SWEDEN Law and Practice Contributed by: Richard Engblom, Per Josephson, Anna Cumzelius and Amin Bell, Harvest Advokatbyrå
Quantitative requirement for the stable net financing ratio (Pillar 1) In addition to the binding minimum requirement for the LCR, there has been a binding require - ment for the stable net financing ratio (NSFR) in EU regulations since 2021. The NSFR require - ment means that a company must have suffi - cient stable funding to cover its financing needs over a one-year horizon under both normal and stressed conditions. The NSFR requirement in EU regulations is set at 100%. Risk Management The SFSA’s regulations and general guidelines (FFFS 2014:1) regarding governance, risk man - agement and control at credit institutions apply to Swedish banks and impose an obligation on banks to ensure they have an appropriate, transparent organisational structure with a clear allocation of functions and areas of responsibility that ensure sound and efficient governance of the undertaking and enable the SFSA to conduct efficient supervision. Banks need to have a risk management frame - work containing the strategies, processes, procedures, internal rules, limits, controls and reporting procedures required to ensure that the company may, on an ongoing basis, identify, measure, govern, internally report and exercise control of the risks to which it is or could perceiv - ably become exposed. Banks must further have a procedure for regu - larly reporting the risks that exist or which could perceivably arise in the operations to the board of directors and the risk committee, if such has been appointed, the managing director and other functions that require such information, so that they receive reliable, current and complete reports in a timely manner.
A bank must set clear boundaries (limits and mandates) for the person who is to make deci - sions within the framework of the company’s risk appetite.
9. ESG 9.1 ESG Requirements Swedish Developments
In November 2022, the Swedish Central Bank (SCB) published a report on banks’ transparency requirements and Pillar 3. The report highlights a growing but still insufficient understanding of the impact of climate change on living conditions and the economic system. It emphasises the critical gap in knowledge about climate change and the financial system’s role. This gap is par - ticularly concerning given the potential for sig - nificant negative impacts on the financial system and the crucial role the financial sector can play in mitigating and managing the effects of climate change. For several consecutive previous years, the SFSA has had sustainable finance as a priori - tised area of supervision, such as the risk of greenwashing or not fully taking climate-related risks into account when assessing risks in finan - cial activities. Even though sustainability was not specifically mentioned as a prioritised area for supervision in 2024, it is evident that the SFSA has continued to focus on this. For example, as part of a common supervisory activity initiated by ESMA, the SFSA started an in-depth analysis in September 2024, focusing on how Swedish banks and investment firms take consumers’ preferences on sustainability into account when providing investment advice and portfolio management.
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