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Sweden unveils SEK 50 bln capital scheme for banks

  Sweden unveiled plans on Tuesday to inject up to SEK 50 billion ($6 billion) into its financial sector as one of the Nordic country’s top banks said it was eyeing a capital boost.

The coalition government said the plan to infuse capital into solvent banks and financial institutions was needed to kickstart lending to Swedish households and companies.

Sweden slipped into recession in the third quarter and its export-dependent economy is seen shrinking by as much as 2% this year, hit by the global economic downturn. “The financial crisis has hit us hard,” Swedish Finance Minister Anders Borg told a news conference. “Partly in the shape of the impact on our financial system, but also due to the fact that our export companies have historically been dependent on the larger international banks."

The Swedish capital scheme, which would require a two-year freeze on wages and bonus payments at any bank taking part, would be financed through a stability fund which the government set up towards the end of last year. The planned size of the fund is SEK 150 billion.

The government, worried the credit crunch would further dampen already lackluster economic activity, said late last year it was considering following in the steps of other European countries that have set up schemes to pour capital into banks. Borg said he expected it could take another six to 12 months before financial markets began operating normally again.


Separately, Swedish bank SEB said it was considering raising capital with the backing of its main owners, though no decision had been taken yet. SEB shares were briefly suspended at the market opening and fell 5.1% after trade resumed, underperforming a flat Swedish blue chip market.

A Swedish newspaper, citing sources, reported on Tuesday that the bank was preparing to raise SEK 15-20 billion ($1.8 billion-$2.4 billion) through a new share issue. That compares with a market capitalization of SEK 24.2 billion, according to Thomson Reuters data. SEB shares have fallen more than 50% over the past three months.

“SEB confirms that a capital increase is considered with support of its core shareholder base, but no decision has been taken,” the bank said in a statement. “A statement on this matter will be made in due course.” The share issue would be the second to be carried out by a major Swedish bank in recent months, after SEB rival Swedbank announced a rights issue to boost its capital position at the end of last year.

The Nordic region’s banks face the risk of mounting loan losses due to the economic downturn spawned by the financial crisis, both in their home markets and in the Baltic countries where SEB and Swedbank have expanded rapidly in recent years. (Reuters)