State aid: Commission approves Swedish scheme to recapitalise banks

The European Commission has approved, under EC Treaty state aid rules, a Swedish aid scheme intended to bolster the financing of the real economy by providing capital to banks. The scheme is in line with the Commission’s guidance on support measures for banks during the financial crisis. In particular, the measures are limited in time and require a significant proportion of private investment alongside with the state intervention. The Commission therefore concluded that the scheme is an adequate means to remedy a serious disturbance of the Swedish economy and as such in line with Article 87.3.b of the EC Treaty.

Competition Commissioner Neelie Kroes said: "The Swedish recapitalisation scheme should contribute to strengthening the confidence in the Swedish banking sector and, above all, to provide finance to the real economy in these difficult times. The scheme is building on private contributions to the recapitalisation, which gives sound incentives to the markets.”

 

The Swedish recapitalisation scheme allows the Government to provide share capital or hybrid capital to be counted as bank Tier 1 capital. The state will only provide capital if a substantial contribution is provided by private investors (at least 30% of the total investment). The state will then participate in the recapitalisation on the same terms as the private investors.

The fact that the state will invest on equal footing with private investors can be regarded as ensuring that the capital is provided at market rates as foreseen in the Commission's guidance on bank recapitalisation. Recapitalisation will also carry with it certain constraints on corporate remuneration. The Financial Supervisory Authority (Finansinspektionen) will regularly monitor the lending of recapitalised banks towards households and companies in the real economy and provide public reports on a monthly basis.

 

The Commission found the scheme to constitute an appropriate means to bolster the Swedish financial sector and to stimulate lending to the real economy. The measures are well-designed and interventions will be limited to what is necessary to achieve their objectives. Sweden will regularly report to the Commission on the implementation of the aid scheme.

 

The non-confidential version of the decision will be made available under case number N 69/2009 in the State aid register on the DG Competition website once any confidentiality issues have been resolved.