prop · GX0330en · 2009-10-13 00:00:00 — Credit institutions depend on the stability of the financial system for their operation and for this reason it should be these institutions that primarily contribute to the funding. Impact on the central government's budget The aim of introducing a stability fee is to ensure that the support measures taken and those that may be taken under the Support Act will, in the first instance, be funded by the credit institutions and consequently not charged to the central government budget and thus taxpayers. When the stability fund was introduced, the central government contributed financially by transferring billion into the fund. The intention is to combine the deposit guarantee and financial support systems into a joint fund in 2011. The objective is for the fund's holding to amount to an average of 2.5 per cent of GDP within a period of 15 years to create a financing system to deal with financial crises that is sustainable in the long term. The cost of support measures, including the administration costs of the Debt Office, will be charged to the fund. the fund are insufficient to fund the support measures that have been Government 2009/10:30 decided, an unlimited loan facility is linked to the fund. Court costs are expected to be covered within existing frames. For central government finances, the introduction of a stability fee entails improving net lending, and similarly increasing the central government budget balance. The central government borrowing requirement will decrease, as will consolidated central government debt. In its consultation response, the Debt Office stated that annual revenues from the stability fee will be significantly higher if the former proposal for a deduction of guarantee fees paid is removed. does the Debt Office consider that regard has been taken to the inflow of guarantee fees or the increase in value of the stability fund's holdings at Nordea. Debt Office estimates that these factors altogether mean that the stability fund, including the fee rules now proposed, would correspond to 2.5 of GDP within a period of ten years. Debt Office therefore proposes that the percentage rate of the fee could be reduced or that the fee basis is adjusted downwards in the event that the Government does not wish the fund to be built up quite as quickly. The Government considers that the long-term objective should be a holding corresponding to 2.5 per cent of GDP. In the opinion of the Government, there is therefore no justification to amend the rules for calculating the stability fee at the present time on the basis of short-term events. Consequences for credit institutions and undertakings Undertakings that have to pay a stability fee include the credit institutions referred to in the Banking and Financing Business Act (2004:297) and such undertakings based in that have been set up by a credit institution as a stage of reconstruction. These entities must pay a stability fee amounting to 0.036 per cent of the fee basis for each fee year. The fee basis shall be based on information taken from the undertakings' annual reports and capital adequacy reports. For this reason, the new rules will probably not entail any increase in the cost of producing the necessary information. A preliminary calculation, based on information from the Swedish Financial Supervisory Authority concerning the relevant credit institutions' balance sheet total, capital base and group liabilities as at , shows that the aggregate full fees charged, without a deduction for guarantee fees, is approximately SEK 2.52.7 billion, depending on how much of the group liabilities refer to Swedish institutions. Penalty interest is payable on unpaid fees. The fee is to be adjusted in the event that a credit institution or undertaking is only covered by the Support Act for part of the year. Fees and any penalty interest shall be deposited in the stability fund. As previously stated, the objective is for the fund's holding to amount to an average of 2.5 per cent of GDP within a period of 15 years. According to Government 2008/09:61, monies in the form of Government 2009/10:30 stability fees and guarantee fees and any yield on capital infusion that, excluding the fees imposed under the Deposit Guarantee Scheme Act, currently amount to billion should be deposited into the fund annually in order to be able to achieve this objective. An individual institution will pay a fee in relation to its outstanding obligations, with the exception of subordinated debt securities that may be included in the capital base. An institution that receives guaranteed deposits will consequently pay both the deposit guarantee fee and the stability fee, while those institutions that do not receive guaranteed deposits will only pay the stability fee. There is a risk of institutions passing part of their stability fee onto . However, some of this amount will certainly need to be taken out of the institution's profits or equity. The Government considers that this represents a more reasonable distribution of the burden than the taxpayer bearing the costs of future crises. As the economy has not yet recovered from the financial crisis and as some institutions also pay guarantee fees that are deposited into the fund, it is proposed that the stability fee should be charged at half the amount during the first two years to mitigate any negative consequences as regards the provision of credit. In