prop · GX0330en · 2009-10-13 00:00:00 — Government 2009/10:30 The Government presents this to the Riksdag. , 8 October 2009 The Government Support to (2008:814) established a stability fund to finance support measures under the Act, the administration costs of the supporting authority (Debt Office) and and also certain other expenses. The Government announced in the that forms the basis of the support legislation that it would with proposals for the introduction of a 'stability fee' to be paid by those credit institutions and other undertakings covered by the financial support system to provide the stability fund with the necessary funds. This contains a proposal for the introduction of the stability fee. It is proposed that this fee be introduced in 2009. The also contains proposals that government guarantees for depositors at Swedish branches of foreign institutions be financed via the stability fund. This also proposes that secrecy should apply when reviewing owners of investment fund management companies and central securities depositories (CSDs) in the same way as when reviewing owners of other kinds of financial company. Government 2009/10:30 Proposed Riksdag decision............................................................... Proposed Act amending the Government Support to (2008:814) ..................................... 2.2Proposed Act amending the Public Access to Information and Secrecy Act (2009:400) ........................... The matter and its preparation ........................................................ Introduction of stability fee ............................................................ Funding of compensation paid under the Government Guarantees for Depositors at Swedish Branches of Foreign Entry into force and transitional provisions.................................... Secrecy when reviewing owners of investment fund management companies and central securities depositories ........... Consequences .......................................................of the proposals 9.2Secrecy when reviewing owners of investment fund management companies and central securities 10 Explanatory comments on the proposed legislation ....................... 10.1Proposed Act amending the Government Support to (2008:814) ................................... 10.2Proposed Act amending the Public Access to Information and Secrecy Act (2009:400)......................... Bilaga 1 The memorandum's proposed legislation contained in the draft proposal referred to Bilaga 3 The proposed legislation referred to the Council on Statement of views from ............ The memorandum's proposed legislation contained in Extract from the minutes of the Cabinet meeting held on 8 October Government 2009/10:30 Appendix 1 The memorandum's proposed legislation contained in the draft proposal referred to the Council on Legislation for consideration .......................................... Appendix 3 The proposed legislation referred to the Council on Statement of views from ...... The memorandum's proposed legislation contained in the Extract from the minutes of the Cabinet meeting held on 8 October 2009....................................................................................... Government 2009/10:30 1 Proposed Riksdag decision The Government proposes that the Riksdag adopt the proposals made by the Government for 1.an Act amending the Government Support to (2008:814), 2.an Act amending the Public Access to Information and Secrecy Act (2009:400). Government 2009/10:30 The Government proposes the following wording for the Act. 2.1Proposed Act amending the Government Support to (2008:814) It is hereby prescribed, as regards the Government Support to (2008:814), first that Chapter 7, Section 1, Chapter 8, Section 3 and the heading of Chapter 7 be worded as follows, second that six new sections (Chapter 7, Sections 2 to 6 and Chapter 8, Section 2 a) be incorporated into the Act with the following wording: Current wording Proposed wording Chapter 7 Stability fund Chapter 7 Stability fund and Chapter 2, Section 2 shall be Chapter 2, Section 2, together with deposited in an interest-bearing fees under Section 2 and penalty interest under Section 6 of this Chapter shall be deposited in an the central government and which interest-bearing account with the refer to support provided under this Act shall also be deposited in Funds recovered by the central government and which refer to support provided under this Act also be deposited in this account. Monies deposited into the account, together with the other assets acquired pursuant to this Act, constitute the stability fund. The following costs shall be support expenses under this Act covered by funds from the costs of the supporting authority support expenses under this Act, be covered by funds from the 2. the administration costs of the The same applies to such costs as referred to in Chapter 6, costs that under the provisions of the Administrative Court Procedure Act (1971:291) as referred to in Chapter 6, Section 2 are to be borne by the central government. Unlimited credit at the Debt office may be used to the extent that there are insufficient funds in the account. Government 2009/10:30 under Chapter 6, Section 4, second paragraph, 4. costs that under the provisions of the Administrative Court Procedure Act (1971:291) as referred to in Chapter 6, Section 2 are to be borne by the central government, and 5. compensation paid out owing to a guarantee for depositors under the Government Guarantees for Depositors at Swedish Branches of Foreign Institutions Act. Unlimited credit at the Debt Office may be used to the extent that there are insufficient funds in the account. Chapter 1, Section 2, first pay the fee') shall pay a fee ('stability fee') for each financial The stability fee shall be 0.036 per cent of a basis for calculation Sections 3 and 5 ('fee basis'). The fee basis is the sum of the liabilities and provisions of the