Opinion of the European Central Bank of 24 October 2008 at the request of the Swedish Ministry of Finance on a draft proposal on stabilising measures for the Swedish financial system (CON/2008/59)
Date: 2008-10-24
Institutions: European Central Bank
Subjects: Sweden, credit guarantee, credit institution, economic support, financial stability, support policy

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 October 2008 

at the request of the Swedish Ministry of Finance 

on a draft proposal on stabilising measures for the Swedish financial system 

(CON/2008/59) 

Introduction and legal basis 

On 20 October 2008 the European Central Bank (ECB) received a request from the Swedish Ministry of 

Finance  for  an  opinion  on  a  draft  proposal  on  stabilising  measures  for  the  Swedish  financial  system 

(hereinafter the ‘draft law’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European  Community  and  on  the  sixth  indent  of  Article 2(1)  of  Council  Decision  98/415/EC  of 

29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to rules applicable to financial institutions insofar as they 

materially  influence  the  stability  of  financial  institutions  and  markets.  In  accordance  with  the  first 

sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 

has adopted this opinion. 

1.  

Purpose of the draft law 

1.1  The  draft  law  is  aimed  at  securing  financial  stability  in  Sweden  and  restoring  confidence  in  the 

markets.  To  this  end,  the  draft  law  provides  a  general  legal  framework  allowing  for  the 

establishment  of:  (i)  a  Governmental  body  responsible  for  administering  any  support  provided 

under the draft law (hereinafter the ‘support authority’); (ii) a stability fund to finance the support 

measures  and  the  administration  of  the  support  authority  (hereinafter  the  ‘stability  fund’);  and 

(iii) an  appeal  board  with  the  authority  to  review  decisions  on  the  conditions  that  are  applied  in 

relation to support provided to credit institutions (hereinafter the ‘appeal board’). Under the draft 

law,  the  support  authority  is  given  a  broad  mandate  to  manage  problems  associated  with 

insufficient liquidity and potential future solvency problems, while making sure that the Swedish 

taxpayers are not responsible for bearing the costs of any future measures. The draft law enables 

the exercise of a wide variety of appropriate stability measures, including, inter alia, the issuance 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
of  State  guarantees,  capital  injections  and  compulsory  share  redemptions2.  Credit  institutions  can 

decide  whether  they  will  make  use  of  the  support  that  may  be  provided  under  the  draft  law. 

Participation  will  be  based  on  contractual  agreements  between  the  support  authority,  which  is 
currently  the National  Debt  Office,  and the  credit  institutions  receiving  the  support3.  In  specified 

cases, the State will also have right to redeem shares held in a credit institution, if this is justified 
by public interest4. The Government or the support authority will be responsible for administering 

the guarantee scheme, with the support authority managing and, if necessary, crediting the stability 
fund in order to finance the support measures5. 

1.2  The Financial Supervisory Authority has been assigned the task of monitoring the situation in order 

to ascertain  whether the benefits arising from the draft law are also passed on to households and 

businesses.  

2.  General observations 

2.1  The  Government  submitted  the  draft  law  to  the  Council  of  Legislation  on  20 October  2008;  the 

ECB  was  consulted  on  the  same  day.  The  draft  law  will  come  into  effect  immediately  after  a 

review by the Council of Legislation and approval by the Parliament. The Government expects this 

to occur during the week starting 27 October 2008.  

2.2  As  already  mentioned  in  recent  ECB  opinions  on  draft  national  laws  in  other  Member  States 
relating  to  emergency  measures  arising  out  of  the  current  financial  turmoil6,  it  is  important  for 

national  authorities  to  coordinate  their  responses  to  the  current  financial  situation  with  their  EU 

partners.  Given  the  similarities  of  the  causes  and  consequences  of  the  financial  crisis  across 

Member  States  and  the  potential  interdependencies  of  policy  responses,  the  ECB  notes  that 

coordination is already taking place at the international and European level to preserve confidence 

and financial stability. More specifically, the ECB refers to the conclusions adopted at the Ecofin 

meeting on 7 October 2008, which highlighted common principles to guide the action of Member 

