Annual decisions taken on planning for crisis management of banks

19 December 2018

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 how banks and other institutions in Sweden are to be managed in a crisis. The Debt Office has also formally decided on the minimum requirement for own funds and eligible liabilities (MREL) that will apply in 2019.

The decisions are a result of the work the Debt Office conducts each year in analysing the institutions’ business activities, resulting in individual resolution plans for every institution. In addition, the Debt Office has formally decided on MREL. The requirements ensure that the institutions have sufficient capital and eligible liabilities to be restructured without relying on tax funds.

“In a serious crisis, so-called systemically important institutions are to be managed through resolution. This entails the state taking control of the institution in order to restructure it or wind it up in an orderly manner,” says 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.

The decisions do not apply to Danske Bank’s or Nordea’s Swedish subsidiaries, as they belong to groups outside of Sweden. The Debt Office follows each respective home country’s decision-making process for crisis planning and MREL. In 2019, the Debt Office will revert with information on MREL for these groups’ Swedish subsidiaries.

The Debt Office has based its decisions on MREL on the conclusions in the memorandum Application of the minimum requirement for own funds and eligible liabilities.

Institutions (with operations deemed critical to the financial system)

MREL at the group level (percentages of total liabilities and own funds)

Handelsbanken

6.2%

SEB

8.0%

Swedbank

6.8%

Landshypotek

10.1%

Länsförsäkringar

6.3%

SBAB

5.1%

Skandiabanken

6.5%

Sparbanken Skåne

9.4%

Swedish Export Credit Corporation

8.3%

See Questions and answers about the Debt Office’s decisions regarding MREL for information on how the requirements are calculated. The requirements are expressed as a percentage of the institution’s total liabilities and own funds.

Special requirements for subsidiaries of systemically important institutions

The Debt Office has also formally decided on MREL for Swedish subsidiaries. For subsidiaries within a group to be managed collectively in resolution, specific principles apply to how the requirement is to be met. The liabilities being used shall be subordinated and issued to the institution within the group that is to be put into resolution, usually the parent company. These characteristics of the liabilities are a prerequisite for the effective implementation of crisis management measures. The requirements apply from 1 April 2019.

Most institutions are deemed non-systemically important

For the 151 institutions deemed capable of being managed through bankruptcy or liquidation, the Debt Office has taken decisions regarding simplified resolution plans and about MREL that does not exceed the capital requirements. For the majority of these institutions, the Debt Office intends to review the plans every two years, provided there is no significant change in the institutions’ business activities.

Deposit guarantee always applies

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

More about resolution planning and MREL.

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