Compliance Function May Merge with Outsourcing Arrangements in Swedish Banking

Stockholm, Sweden

The Swedish Financial Supervisory Authority (SFSA) has announced plans to merge the compliance function with outsourcing arrangements in the country’s banking sector. This move aims to enhance transparency and accountability in the industry.

New Guidelines for Banks

Under the new guidelines, banks will be required to have internal rules for managing their outsourcing agreements, which relate to work or functions of material significance to operations. The companies will also need to exercise due skill, care, and diligence when entering into, managing, and terminating these agreements.

Specific Requirements for Senior Management Appointments

The SFSA has set out specific requirements for senior management appointments:

• Anyone appointed to a board position or as a managing director must possess sufficient insight and experience to participate in the management of a bank.
• The board of directors as a whole must also have sufficient expertise and experience to run the company.

Registration and Assessment

Banks will be required to register their senior management appointments with the SFSA. The regulator will assess the suitability of these individuals based on information provided by:

• Swedish Police
• Swedish Companies Registration Office
• Swedish Tax Agency
• Other relevant sources

Accountability Measures

The guidelines outline accountability measures for bank directors and senior managers, including:

• Intervention against individual members of the board or management team if a bank violates certain obligations.
• Requirement to compensate damages caused to the company, shareholders, or other parties due to infringements of banking regulations.

Remuneration Policies

The guidelines regulate remuneration policies for banks in Sweden, requiring:

• The board of directors to establish a documented remuneration policy that promotes sound and effective risk management.
• Variable remuneration to be balanced and aligned with the company’s overall performance.

Control Functions

Specific requirements have been set out for senior management and employees responsible for control functions, such as:

• Risk takers: variable remuneration will be based on both individual performance and company performance, and may not exceed fixed compensation.
• Employees whose total remuneration exceeds a certain threshold: variable remuneration will also be based on both individual performance and company performance.

Deferring Variable Remuneration

The regulator has set out guidelines for deferring variable remuneration, requiring:

• At least 40% of such remuneration to be deferred for specially regulated staff.
• At least 60% for senior management and other employees with high amounts of variable remuneration.

Conclusion

The new guidelines aim to enhance transparency, accountability, and risk management in the Swedish banking sector.