States  as  follows:  (i)  interventions  should  be  timely  and  the  support  should  in  principle  be 

temporary; (ii) the interests of taxpayers should be protected; (iii) existing shareholders should bear 

the due consequences of the intervention; (iv) the government should be in a position to bring about 

a change of management; (v) management should not retain undue benefits; (vi) governments may 

have, inter alia, the power to intervene in remuneration; (vii) the legitimate interest of competitors 

must  be  protected,  in  particular  through  the  State  aid  rules;  and  (viii)  negative  spill-over  effects 

2  
3  
4  

5  
6  

See the first sentence of Chapter 1, Section 2 of the draft law.  
See Chapter 1, Section 4 of the draft law.  
See Chapter 4, Section 1 of the draft law. The conditions under which redemption of the shares is possible include the 
following:  (i)  the  company  or  the  shareholder  has  not  accepted  the  proposed  agreement  whose  terms  are  not  found 
unreasonable  by  the  specially  established  Appeals  Board;  (ii)  the  company  or  the  shareholder  do  not  comply  with  the 
conditions of an agreement; and (iii) the company’s capital base falls below the specified limit. 
See Chapter 1, Section 3 and Chapter 7 of the draft law.  
See, e.g., ECB Opinion CON/2008/44 of 3 October 2008 at the request of the Irish Minister for Finance on a draft Credit 
Institutions (Financial Support) Bill 2008. 

2 

 
                                                 
should be avoided7. Against this background, the ECB is pleased to note that the draft law closely 

follows these conclusions. 

2.3  On  12 October  2008,  the  Heads  of  States  of  the  euro  area  issued  a  ‘Declaration  on  a  concerted 
European  action  plan  of  the  euro  area  countries’  (hereinafter  the  ‘Declaration’)8,  in  which  they 

confirmed  their  commitment  to  act  together  in  a  decisive  and  comprehensive  way  in  order  to 

restore  confidence  and  the  proper  functioning  of  the  financial  system,  aiming  at  restoring 

appropriate and efficient financing conditions for the economy. They agreed on common principles 

to  be  followed  by  the  EU  and  euro  area  governments,  central  banks  and  supervisors  to  avoid 

national measures adversely affecting the functioning of the single market and the other Member 

States. Such coordinated approach includes initiatives aimed at: (i) ensuring appropriate liquidity; 

(ii)  facilitating  the  funding  of  banks  through  various  means;  (iii)  providing  additional  capital 

resources  to  financial  institutions;  and  (iv)  recapitalisation  of  distressed  banks.  These  principles 

were also endorsed by the European Council on 16 October 2008 for all Member States. Against 

this background, the ECB highlights that all the initiatives put in place by national governments to 

restore confidence in financial markets should be aimed at implementing such common principles, 

in the spirit of close cooperation with other Member States and EU institutions. 

2.4 

In  line  with  the  Declaration,  there  is  a  need  for  coordination  in  order  to  avoid  significant 

differences  in  national  implementation  from  having  a  counter-productive  effect  and  creating 

distortions in global banking markets. In particular, the ECB stresses that uncoordinated decisions 

related to state guarantee schemes in some Member States should be avoided as they may involve a 

fragmentation  of  money  markets  within  the  EU.  Moreover,  the  ECB  notes  that  the  draft  law 

provides  a  general  legal  framework  enabling  the  Government  to  provide  support  to  credit 

institutions,  in  the  form  deemed  appropriate  depending  on  each  credit  institution’s  situation, 

through an agreement between the support authority and the credit institution concerned. The draft 

law provides that the terms and conditions of such agreements are to be drafted according to the 

following  principles:  (i)  the  receiving  institution  and  its  owners  will  be  the  first  to  bear  any  loss 

which  arises;  (ii)  the  support  should  be  granted  under  normal  market  conditions  to  prevent  any 

distortion of competition; and (iii) the cost to the state should be as low as possible. The ECB notes 

that  these  principles,  as  set  out  in  the  draft  law,  are  broadly  in  line  with  the  common  principles 

adopted at the Ecofin meeting on 7 October 2008 and highlights that the various forms of support 

which  may  eventually  be  granted  in  the  future  will  have  to  be  consistent  with  the  principles 

enshrined in the Declaration. 

