
of Carnegie Investment Bank, which had lost its banking license
and also had serious financial problems. The bank was
subsequently sold to a large Swedish private equity house.
14. STRESS TESTS
The four major Swedish banks participated in the 2014 EBA
stress test, which they all passed. The SFSA worked with the
EBA/ECB on the stress test.
The SFSA also executes annual national stress tests of the
four major Swedish banks within the framework of its
supervisory measures. The result of these stress tests are
normally published in a memo and, in parts, in SFSA's annual
The SFSA has not yet taken a position on the implementation of
the buffer for global systemically important institutions.
However, the SFSA will decide which firms will be required to
hold a capital buffer for global systemically important
institutions (G-SIIs) or other systemically important
institutions (O-SIIs) respectively before the provisions on
such buffers come into effect on January 1 2016.
The SFSA has identified the four major Swedish banks Nordea,
Svenska Handelsbanken, Skandinaviska Enskilda Banken, and
Swedbank as sifis.
No other additional rules in relation to sifis has been
Phone: +46 8 522 065 32
Magnus Lindstedt has extensive experience advising on
matters related to financial market regulations and
equity capital markets. Many of his clients are leading
Swedish and international financial institutions that are
subject to the BRRD, CRR and CRD IV and under the
supervision of the Swedish Financial Supervisory
Authority. He also has extensive experience in advising
Swedish and international clients on takeover offers and
other M&A transactions, IPOs, mergers between listed
companies, and other public transactions. Magnus
Lindstedt joined Cederquist in 1998.
Phone: +46 8 522 065 57
Annika is a senior specialist in
Cederquist’s Financial Market Regulation
group advising leading Swedish and international
financial institutions in any matter related to financial
market regulations such as licence requirements and
compliance with and adaptation of new rules and
regulations, such as BRRD, CRR and CRD IV. Annika Walin
joined Cederquist in 2009 after having worked at large
Swedish banking and asset management institutions.
Phone: +46 8 522 065 18
Michela Hallberg Westin is an associate in Cederquist's
Transactions group. Her areas of practice include
financial market regulations. Michela Hallberg Westin
joined Cederquist in 2014.
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