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Swedish Banking Sector: Regulations and Requirements

In Sweden, credit institutions are regulated by the Financial Supervisory Authority (SFSA) and are required to obtain a banking licence before commencing operations. There are two main regulated activities: “banking business” (bankrörelse) and “financing business” (finansieringsrörelse).

Banking Business

Under this activity, institutions process payments through general payment systems, receive money from the public on their own account, and grant credits for their own account. These undertakings must be licensed to conduct banking business and are subject to strict regulatory requirements.

Financing Business

Institutions that participate in financing business take up deposits and other repayable funds from the public and grant credits for their own account. They are referred to as credit institutions and are also required to obtain a licence before commencing operations.

Licensing Requirements

To obtain a banking licence, an institution must meet certain requirements, including:

• Having a sound and prudent management structure
• Maintaining adequate capital and liquidity buffers
• Implementing effective risk management systems
• Complying with anti-money laundering and terrorist financing regulations

The SFSA assesses applications on a case-by-case basis, taking into account the institution’s business plan, financial situation, and governance structure. The licensing process can be lengthy and costly, requiring external consultants and regulatory experts.

Control Over Banks

In Sweden, any individual or entity acquiring a qualifying holding in a bank must obtain prior approval from the SFSA. A qualifying holding is defined as a direct or indirect holding of at least 10% of the capital or voting rights, or which otherwise makes it possible to exercise significant influence over the bank.

The SFSA assesses applications for controlling holdings based on various factors, including:

• The reputation and financial strength of the acquirer
• The reputation, competence, and experience of the management of the acquirer
• The bank’s ability to comply with prudential requirements after the acquisition

The regulatory filing process involves providing detailed information about the organisational structure of the acquirer, its financial situation, and its management, as well as business and financing plans. The SFSA has a handling time of up to 60 working days for these applications.

Conclusion

In Sweden, the banking sector is subject to strict regulatory requirements, including licensing and control over banks. Institutions must meet specific criteria to obtain a licence, and any changes in ownership or control require prior approval from the SFSA. The regulatory framework aims to ensure the stability and integrity of the financial system, while also promoting competition and innovation in the industry.