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Securitization markets in Sweden
This page updated regularly deals with securitization developments in Sweden. If you have any data, developments or contributions to make to this page, please write to me. Your contribution shall be acknowledged with credit to you.
Update history:24th August 2001
The page was updated with additional information. Besides, there is a news report on securitisation by a Swedish municipality - click on our news page here.
17th June, 2000
State of the Market:
There have not been too many securitisation deals in Sweden so far, primarily because the law has not been rationalised to the needs of securitization. There are difficulties relating to capital requirements - see below under legal issues. Some of the deals concluded in the past include r SEB Bolin (formerly Svensk Fastighetskredit), BoKredit i Sverige, and Stockholms stads fastighetsbolag and SJ (the Swedish railway). For all these transactions the SPVs were outside Sweden to avoid the demand for capital coverage which would have been the case for Swedish SPVs under existing legislation.
Sweden, like number of continental European markets, has a traditional mortgage funding instrument, called Pandbrev (German equivalent Pfandbriefe).
The mortgage market itself in Sweden is very well developed, though. The outstanding amount of mortgage loans forms more than 50% of the country's GDP - based on a lecture by Mr Lars Nyberg, Deputy Governor of the Sveriges Riskbank, at Economics Day held at HSB Bank, Stockholm, on 8 November 2000 [link in the box on top of page]. Sweden also has a very strong mortgage bond market - Pantbrev referrred to above..
Legal and regulatory framework:
In March 1994 the Government appointed a High Court Judge to investigate the requisites of securitisation in Sweden, and Mr Gregor produced a memo in May 1994 setting out his conclusions. However, nothing great has been done on the legislative front since then.
Present law requires notice to debtors for assignment. Besides, an SPV may be regarded as a credit institution under the Credit Companies Act - thereby requiring regulation of the Financial Supervisory Authority.
The Swedish Ministry of Finance has announced a memorandum (Ds 1998:71) amending the Financial Business Act (lagen (1992:1610) om finansieringsverksamhet) (the Act) in order to facilitate securitization in Sweden. The issue has also been addressed by the bank legislative committee (banklagskommitten), but not in as thorough a manner as the memorandum.
The new law was expected to be approved in Jan., 2000. The new law intended to alleviate the difficulties under the existing law. Securitization is possible under existing legislation, but costly as the SPV is required to maintain a certain level of capital coverage. In order to avoid the capital costs, SPVs have so far been set up abroad, where legislation permits this type of transaction without demand for capital coverage. Capital coverage, that is, the regulatory capital required by banks against their assets, is the problem that pushed the jurisdiction of several transactions done in the past.
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