addition to this, a deduction from the fee basis for guaranteed obligations is permitted for those credit institutions that choose to participate in and issue securities within the . The scope of the fee that the undertakings will pay to the stability fund over the next two years will consequently partly depend on how much is issued under the . The Swedish have stated in their consultation response that the competition situation in the market may be affected negatively by credit undertakings, which utilise and pay for the , having a lower stability fee than credit institutions that cannot utilise the . However, this deduction does not mean that the institution pays a lower total fee, as the institution will also be paying the guarantee fee. Indeed, an institution that pays a guarantee fee will have a lower funding cost but, according to the and the Riksbank, even those that do not pay a guarantee fee will have lower funding costs as a consequence of the programme's general stabilising effect. It is consequently difficult to design a system that is completely competition neutral. The Government considers that the proposed system is reasonably competition neutral. 9.2Secrecy when reviewing owners of investment fund management companies and central securities depositories The proposal entailing that the secrecy applying to information in matters concerning the review of owners should also apply to investment fund management companies and central securities depositories is not Government 2009/10:30 considered to involve any higher costs or have any other negative impact on the authorities or undertakings. Government 2009/10:30 10Explanatory comments on the proposed legislation 10.1Proposed Act amending the Government Support to (2008:814) The proposal has been dealt with in Section 4.2. In the first paragraph of the section, references were introduced to Chapter 7, Section 2, which regulates the stability fee, and Section 6, which regulates penalty interest; see in more detail below under the respective section on the implication of the provisions. The references imply that stability fees and any penalty interest will be deposited into the stability fund. funds received from abroad as a consequence of compensation having been paid out as a result of the Government providing a guarantee to depositors at Swedish branches of a foreign institution shall also be deposited into the stability fund. Besides editorial changes, a supplementary provision has been made in the third paragraph of the section, meaning that funds from the stability fund should also cover compensation paid out as a result of a guarantee to a depositor at a foreign branch of a credit institution in under the Government Guarantees for Depositors at Swedish Branches of Foreign Institutions Act (2008:812). It may be deemed to ensue from item 2 of the third paragraph that the costs for the supporting authority and , which may be funded by the stability fund, shall be limited to dealing with matters under the Support Act. The last sentence of the current third paragraph has been made into a new fourth paragraph. The proposal has been dealt with in Section 4.2. This section, which is new, stipulates the principles for charging a stability fee. The first paragraph states that credit institutions as referred to in the Banking and Financing Business Act (2004:297), and such undertakings based in that have been set up by a credit institution as a stage of reconstruction, must pay a stability fee for each financial year. Liability to pay the fee will not be conditional upon any assessment that the credit institution or undertaking could present a potential risk to the system. Instead, all undertakings covered by the definition will be required to pay the fee. A Swedish credit institution that forms part of a foreign group is expected to pay the Swedish stability fee even if the group's borrowing is guaranteed by the foreign government for a fee, as long as the institution is a Swedish legal entity and is covered by the definition contained in the Banking and Financing Business Act, as such an institution may receive support under the Support Act. Government 2009/10:30 statutory text contained in the memorandum does not give a clear indication of which entities should pay the stability fee. agrees with this and has therefore clarified the wording in the statutory text in this respect. also like clarification as to whether a Swedish credit institution that forms part of a foreign group, where the group's borrowing is guaranteed by the foreign government for a fee, is expected to pay the Swedish The Government considers that this is indeed the case if the institution is a Swedish legal entity and is covered by the definition contained in the Banking and Financing Business Act, as such an institution may receive support under the Support Act. The second paragraph states that the stability fee shall be a fixed charge of 0.036 per cent of a basis calculated according to Sections 3 The proposal has been dealt with in Section 4.2. This section, which is new, stipulates how the fee basis should be The first paragraph, which has been rewritten and formulated according to the proposals made by , states that the point of departure is for the liabilities and provisions of the party required to pay the fee at the end of the financial year according to an adopted balance sheet to serve as the basis for the fee charged. and