Annual decisions taken on planning for crisis management of Swedish banks

Press release 18 joulukuuta 2019

Nine Swedish institutions currently conduct operations that are critical to the financial system. This has been established by the Swedish National Debt Office in its annual decisions on plans for managing Swedish banks and other institutions in crisis.

Every year, the Debt Office analyses the institutions’ functions and their importance to the financial system. This results in what are called resolution plans that show how each institution will be managed if a crisis occurs.

In the event of a crisis, the institutions that are deemed systemically important will be put in resolution. This entails, among other things, that the institution is kept open and that its shareholders and creditors bear the costs of crisis management. Institutions that are not deemed systemically important will be allowed to enter bankruptcy or liquidation.

The Debt Office has also taken decisions on the minimum requirement for own funds and eligible liabilities (MREL) that will apply in 2020 for the relevant institutions. The requirements are intended to ensure that the institutions have sufficient own funds and eligible liabilities to enable them to be restructured without relying on taxpayers’ money.

Resolution entails that the Debt Office assumes control of a crisis-affected bank in order to carry out crisis management measures. Banks and institutions complying with the Debt Office’s requirements beforehand increases the incentives to be prudent and prepared for facing a crisis without having to pass on the costs to taxpayers. Good preparedness also contributes to reducing the cost if a crisis were still to occur, says Debt Office Director General Hans Lindblad.

Nine systemically important institutions in Sweden

The nine institutions currently deemed systemically important are Handelsbanken, SEB, Swedbank, Landshypotek, Länsförsäkringar, SBAB, Skandiabanken, Sparbanken Skåne and the Swedish Export Credit Corporation.

See the memorandum Application of the minimum requirement for own funds and eligible liabilities and the Debt Office’s Questions and answers regarding MREL for information about how the requirements are calculated.

Separate requirements for subsidiaries of systemically important institutions

MREL decisions are also made for the institutions that are subsidiaries of Swedish systemically important institutions. The purpose of setting requirements for the subsidiaries of a group is to promote effective management of a crisis that is not limited to the parent company. This year, such decisions were taken for the Swedish systemically important institutions’ foreign subsidiaries. These decisions are formally communicated to the respective institutions by the resolution authorities responsible in the countries where the Swedish institutions have subsidiaries with significant operations. The requirements will be phased in during 2020.

The Debt Office has also made MREL decisions for the Swedish systemically important institutions’ domestic subsidiaries. MREL decisions for Swedish subsidiaries were taken for the first time in December 2018. In addition, the Debt Office has made MREL decisions for the Swedish subsidiaries of Nordea and Danske Bank.

For all MREL requirements for Swedish systemically important institutions, see the table.

Most institutions are deemed non-systemically important

The Debt Office designates the majority of the institutions subject to its resolution planning as non-systemically important. In the event of a crisis, these institutions can be placed in bankruptcy as they do not have functions critical to the financial system and because there is a low risk that their problems will have repercussions in other parts of the system. Decisions on resolution plans for non-systemically important institutions are made every other year. New decisions for this category of institution will be taken in 2020.

Deposit insurance always applies

Irrespective of how an institution is managed in a crisis, deposit insurance always applies. This means that depositors’ money is protected up to SEK 950,000 per depositor and institution.

More about resolution planning and MREL.

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