In October 2008 the Swedish FSA (SFSA) revoked Sweden's largest investment bank's licences to conduct various banking business. Following the SFSA's decision, the Swedish Government, through the Swedish National Debt Agency (SNDA), seized ownership of the bank. Ten minutes after the decision to revoke the licences, the SFSA changed its decision to include only a warning and hence returned the licences to the bank, which allowed it to continue its business. The bank was then owned by the SNDA whereas its former owners the shareholders of the publicly traded parent company to the bank were left empty-handed.
The take over, particularly the manner in which it was made, has been heavily debated. Several legal experts have criticised how the SNDA and the SFSA handled the matter. Already in September 2007 the SFSA issued a warning to the bank, combined with a substantial penalty, due to, among other things, insufficient internal control. In mid-2008 the SFSA, again, found reasons to criticise the bank.
The bank, which was considered vital for Swedish financial stability, was granted a support loan from the Swedish Central Bank in late 2008 as it had difficulties funding itself. The shares in the bank were then pledged to the Central Bank as security for that loan.
The SFSA's decision to revoke the bank's licences was to be made public at 3.00 pm on October 10 2008. At 10.00 am the same day, the SNDA was informed by the SFSA that there was a "great likelihood" that the SFSA would revoke the bank's licences, with a mandatory winding up as consequence. The SNDA arranged for the bank's loan and security, by then pledged to the Central Bank, to be transferred to the SNDA which may, contrary to the Central Bank, lend money to banks facing insolvency issues. The transfer was, however, only to be effected if the SFSA would in-fact revoke the licences.
At 2.30 pm the SFSA informed some parties, including the bank and the SNDA, that it had decided to revoke the licences and that the decision was to become effective at 3.00. The transfer of the loan and securities from the Central Bank to the SNDA was executed at 2.31. At 3.01, the SNDA applied the pledge agreement and took over the shares in the bank. The SFSA re-evaluated its decision at 3.10 and changed it to be only a warning; the licences were returned to the bank. Consequently, the bank could continue its business under the SNDA's ownership. The former owners were left with nothing, 10 minutes later.
It is not the fact that the SNDA enforced the pledge and exercised its rights that has been subject to criticism it is the manner in which it was done. The SNDA could have applied provisions in a newly adopted act that allows the SDNA to take over shares in credit institutions by a mandatory redemption process. But instead the SNDA chose to enforce its share pledge and assume legal title to the shares. Various legal experts have argued that the SNDA's manner in this respect conflicts with the prohibition on automatic transfer of ownership, which is explicitly set out in the Swedish Contract Act. The SNDA claims that it acted in compliance with the law and that the take-over was legitimate. The aftermath of the matter is uncertain, but it should be pointed out that it is vital for the credibility of a government that it acts in accordance with the laws it has, after all, participated in enacting.
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