provisions' mean such items that according to the applicable rules for annual accounts (e.g. the Annual Accounts Act [1995:1554]) are reported as such in the undertaking's balance sheet. Such possible items that are included as memorandum items on the balance sheet and that do not meet the requirements for being reported as a liability or provision are consequently not included. The item 'untaxed reserves' constitutes neither a liability nor equity in an undertaking's balance sheet and should therefore not be included in the fee basis; for the sake of clarity, this should be indicated by the statutory wording. An 'adopted balance sheet' means the balance sheet that has been adopted by an annual general meeting (AGM) that was held within six months from the end of the financial year (see, for instance, Chapter 7, Sections 10 and 11 of the Act [2005:551], together with Chapter 10, Section 1 of the Banking and Financing Business Act [2004:297]). undertaking has the calendar year as its financial year, this means that the fee for 2009 will first be paid after the AGM held in 2010. The second and third paragraphs, which have been rewritten and formulated according to the proposals made by the Council on Legislation, stipulate what should be excluded from the fee basis. second paragraph states that the fee basis should not include liabilities to group companies that are subject to an obligation to pay a stability fee. 'group company' means a parent company or a subsidiary according to the definition contained in Chapter 1, Section 4 of the Annual Accounts Government 2009/10:30 It is also indicated by the third paragraph that the fee basis should be reduced by the subordinated debt securities that may be included in a credit institution's capital base according to the Capital Adequacy and Large Exposures Act (2006:1371). An undertaking that is not a credit institution is unaffected by the latter deduction. The proposal has been dealt with in Section 4.2. This section, which is new, governs how the stability fee should be determined when the financial year for the entity paying the fee is longer or shorter than twelve months; the latter may, for instance, be the case if the operation commences partway through a calendar year. In such cases, the stability fee should be increased or reduced respectively considering the actual length of that financial year. For example, the stability fee should be reduced by half if the financial year only covers six months. The proposal has been dealt with in Section 4.3. This section, which is new, has been partly rewritten and formulated according to the proposal made by . This section states that for a credit institution to which the Debt Office has issued a guarantee for debt securities under this Act, an average of the guaranteed amount during the financial year shall be deducted from the fee basis in accordance with Section 3. The average is calculated on the basis of the credit institution's guaranteed obligations at the end of each quarter. The guarantees referred to are regulated in the Government Guarantees to Banks and others Ordinance (2008:819). The proposal has been dealt with in Section 4.2. This section, which is new, states in the first paragraph that it is the supporting authority that makes decisions on the stability fee and that the fee must be paid within one month from the authority's decision. The second paragraph states that penalty interest shall be charged if the fee is not paid on time. The section stipulates how penalty interest should be calculated. This section, which is new, imposes an obligation on the supporting authority to notify the if any credit institutions or undertakings do not fulfil their obligations under the Act. There is a corresponding provision in Section 20 of the Deposit Guarantee Scheme Act (1995:1571). Government 2009/10:30 The proposal has been dealt with in Section 6. This section has been amended in such a way that an appeal may be made against certain decisions made under the Act. A possibility has been introduced into the first paragraph of this section for appeals to be made to a general administrative court (that is, in the first instance to the county administrative court) against decisions about the stability fee made by the supporting authority. It is also stated that leave to appeal is required for the administrative court of appeal to be able to seek a reconsideration of a decision made by the country administrative court. Entry into force and transitional provisions The proposal has been dealt with in Section 7. Item 1 states that the Act amending the Government Support to enters into force on . Item 2, which was added following a proposal made by , means that the stability fee will be charged as of 2009, subject to the precondition that the end of the financial year for the party required to pay the fee falls after the statutory amendment has entered into force. Item 3 states that half the stability fee will be charged for 2009 and 2010; that is, for financial years that end after the Act's entry into force in 2009, or 2010. 