party required to pay the fee though not untaxed reserves at the end of the financial year according to the balance sheet prescribed by the second or third The fee basis for a party required to pay the fee where such party forms part of a group according to the Annual Accounts Act (1995:1554) shall be reduced by the corresponding liabilities to other fee-paying undertakings in Government 2009/10:30 institution shall be reduced by the subordinated debt securities that may be included in the capital base under the Capital Adequacy and Large Exposures Act (2006:1371). If a financial year has encompassed a period that is longer or shorter than twelve months, the stability fee shall be increased or reduced accordingly in proportion to the length of the financial year. An average of the guaranteed amount for the financial year will be deducted from the fee basis under Section 3 for a credit institution to which the Debt Office has issued a guarantee for debt securities under this Act. The calculation of the average shall be based on the credit institution's guaranteed obligations at the end of each quarter. The supporting authority shall decide on the stability fee for each party required to pay the fee. The fee shall be paid within one month from the date when the authority made the decision. Penalty interest shall be charged for stability fees that are not paid on time. shall be calculated according to a rate of interest that each year corresponds to the reference interest rate determined by the Riksbank at any given time under Section 9 of the Interest Act (1975:635), plus eight percentage Government 2009/10:30 The supporting authority shall notify the Swedish Financial Supervisory Authority if a credit institution or other undertaking does not fulfil its obligations under this Act. Appeals may not be made against decisions made under this Act. An appeal may be made to a general administrative court against a decision regarding a fee under Chapter 7, Section 6. Leave to appeal is required for appeals to an administrative court of appeal. Appeals may not be made against other decisions made under this Act. 1.This Act enters into force on . 2.The new provisions may only be applied for financial years that end after this Act has entered into force. 3.The stability fee shall be reduced by half for a financial year that ends in 2009 and 2010. Government 2009/10:30 2.2Proposed Act amending the Public Access to Information and Secrecy Act (2009:400) It is hereby prescribed that Chapter 30, Section 5 of the Public Access to Information and Secrecy Act (2009:400) shall be worded as follows: Secrecy applies to information about the personal or financial circumstances of a private party if it may be assumed that the private party would suffer harm or damage if the information were to be disclosed and the information appeared in a matter with a central government authority concerning holdings of or limited insurance companies, interests in member banks interests in an exchange or interests in an exchange, in a Secrecy applies neither to a decision made by the authority nor to information from another authority about this information not being governed by secrecy there. Secrecy applies for a maximum of twenty years for information contained in an official document. This Act enters into force on 1 January 2010. Government 2009/10:30 3 The matter and its preparation The introduction of a stability fee was announced in the Government entitled 'Measures to strengthen the stability of the Swedish financial system' (Government 2008/09:61). This contains proposals to introduce a stability fee into the Government Support to (2008:814). A memorandum with a draft proposal referred to the Council on Legislation for consideration has been submitted to consultation bodies The proposed legislation in the memorandum is shown in A schedule of the consultation bodies and those that have expressed an opinion on their own initiative is shown in Appendix 2. opinions expressed by the consultation bodies are available from the (file ref. Fi2009/1494). The Government is also processing the written communications submitted by in this matter, in addition to its consultation responses, regarding the Government Guarantees to Banks and others Ordinance (2008:819) and the correlation of this ordinance with the Government Support to Credit Institutions Act (2008:814) (file ref. Fi2009/347). The Government decided on to obtain a statement of views from regarding the proposed legislation contained in Appendix 3. The statement of views submitted by is shown in Appendix 4. The Government has essentially accepted the proposals made by the The views and proposals submitted by are dealt with in the explanatory comments on the proposed legislation (Section 10) and in Section 4. the statutory wording has also been rearranged slightly on the advice of Some editorial changes have also been made in relation to the proposal referred to for consideration. Deductions for certain obligations guaranteed by the government Following the review by , a further analysis was conducted of the proposal to allow credit institutions that have paid guarantee fees for the government's commitment for an institution's borrowing within the framework of the '' to make a deduction from the stability fee. A memorandum with a draft containing a new proposal relating to this deduction has been submitted to consultation bodies for comment and a consultation meeting has been The proposed legislation contained in the memorandum is shown in A schedule of the consultation bodies that were also invited Government 2009/10:30 to the consultation meeting is provided in Appendix 6. The opinions expressed by the consultation bodies together with a schedule of views presented at the consultation meeting can be obtained from the (file ref. Fi2009/1494). The proposes a different deduction method compared to the one proposed pursuant to the referral to (see Section 