Opinion of the European Central Bank of 26 March 2009 at the request of the Swedish Ministry of Finance on a draft ordinance amending Ordinance 2008:819 on Government guarantees to banks etc (CON/2009/30)
Date: 2009-03-26
Institutions: European Central Bank
Subjects: State aid, Sweden, bank, financial stability, guarantee, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 26 March 2009 

at the request of the Swedish Ministry of Finance on a draft ordinance  

amending Ordinance 2008:819 on Government guarantees to banks etc 

(CON/2009/30) 

Introduction and legal basis 

On 23 March 2009 the European Central Bank (ECB) received a request from the Swedish Ministry of 

Finance for an opinion on a draft ordinance amending Ordinance 2008:819 on Government guarantees to 

banks etc (hereinafter the ‘draft ordinance’). 

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 ordinance 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 ordinance 

The draft ordinance is intended to amend Ordinance 2008:819 on Government guarantees to banks and 

others,  which  was  issued  by  the  Swedish  Ministry  of  Finance  on  29 October  2008.  The  ECB  was 

consulted  on  Ordinance  2008:819  at  the  draft  stage  and  issued  its  Opinion  CON/2008/62  on 
29 October 20082. 

Under the current provisions, the Swedish guarantee scheme expires on 30 April 2009. While the scheme 

and  other  measures  have  contributed  to  the  stabilisation  of  the  financial  markets,  the  Swedish 

Government predicts that markets will not have returned to normal functioning by the end of April 2009 

and that further support is therefore required. 

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2  

OJ L 189, 3.7.1998, p. 42.  
ECB Opinion CON/2008/62 of 29 October 2008 at the request of the Swedish Ministry of Finance on a draft ordinance 
on State guarantees for banks etc. 

 
 
 
 
                                                 
To  avoid  unnecessary  uncertainty  for  affected  institutions  and  the  financial  markets,  the  Swedish 

Government therefore proposes the following changes to the existing guarantee scheme: 

(a)  Prolonging  the  period  during  which  guarantees  may  be  provided  to  31  December  2009.  The 

possibility of extending the scheme was already mentioned when it was established. The reason for 

extending  the  scheme  is  that  the  Government  wants  to  send  a  clear  signal  that  the  measures  will 

stay in place for as long as the disturbances in the financial markets remain. 

(b)  Adjusting  the  maximum  amount  of  guaranteed  instruments  per  participating  institution.  As  a 

consequence  of  the  extension  of  the  period  during  which  guarantees  may  be  provided,  the 

Government proposes to adjust the calculation of the maximum limit on guaranteed instruments per 

institution. The new limit relates to the sum of an institution’s debt instruments maturing between 

1 September 2008, and 31 December 2009 (hitherto 30 April 2009). The total limit for the scheme 

of SEK 1 500 billion of debt instruments remains unchanged. 

(c) 

Including  uncollateralised  debt  instruments  with  terms  of  up  to  five  years  in  the  scheme.  The 

Government  believes  that  three  years’  maturity  is  too  short  to  sustain  longer-term  lending.  This 

adjustment  aims  at  mitigating  the  problems  identified  by  banks  and  corporations  in  obtaining 

funding and credit with longer maturities than one to two years respectively. 

(d)  Adjusting the solvency requirements. Under the current guarantee scheme, the capital requirements 

for participating institutions are higher than the legal requirements. Only institutions with at least 

6 % Tier 1 capital and at least 9 % combined Tier 1 and Tier 2 capital qualify for the scheme. The 

Swedish government fears that this may have had unwanted consequences, by implicitly setting a 

new minimum standard for capital ratio requirements. It therefore proposes to adjust the solvency 

requirements under the scheme in order to bring them in line with the basic legal requirements. 

2. 

General observations 

2.1  Extension of the scheme 

Regarding the eight-month extension of the guarantee scheme, the ECB emphasises, in line with the 
Declaration of 12 October 2008 made at the summit of the euro area Member States in Paris3, that 

European  Union  Member  States  have  to  act  in  a  coordinated  manner,  since  harmonisation  of  the 
expiry of national financial support schemes across the EU is of crucial importance4. 

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4  

‘Declaration on a concerted European action plan of the euro area countries’ of 12 October 2008 by the Heads of State of 
the euro area, available on the website of the French Presidency, www.ue2008.fr. 
This  is  also  in  line  with  what  the  ECB  has  stated  in  its  previous  recent  opinions,  see  paragraph  3.1  of  ECB  Opinion 
CON/2009/24  of  17 March  2009  at  the  request  of  the  German  Ministry  of  Finance  on  a  draft  law  on  the  further 
stabilisation of the financial market and paragraph 3.2 of ECB Opinion CON/2009/6 of 26 January 2009 at the request of 
the Danish Ministry of Economic and Business Affairs on a proposal for a Law on State investments in credit institutions 
and a proposal for a Law amending the Law on financial stability. 

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2.2  Maturity of instruments 

Once  the  guarantee  scheme  has  been  amended  by  the  draft  ordinance,  the  ECB  understands  that 

bank debt with a maturity of up to five years may be guaranteed. In this respect, the ECB reiterates 

that  such  arrangements  for  the  granting  of  government  guarantees  on  bank  debt  should,  in  their 

practical  implementation,  aim  at:  (a)  addressing  the  funding  problems  of  liquidity-constrained 

solvent  banks  by  improving  the  functioning of  the  market  for  bank  debt of  longer  term  maturity; 

(b) preserving the level playing-field among financial institutions and avoiding market distortions; 

and  (c) ensuring  consistency  with  the  management  of  liquidity  by  Sveriges  Riksbank.  As  regards 

the extension of the State guarantee to bank debt of up to five years’ maturity, the ECB notes that 
this  measure  appears  to  be  in  line  with  the  ECB’s  recommendations5  for  the  harmonisation  and 
coordination  of  State  guarantees  across  the  EU  and  with  the  Declaration,  according  to  which  the 

euro area governments should make available a government guarantee of new medium term (up to 

five  years)  bank  senior  debt  issuance.  In  this  context,  and  given  the  integration  of  the  financial 

markets within the EU, the ECB repeats that the coverage of such guarantees must be harmonised 

within the EU as regards the maturity of the guaranteed financial instruments in order to maintain a 

level playing-field, which is here of essence.  

2.3  Capital requirements 

The ECB acknowledges that under the current Swedish guarantee scheme, the capital requirements 

for participating institutions are higher than the legal requirements, something the draft ordinance 

aims  to  change.  In  this  respect,  the  ECB  draws  attention  to  the  EU  Council  Conclusions  of 

20 January 2009 on bank capital, which state that ‘the provision of capital to the banking sector is 

not  intended  to  create  new,  higher  statutory  capital  requirements  for  the  banking  sector.  Banks’ 

capital requirements should continue to be assessed on a case-by-case basis, in line with existing 

EU  regulation,  based  on  their  individual  risk-profile  and  rigorous  stress-testing.  It  should  be 

recognised that capital provides a buffer both to withstand the challenging economic conditions and 
to maintain lending to creditworthy borrowers’6. 

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

Done at Frankfurt am Main, 26 March 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

5  

6  

The  reference is  to  the  Recommendations  of  the  Governing  Council  of the European  Central  Bank  on  the  government 
guarantees for bank debt of 20 November 2008, available on the ECB’s website at www.ecb.europa.eu. 
See the Council conclusions on bank capital, as adopted by the Council (ECOFIN) on 20 January 2009. 

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