State to require payment for guarantees - Billions can be required from insured borrowers
Press release 4 February 2000
The Swedish National Debt Office (SNDO) today delivered a new report on state guarantees as of 31 December 1999 to the Finance Ministry.
Large credit risks will now be subject to a new fee-based system for state guarantees. This applies to the older state guarantees administered by the SNDO. The expected cost for this is equivalent to SEK 11 billion SEK in present value.
Since 1998, there are new guideliness for the state guarantee system. They require that credit risk should be assigned a value and the premium against the risk should be placed in an interest-bearing account as a reserve against future losses. Subsidised fees should be covered by appropriations in the state budget. Older guarantees must also be included into the new system, no later than 31 December 2001.
According to the report, there is an estimated cost for older guarantees in the order of 1 billion SEK annually during a 15 year period. Including the old guarantees in the new system makes the costs explicit. These costs will either be paid by the borrowers or financed with taxes via the state budget. The calculation is preliminary, but the report indicates the scope of the amount.
The state's total commitment , via the SNDO's guarantees, was slightly more than SEK 200 billion at the end of 1999.
For further information, please contact:
Thomas Franzen +46 8 613 45 00
Patrick Nimander +46 8 613 46 28