4.3). The change is so straightforward that it is unnecessary to consult with in this respect. A matter of secrecy The also proposes amendments to one of the provisions contained in the Public Access to Information and Secrecy Act (2009:400). The proposal that has been drafted following consultation with the [Swedish Financial Supervisory Authority] means that secrecy should also encompass investment fund management companies and central securities depositories (CSDs) when owners of financial undertakings are reviewed (Chapter 30, Section 5). The rules on secrecy when reviewing owners of different kinds of financial undertaking have been subject to the examination of in several previous legislative matters. The relevant amendments are being made with a view to rectifying a previous omission, so that the rules on secrecy when reviewing owners of investment fund management companies and central securities depositories (CSDs) will be the same as when reviewing owners of other kinds of financial undertaking. The change is, against this background, so straightforward that it is unnecessary to consult with in this respect. Government 2009/10:30 4 Introduction of stability fee The Government Support to (2008:814) (the Support Act) empowers the Government to intervene using different kinds of support measure to counteract a risk of serious disruption to the financial system in . The preparatory works for this Act (Government 2008/09:61) state that the government, in the event that a support measure is taken, will as a rule impose terms to ensure the repayment of funds released and also that compensation is obtained for the level of risk that such measure involves. Additional funds may still be required regardless of whether the consequent point of departure is that those institutions in need of support must finance the necessary support measures themselves. Experience shows that crisis solutions often entail long-term costs for the government. The Government has stated in the above-mentioned that stakeholders covered by the Support Act should largely be responsible for financing these costs through the introduction of a stability fee so that the interests of taxpayers are protected and stability is strengthened in the long term. Government proposal: The stability fee announced will be introduced in 2009. The fee for the first two years will be reduced by half. All credit institutions and other undertakings covered by the Government Support to (2008:814) must pay the stability fee. The fee shall be calculated annually and fixed by the supporting authority (Debt Office) using the fee basis comprising the obligations at the end of the financial year of the party required to pay the fee, with a deduction for certain group loans and subordinated liabilities. The fee shall be based on the balance sheet adopted at the undertaking's annual general meeting (AGM). The stability fee shall be set at 0.036 per cent of the fee basis. The fee shall be paid in arrears within one month of the supporting authority determining the fee. Unpaid fees will incur penalty interest. If a credit institution or undertaking is only covered by the Act for part of the year, the fee shall be adjusted accordingly. The fee and any penalty interest shall be paid into the stability fund. Assessment of the Government: The fee system should be amalgamated with the deposit guarantee system in the future. The fee system should then be designed so that the fees reflect the level of risk assumed by different credit institutions. The Government intends to to this issue prior to 2011 with a proposed new fee structure that will, among other things, consider the differentiation of risk. Government 2009/10:30 The proposals and assessments contained in both the memorandum on a draft proposal referred to the Council on Legislation for consideration and the memorandum on a draft correspond with the proposals and assessments made by the Government. Consultation bodies: Most of the consultation bodies recommend or have no objections to the proposed introduction of a stability fee. this, the consultation bodies largely state the following: When should the stability fee be introduced? Debt Office rejects the proposed point in time for introducing the stability fee on the grounds that the introduction of such a fee should be postponed until the financial market situation has normalised and also because the design of the fee and size of the stability fund need to be analysed in more detail. Office considers it inappropriate to charge a fee that reduces the capital base while at the same time offering credit institutions various support Moreover, the Swedish National Debt Office considers that the funds that may be accumulated from stability fees over the next few years will be marginal in this context. (including the Swedish Bankers' Association, the of and ) point out the importance of reviewing and comparing the proposed charging system with corresponding systems in other EU countries once the market has stabilised to avoid any competitive disadvantages arising in respect of, for instance, Swedish undertakings. The Swedish Bankers' Association emphasises that, from a long-term perspective, there is cause for analysing and evaluating in more detail the support measures taken, the scope for utilising of the stability fund and the costs incurred by the institutions for the various support measures, and that a normalised market will enable this type of analysis. The group of entities required to pay the fee seeks some clarification in terms of the definition by the wording of the Act of the entities liable to pay the stability fee. (These views are dealt with in the explanatory comments on the proposed legislation.) also considers that the group of entities required to pay the fee should be the same as the group of entities eligible for support under the Government Guarantees to Banks and others Ordinance (2008:819). Otherwise, competition