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Bond-financed lending - the Swedish Regulator clarifies its position
- Sweden
23-02-2021
On 18 February 2021, the Swedish Financial Supervisory Authority (FSA) clarified its position on bond-financed lending in the financial regulatory context of the Swedish Banking and Financing Business Act (Banking Act) by way of a published statement on the authority’s website.
More specifically, the statement addresses the question of under what circumstances bond financing may constitute “taking of repayable funds from the public” within the meaning of the Banking Act and the definition of “financing business” and, as such, be subject to authorisation requirement as credit institution if combined with lending activities.
In short, the FSA notes that bonds are indeed to be regarded as “repayable funds” within the meaning of the Banking Act, and concludes that bond financing is generally to be regarded as taking of repayable funds “from the public”, unless the issuer is able to ensure that the bonds will not be owned by the public; neither by the initial investors, nor by secondary market investors. This could, theoretically, be achieved by subjecting the bonds to certain transfer limitations.
The FSA’s statement is certainly well received by us and market participants plagued by the lack of harmonisation at an EU level of key notions of the banking regulations, as it provides another piece of the regulatory jigsaw puzzle.
The FSA’s statement is available in Swedish here.
We have during the past year successfully represented clients in proceedings with the FSA in relation to the subject matter of the FSA’s statement, as well as other directly linked ancillary regulatory questions that must be considered when contemplating bond-financed lending – questions that the FSA’s statement does not shed light on.
If you have any questions, please do not hesitate to contact our experienced members of the financial services group:
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.
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