2.5  The ECB also wishes to draw the consulting authority’s attention to the recent ECB opinions issued 

at  the  request  of  other  Member  States,  where  the  ECB  has  commented  on  legislative  proposals 

7  

8  

the  press  release  of 

See 
www.consilium.europa.eu. 
The Declaration is available on the French Presidency’s website at www.ue2008.fr. 

the  2894th  Council  meeting  (13784/08),  available  on 

the  Council’s  website, 

3 

                                                 
sharing some of the features of the draft law9. It is the ECB’s intention to facilitate coordination of 

the various national efforts addressing the current financial situation, inter alia, through the timely 

adoption and publication of ECB opinions on such draft national legislation. 

3. 

Specific comments 

3.1   Conditions of support  

The  ECB  acknowledges  that  the  draft  law  is  aimed  at  ensuring  that  sound  business  practices  are 

followed  by  the  supported  credit  institutions,  that  support  is  provided  insofar  as  possible  in  a 

commercial  way,  with  the  supported  credit  institution  and  its  owners  being  the  first  to  bear  any 
losses  and  that  the  State  is  protected  against  undue  liabilities10.  The  ECB  further  notes  that  the 

share redemption mechanism provided for under the draft law allows the State to intervene using 

direct administrative powers in cases where proposed or contractually agreed measures with credit 
institutions  are  not  effective  in  ensuring  the  financial  soundness  of  an  institution11.  The  ECB 

considers  that  such  measures,  applied  in  a  non-discriminatory  and  proportional  manner,  are  in 

accordance  with  the  principles  of  the  Declaration,  in  particular  the  need  to  ensure  that  the 
shareholders and management of the credit institution bear the consequences of any intervention12. 

3.2  Prohibition on monetary financing  

The  ECB  welcomes  the  stabilising  measures,  which  are  structured  to  encourage  the  Swedish 

financial sector to take an active and responsible role in ensuring financial stability. In line with its 

9  

10  

11  
12  

See  ECB  Opinion  CON/2008/44  of  3  October  2008  at  the  request  of  the  Irish  Minister  for  Finance  on  a  draft  Credit 
Institutions (Financial Support) Bill 2008, ECB Opinion CON/2008/46 of 8 October 2008 at the request of the Belgian 
Ministry of Finance on a preliminary draft law on measures promoting financial stability and in particular establishing a 
State  guarantee  for  the  provision  of  credit  in  the  context  of  financial  stability,  ECB  Opinion  CON/2008/48  of 
15 October 2008 at the request of the Irish Minister for Finance on a draft Credit Institutions (Financial Support) Scheme 
2008, ECB Opinion CON/2008/50 of 17 October 2008 at the request of the Belgian Ministry of Finance on a draft royal 
decree  adopted  under  Article  117bis  of  the  Law  of  2  August  2002  on  the  supervision  of  the  financial  sector  and  on 
financial services; ECB Opinion CON/2008/51 at the request of the Greek Ministry of Economy and Finance on a draft 
law  on,  inter  alia,  the establishment  of  the  ‘Depositors  and  Investors  of  Credit Institutions  Compensation  Fund’;  ECB 
Opinion CON/2008/52 of 17 October 2008 at the request of the Spanish State Secretary for Economic Affairs on a Royal 
Decree-Law creating a Fund for the acquisition of financial assets and on a Royal Decree-Law adopting urgent financial 
and  economic  measures  in  relation  to  the  concerted  European  action  plan  of  the  euro  area  countries;  ECB  Opinion 
CON/2008/54 of 17 October 2008 at the request of the Danish Ministry of Economic and Business Affairs on a proposed 
Law  on  financial  stability;  ECB  Opinion  CON/2008/55  of  20  October  2008  at  the  request  of  the  Austrian  Ministry  of 
Finance on draft legal measures to ensure the stability of the Austrian financial market; ECB Opinion CON/2008/56 of 
21  October  2008  at  the  request  of  the  Banque  de  France  on  a  draft  amending  finance  law  for  the  financing  of  the 
economy; ECB Opinion CON/2008/57 of 21 October 2008 at the request of the German Ministry of Finance on a Law on 
the implementation of a package of measures to stabilise the financial market and an order on its implementation; and 
ECB Opinion CON/2008/58 of 23 October 2008 at the request of the Banca d’Italia on behalf of the Italian Ministry for 
Economic Affairs and Finance on two Decree-Laws containing urgent measures to guarantee the stability of the banking 
system  and  the  continuity  of  the  provision  of  credit.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See  the  third  sentence  of  Chapter  1,  Section  2,  the  first  sentence  of  Chapter  2,  Section  2  and  the  fifth  sentence  of 
Chapter 2, Section 2, together with Chapter 3, Section 3 of the draft law. 
See Chapters 4 and 5 of the draft law. 
See, e.g., paragraph 3.5 of ECB Opinion CON/2008/53, paragraph 3.3 of ECB Opinion CON/2008/56 and paragraph 3.5 
of  ECB Opinion CON/2008/57. 

