SFSA’s Business Operations Under Scrutiny: One Year On

The Swedish Financial Supervisory Authority (SFSA) has undergone a significant overhaul in its approach to business operations within the banking sector. Since granting licenses to a handful of applicants in recent years, the authority has been scrutinizing applications with unprecedented rigor.

Increased Focus on Credible and Viable Strategy and Business Model

The SFSA’s increased focus on assessing whether an applicant’s business model can generate long-term returns has led to a significant drop in approval rates. Many applicants have either been rejected or withdrawn their applications following indications that they would not be approved. The lengthy and costly process, which often requires the involvement of external consultants, has become a major hurdle for those seeking to enter the market.

New Developments

• In recent years, the SFSA has placed greater emphasis on assessing whether an applicant’s business model can generate long-term returns.
• This shift in approach has led to a more stringent evaluation process, which takes into account not only formal compliance with regulations but also the viability of the applicant’s strategy and business plan.

The authority’s case handlers will continue to maintain regular informal contact with applicants to ensure that all necessary information is provided and to keep them informed about the status of their application. However, the lengthy and costly process has made it increasingly challenging for new entrants to break into the market.

Control Requirements

• Under the SFSA’s guidelines, any individual or entity acquiring a qualifying holding in a bank must undergo prior approval and ownership assessment.
• A qualifying holding is defined as a direct or indirect holding of at least 10% of the capital or voting rights, or which enables significant influence over the bank.

The authority will also assess whether an acquirer is suitable to own a qualifying holding, taking into account factors such as: + Reputation + Financial strength + Management competence

Additionally, the SFSA will consider whether the acquisition could impede the sound and prudent management of the bank and its ability to comply with applicable legal requirements.

Regulatory Filings

• Applications for approval are made using standard forms provided by the SFSA.
• The magnitude of information required varies depending on the size of the holding acquired, but typically includes:
  • Details about the acquirer’s organizational structure
  • Financial situation and management
  • Business and financing plans

The authority has a handling time of up to 60 working days from the date a formally complete application is filed. During this period, the SFSA may request additional information, which can suspend the assessment process.

Conclusion

In conclusion, the SFSA’s increased scrutiny of business operations within the banking sector has led to a more challenging environment for new entrants. As the authority continues to prioritize the sound and prudent management of banks, applicants must be prepared to demonstrate a credible and viable strategy and business model in order to succeed.