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Banking Regulations and Guidelines in Sweden

Sweden has implemented various banking regulations and guidelines to ensure the stability and security of its financial system. These guidelines cover several key areas, including capital adequacy requirements, buffer requirements, enforcement of capital adequacy guidelines, undercapitalisation, insolvency, changes in capital adequacy guidelines, and ownership restrictions.

Capital Adequacy Requirements

Banks in Sweden are required to maintain a minimum level of capital (8%) against their risk-weighted assets. This ensures that banks have sufficient funds to absorb potential losses and maintain stability during times of financial stress.

Buffer Requirements

In addition to the minimum capital requirement, Swedish banks are subject to several buffer requirements:

  • Institution-specific countercyclical capital buffer: This buffer is designed to help mitigate the risks associated with economic downturns.
  • Systemic risk buffer: This buffer aims to reduce the systemic risk posed by systemically important financial institutions.
  • Buffers for systemically important institutions: These buffers are intended to ensure that systemically important banks have sufficient capital to withstand potential losses.

Enforcement of Capital Adequacy Guidelines

The Swedish Financial Supervisory Authority (SFSA) is responsible for overseeing and enforcing compliance with these guidelines. The SFSA works closely with banks to ensure they meet the required capital adequacy standards and takes supervisory actions if necessary.

Undercapitalisation

If a bank becomes undercapitalised, it may face restrictions on distributions, and the SFSA could take supervisory actions or even trigger resolution procedures.

Insolvency

Systemically important banks would be subject to resolution procedures, while non-systemically important banks would be wound down by way of ordinary bankruptcy procedures.

Changes in Capital Adequacy Guidelines

The capital adequacy framework has been revised following the financial crisis. New directives (CRD V) are set to be implemented in Sweden by December 2020, and Regulation (EU) 2619/876 (CRR II) will largely be applicable from June 2021.

Ownership Restrictions

There are no restrictions on foreign ownership of banks, but any entity or individual holding a controlling interest needs to be approved by the SFSA.