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previous opinions13, the ECB reiterates that it is important that the implemented measures comply 

with the Treaty provisions on the prohibition of monetary financing. In particular, the draft law will 

lead to the establishment of a stability fund, which would qualify as a ‘public undertaking’ within 

the meaning of Article 101(1) of the Treaty. Although the draft law does not address the possible 

role  of  Sveriges  Riksbank  in  this  context,  the  ECB  would  remind  the  Swedish  authorities  that  a 

number of elements must be observed with regard to the stability fund in order to comply with the 

monetary  financing  prohibition  laid  down  in  the  Treaty.  First,  the  stability  fund  should  not  be 

allowed to benefit from any type of lending or overdraft facilities from Sveriges Riksbank. Second, 

should  the  stability  fund  issue  debt  instruments  in  the  future,  the  ECB  considers  it  important  to 

point  out  that  central  banks  of  the  European  System  of  Central  Banks  would  be  prohibited  from 

purchasing such debt instruments directly from the stability fund. Third, in case Sveriges Riksbank 

performs  any  activities  for  the  benefit  of  the  stability  fund,  these  activities  would  also  need  to 

comply with the monetary financing prohibition as regards the remuneration of such activities. 

3.3  Community rules on State aid and financial services 

Finally, it should be ensured that the beneficiary institution(s) will not be unfairly advantaged by 
making  undue  use  of  their  guaranteed  status14.  In  this  context,  the  ECB  draws  the  consulting 

authority’s attention to the Commission’s recently adopted guidance on compliance by the financial 
sector support schemes with EU State aid rules15, particularly since the state guarantee of interbank 

deposits  is  considered  an  option,  and  which  includes  in  the  specific  context  of  the  provision  of 
State  guarantees,  detailed  rules  on  setting  eligibility  criteria  for  the  beneficiary  institutions16. 
Further, in line with its previous opinions17, the ECB reiterates the importance of ensuring that the 

proposed arrangements will be implemented in full compliance with the relevant Community law 

provisions, including EU financial services legislation and the single market principles. 

13  

14  

15  

16  

17  

See, e.g., paragraph 3.3 of ECB Opinion CON/2008/52, paragraph 3.1 of ECB Opinion CON/2008/56 and paragraph 3.1 
of ECB Opinion CON/2008/57. 
See, e.g., paragraph 3.4 of ECB Opinion CON/2008/48, paragraph 3.1 of ECB Opinion CON/2008/50 and paragraph 3.4 
of ECB Opinion CON/2008/57. 
See  the  ‘Communication  from  the  Commission  –  The  application  of  State  aid  rules  to  measures  taken  in  relation  to 
financial  institutions  in  the  context  of  the  current  global  financial  crisis’  of  13  October  2008,  available  on  the 
Commission’s website at www.ec.europa.eu (hereinafter the ‘Commission’s guidance’). 
See paragraph 18 of the Commission’s guidance, specifying that ‘The eligibility criteria of financial institutions … must 
be  objective,  taking  due  account  of  their  role  in  the  relevant  banking  system  and  the  overall  economy,  and  non-
discriminatory  so  as  to  avoid  undue  distortive  effects  on  neighbouring  markets  and  the  internal  market  as  a  whole.  In 
application  of  the  principle  of  non  discrimination  on  the  grounds  of  nationality,  all  institutions  incorporated  in  the 
Member State concerned, including subsidiaries, and with significant activities in that Member State should be covered 
by the scheme’. 
See paragraph 2.3 of ECB Opinion CON/2008/44 and paragraph 3.5 of ECB Opinion CON/2008/48. 

5 

 
 
                                                 
This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 24 October 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

6