1.1 Key Laws and Regulations

Key Laws and Regulations

As Sweden is an EU Member State, Swedish banks are subject to laws and regulations on an EU level and a national level. Consequently, Swedish banks are subject to national laws implementing the Capital Requirements Directive (2013/36/EU) (the CRD) and directly subject to the Capital Requirements Regulation (EU No 575/2013/EU) (the CRR), which are the two key European legislative acts that govern the Swedish banking sector.

On a national level, Sweden has implemented the CRD through the Banking and Financing Business Act (2004:297) (the BFA). The CRR is directly applicable in Sweden but has been complemented with certain Swedish rules, including the Credit Institutions' and Investment Firms' (Special Supervision) Act (2014:968) (the Special Supervision Act) and the Capital Buffers Act (2014:966) (the CBA). The relevant acts set out general prudential and organisational requirements with which Swedish credit institutions (including banks) must comply. For banks that are limited liability companies, the general Swedish Companies Act (2005:551) (the Companies Act) is also an important piece of legislation that has an implication on the corporate governance of Swedish banks.

Banks that provide investment services are subject to the Securities Market Act (2007:528) (the SMA), implementing MiFID 2 (2014/65/EU). Other key legislation containing requirements in relation to specific financial services includes the Payment Services Act (2010:751) implementing PSD2 (EU) 2015/2366, and the Consumer Credit Act (2010:1846), regulating consumers' rights in relation to credits offered to consumers.

Swedish banks are subject to the Anti-Money Laundering and Terrorist Financing Act (2017:630) (the AMLA), implementing the AML Directive (EU) 2015/849, which stipulates requirements in relation to the prevention of money laundering and terrorist financing.

In relation to depositor protection and the crisis management of banks, the Deposit Guarantee Act (1995:1571) (the DGA) (providing for the Swedish deposit guarantee scheme) and the Resolution Act (2015:1016) implementing the Banking Recovery and Resolution Directive 2014/59/EU are key pieces of legislation.

Swedish laws are supplemented by regulations (mandatory rules) and guidelines (comply or explain principle) issued by the Swedish regulator and financial supervisory authority, the Swedish Financial Supervisory Authority (Finansinspektionen) (the SFSA). Furthermore, the guidelines of the European Banking Authority (EBA) generally apply to Swedish banks, either directly through confirmation by the SFSA or as further implemented by SFSA regulations or guidelines. Upon confirmation by the SFSA, EBA guidelines have the same legal status as the SFSA guidelines.

Regulatory Authorities

The SFSA is the primary regulator in the financial sector and is responsible for the authorisation and supervision of Swedish banks. The SFSA's objective is to ensure stable financial systems, by promoting confidence, well-functioning markets and a high level of consumer protection.

The Swedish National Debt Office (Riksgälden) is responsible for the resolution of banks and the national deposit guarantee scheme. The central bank of Sweden (Riksbanken) acts as a lender of last resort but does not have any supervisory function in relation to banks.

Other relevant regulatory authorities include the Data Protection Authority (Datainspektionen), which supervises compliance with the General Data Protection Regulation (EU) 2016/679 (GDPR), and the Consumer Agency (Konsumentverket), which has certain supervisory powers regarding the marketing of and disclosure requirements in relation to consumer credits.

Although a member of the EU, Sweden does not participate in the European banking union and the institutional frameworks referred to as the "Single Supervisory Mechanism" and the "Single Resolution Mechanism" (the SRM). Therefore, the European Central Bank (the ECB) does not have any direct authority in relation to the licensing and supervision of Swedish banks.


2.1 Licences and Application Process

Types of Licences and Activities Covered

The BFA regulates Swedish licence requirements that apply to activities carried out by credit institutions. There are two regulated activities in this regard.

The first activity is "banking business" (bankrörelse), which captures undertakings that participate in the processing of payments through general payment systems and receive money from the public on their own account, which after termination is available to the creditor within a maximum of 30 days. The second activity is "financing business" (finansieringsrörelse), which refers to undertakings that take up deposits and other repayable funds from the public and grant credits for their own account. Companies that are licensed to carry out financing business are referred to in the BFA as credit market institutions.

Conceptually, Swedish banks and credit market institutions are both "credit institutions" within the meaning of the CRD. Accordingly, Swedish banks as well as credit market institutions may provide all sorts of financial services listed in Annex 1 of the CRD. However, institutions that carry out financing business are traditionally less complex than banks, but are in essence subject to the same regulatory requirements as banks. For the purposes of the descriptions below and unless specifically set out below, we will use the word "bank" when describing regulatory requirements applicable to credit institutions in Sweden.

Other Financial Services

Business that includes only limited financial services, such as residential credits, consumer credits and payment services, but not deposit-taking, is also regulated and subject to licence requirements under separate legal frameworks.

Foreign Banks

Banks authorised in other European Economic Area (the EEA) Member States (including the EU) may provide banking services in Sweden without obtaining a separate licence from the SFSA. These banks may start to operate in Sweden on a cross-border basis or by establishing a branch office by notifying their home state authority, which will in turn notify the SFSA. Third country banks will need to apply for authorisation in Sweden through establishment in Sweden, and may not provide cross-border services into Sweden.