will be distorted to the disadvantage of institutions (e.g. institutions that are not owned by banks) ineligible for support under the said Ordinance. Business Owners objects to the fee only being charged in respect of Swedish parent companies and not, where applicable, subsidiaries has stated that savings Government 2009/10:30 banks/limited savings banks are not covered by the Support Act and for this reason should not have to pay a stability fee. If they are considered to be covered by the Support Act, emphasises that these savings banks should be entitled to a capital infusion on the same terms as other institutions in the Swedish banking market. The basis for calculating the fee ('fee basis') and consider that the fee should be based on the obligations of the entire group, as the stability of a systemically important bank is not limited to a particular country or solely to parent banks. are of the opinion that the risk-weighted assets of the respective institution required to pay the fee constitute a better basis for calculating this fee than obligations. is of the opinion that institutions forming part of foreign-owned groups would be discriminated against, as when the fee basis for the stability fee is calculated they would not be able to make deductions for intra-group liabilities to their foreign owners, as would be the case for institutions that form part of Swedish groups. Several consultation bodies (including the Swedish Bankers' Association, the Swedish , , , , and ) have commented on the future risk differentiation of the fee and endorsed the proposal in this respect. However, Nordea and consider that the fee should be risk differentiated from the outset through an interim system based on risk-weighted assets. Nordea advocates that the riskweighted assets of the respective institutions required to pay the fee should be used as an alternative basis for calculating the fee. This alternative constitutes a better basis for calculating the fee than obligations, as this would introduce a risk dimension into the basis of calculation and would thus avoid most of the intra-group problems that might affect a cross-border bank group. A cross-border group will be the subject of different kinds of stability measure and associated costs in each country, and there is a risk of such a group incurring double costs. Amalgamation with the deposit guarantee system Most of the consultation bodies welcome an amalgamation of the proposed charging system with the deposit guarantee system. Swedish Financial Supervisory Authority and the Swedish recommend amalgamation as soon as possible. Government 2009/10:30 FAR SRS considers that the accuracy of the figures used for the fee basis should be examined and confirmed by the auditors of the respective institutions so as to ensure the reliability of the basis for calculation, in line with the practice for the deposit guarantee system. Reasons for the Government's proposal and assessment When should the stability fee be introduced? The containing the proposed Support Act states that the stability fee should be introduced when the market situation has normalised. Such market normalisation would entail a reduction in the guarantee fees received by the state, for which reason the Government should only introduce the fee at that stage. The decision to postpone the introduction of the stability fee was made in light of the revenues anticipated from the guarantee fees. There are now grounds for charging a stability fee, as few credit institutions have chosen to join the government's and the markets have stabilised somewhat. The Swedish National Debt Office considers that the introduction of the stability fee should be postponed until the financial market situation has normalised. However, the Government is of the opinion that it is necessary to start to build up the fund to enable institutions to bear the costs of managing risks in the financial system over time. On the other hand, this should be done gradually to avoid overburdening these institutions. For this reason, only half of the fee should be charged to start with. As explained in Section 4.3, it is reasonable for institutions that have already paid fees for government guarantees within the to receive some compensation for their expenditure. A stability fund was established in conjunction with the introduction of the Support Act. It is intended to be used to finance the financial support system. The funds received by the government as a result of support measures taken under the Support Act should be added to the stability fund in addition to a specifically earmarked appropriation of billion made in 2008. These funds will be deposited in an interest-bearing account with the Debt Office. The stability fund will consist of the balance of this account and the financial instruments and other assets acquired under the Support Act. The Government and supporting authority may, for example, use the money available in the fund for support measures and for the administration costs of the supporting authority. If a deficit should arise, an unlimited amount of funds may be borrowed from the Debt Government 2009/10:30 The preparatory works (travaux préparatoires) for the Support Act state that the compensation and financial support systems established under the Act should be amalgamated in the long term with the deposit guarantee system under the Deposit Guarantee Scheme Act (1995:1571). Furthermore, it is considered that the funds received owing to the said regulations should be accumulated in the stability fund (Government 2008/09:61, p. By coordinating these systems, it should be possible to charge institutions just one fee and to use the funds accumulated from the fees in an appropriate way considering the prevailing situation. The Government shares the views of the Swedish Financial Supervisory Authority and the Swedish that this amalgamation should take place as soon as possible.