10.2Proposed Act amending the Public Access to Information and Secrecy Act (2009:400) The proposal has been dealt with in Section 8. By amendments contained in the first paragraph, items 1 and 3, secrecy also applies when reviewing owners of investment fund management companies and central securities depositories. Secrecy when reviewing owners on matters relating to holdings of shares in investment fund management companies or shares or participating interests in central securities depositories should be applied in a corresponding way as when reviewing owners on matters relating to other kinds of financial undertaking, such as limited banking companies, securities companies and exchanges. Government 2009/10:30 Appendix 1 The memorandum's proposed legislation contained in the draft proposal referred to for consideration Proposed Act amending the Government Support to Credit Institutions Act (2008:814) It is hereby prescribed, as regards the Government Support to (2008:814), first that Chapter 7, Section 1 and Chapter 8, Section 3 shall have the following wording, second that three new sections (Chapter 7, Sections 2 and 3 and Chapter 8, Section 2 a) be incorporated into the Act, and that Chapter 7 shall have a new heading with the following wording. Stability fund and stability fee Chapter 2, Section 2 shall be under Chapter 2, Section 2 and deposited in an interest-bearing Section 2 of this Chapter, together with penalty interest under Section 3 shall be deposited in an interest- the central government and which bearing account with the Swedish refer to support provided under this Act shall also be deposited in 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, Section 4, second paragraph and 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 3.costs of guardian ad litem 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 issued 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. Credit institutions and undertakings referred to in Chapter 1, Section 2 ('parties required to pay the fee') shall pay a fee ('stability fee') for each financial year. The fee shall constitute 0.036 per cent of the obligations of the party required to pay the fee at the end of the financial year according to an approved balance sheet, with a deduction for 1.obligations that refer to group companies required to pay the fee under this Act, and 2.subordinated debt securities that may be included in a credit institution's capital base according to the Capital Adequacy and Large Exposures Act (2006:1371). If a financial year has covered a period that is longer or shorter than twelve months, the stability fee shall be increased or reduced respectively in proportion to the length of the financial year. For a credit institution, half of the amount paid by the institution in fees under the Government Guarantees to Banks and others Ordinance (2008:819) for the same period of time shall be deducted from the stability fee. The maximum deduction that can be made is the full amount of the stability fee. The supporting authority shall determine, in accordance with the grounds stated in Section 2, the amount that each party is required to pay. The fee shall be paid within one month from the date when the authority made the decision. Penalty interest shall be charged for fees that are not paid on time. Penalty interest shall be calculated according to a rate of interest that each year corresponds to the applicable reference interest rate determined by the Riksbank at any given time according to Section 9 of the Interest Act (1975:635), plus eight percentage points. The supporting authority shall notify the if a credit institution or undertaking does not fulfil its obligations under this Act. An appeal may be made to a general administrative court against a decision regarding a fee under Chapter 7, Section 2. Leave to appeal is required for appeals Government 2009/10:30 Government 2009/10:30 to an administrative court of Appeals may not be made Appeals may not be made against decisions made under this against other decisions made under this Act. 1.This Act enters into force on 1 2009. 2.The stability fee under Chapter 7, Section 2 shall be reduced by half for a financial year that ends in 2009 and 2010. Consultation bodies and other bodies which on their own initiative have expressed their views on the draft proposal referred to for consideration regarding the introduction of a stability fee: Riksbank (Swedish central bank), , Debt Office, (Swedish Financial Supervisory Authority), , Authority, Swedish Bankers' Association, , , of , Swedish , , FAR SRS, , Bostadsfinansieringsaktiebolag (), , , , , . Government 2009/10:30 Government 2009/10:30 The proposed legislation referred to the Council on Proposed Act amending the Government Support to Credit Institutions Act (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 shall be worded as follows, second that three new paragraphs (Chapter 7, Sections 2 and 3 and Chapter 8, Section 2 a) shall 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 into an interest-bearing fees under Section 2 and penalty interest under Section 3 of this Chapter shall be deposited into an the central government and which interest-bearing account with the refer to support provided under this Act shall also be deposited Funds recovered by the central into this account. government and which refer to support provided under this Act (2008:812) shall also be deposited into 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, 2. the administration costs of the The same applies to such costs as referred to in Chapter 6, Section 4, second paragraph and 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. supporting authority and , 3.costs of guardian ad litem 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.