Conditions for Authorisation

In order to obtain a banking licence, an applicant must file a comprehensive application to evidence that they will meet the conditions for authorisation, including that:

  • the articles of association comply with the BFA and other relevant legislation;
  • there is reason to assume that the business will be conducted in accordance with the BFA and other applicable legislation;
  • owners of qualifying holdings are deemed suitable to exercise significant influence over the undertaking; and
  • members of the board of directors (the board) and senior executives possess the insight, competence and experience necessary to manage a bank.

Furthermore, a bank must have a starting capital corresponding to at least EUR5 million at the time of commencing business once the application has been approved.

The Application Process

Applications are submitted to the SFSA, which will decide whether the conditions for authorisation are fulfilled. Applicants pay a fee to the SFSA in conjunction with the application, currently SEK420,000.

The application must include information on how the undertaking will fulfil and comply with legal, organisational and prudential requirements. This includes comprehensive and detailed descriptions of the undertaking's internal rules, procedures and methods with respect to internal governance and risk management.

Documents that must be provided in the application include a detailed business plan, annual reports, capital and liquidity assessments and a wide range of required internal policies, as further described under 4.1 Corporate Governance Requirements. The applicant must also submit information about the owners, management and senior executives for the purpose of the SFSA's assessment with respect to the criteria described under 3.1 Requirements for Acquiring or Increasing Control over a Bank and 4.2 Registration and Oversight of Senior Management.

The SFSA's Assessment

As a formal rule, the SFSA should make its decision to grant or refuse a licence within six months of receiving a formally complete application. As the SFSA usually requests complementary information during the evaluation period, a timeline of 12-18 months from the date an application is filed can be expected. The undertaking must then commence its business operations within a year of the application being granted.

During the evaluation period, the SFSA will communicate with the applicant on an ongoing basis – for example, in order to request complementary information. In general, it is advisable to have regular informal contact with the SFSA's case handler in order to check on the status of the application.

Recent Developments

As a rule, the application must show that the undertaking will be able to fulfil all of the criteria described in the previous sections as soon as the business operations commence. In recent years, the SFSA has increasingly focused not only on whether the conditions for authorisation are formally fulfilled but also on whether the applicant has a credible and viable strategy and business model, which will allow the applicant to generate returns on a long-term basis.

In the past four to five years, the SFSA has only granted licences to a handful of applicants, and many others have either been subject to non-approval or have withdrawn their application following the SFA's indication that it would not be approved.

For the reasons above and due to the sheer amount of information that must be provided, an application has become a lengthy and costly procedure, which usually requires the involvement of external consultants, such as lawyers with regulatory expertise and capital adequacy experts.


3.1 Requirements for Acquiring or Increasing Control over a Bank

Qualifying Ownership

Any individual or entity acquiring a qualifying holding in a bank must be subject to prior approval and ownership assessment by the SFSA. A qualifying holding is defined as a direct or indirect holding of at least 10% of the capital or the voting rights, or which otherwise makes it possible to exercise significant influence over the bank – eg, through veto rights or representation on the board. An approval must also be obtained if a qualifying holding is increased and reaches or exceeds 20%, 30% or 50% of the capital or the voting rights.

Furthermore, an application should be made if several acquirers act in concert and their aggregate holdings amount to a qualifying holding. When determining whether the acquirers act in concert, consideration should be taken inter alia of shareholder agreements and other close ties between the acquirers.

Requirements in Relation to Owners

There are no formal restrictions regarding the categories of persons that may acquire a qualifying holding – eg, in relation to foreign ownership. However, the SFSA will assess whether the acquirer is suitable to own a qualified holding.

An acquisition will be approved only if it does not impede the sound and prudent management of the bank and its ability to conduct business in accordance with applicable legal requirements. In its assessment, the SFSA will consider the following, among other things:

  • 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; and
  • if the acquisition has a connection to, or increases the risk of, money laundering or terrorist financing.

If the acquisition results in a "close link" between the bank and the owner or an affiliate of the owner, which is assessed based on certain ownership thresholds, it will only be approved if it does not prevent the effective supervision of the bank.

Regulatory Filings

The application for approval is made using standard forms provided by the SFSA. The magnitude of the information that must be provided in the application varies depending on the size of the holding that is acquired, but includes information about the organisational structure of the acquirer (including an ownership chain), the acquirer's financial situation and the acquirer's management, as well as business and financing plans.

The SFSA has a handling time of up to 60 working days from the date a formally complete application is filed. During the assessment period, the SFSA may request additional information, in which case the assessment period is suspended.

In order to obtain relevant information about the acquirer, the SFSA will also gather information from other Swedish authorities and, where applicable, foreign authorities.

If the SFSA decides to oppose the proposed transaction, it must inform the proposed acquirer of the decision in writing. The decision may be appealed to the administrative courts of Sweden.

Click here to continue reading ...

Originally published by Chambers Banking Regulation 2020/2021 Global Practice Guide.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.