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Swedish Debt Office expands MREL principle to key mid-sized banks

The Swedish National Debt Office, or Riksgäldskontoret, said all 10 financial institutions deemed critical to the country's financial system must meet the two principles it set for how the minimum requirements for own funds and eligible liabilities, or MREL, should be met and on characteristics that eligible liabilities must have.

The country's six mid-sized banks — Landshypotek Bank AB, Länsförsäkringar Bank AB (publ), SBAB Bank AB (publ), Skandiabanken AB (publ), Sparbanken Skåne AB (publ) and AB Svensk Exportkredit — are now also required to meet the subordinated liabilities principle, which requires that MREL be fully met with subordinated liabilities by Jan. 1, 2022.

Previously, the principle only applies to the country's four biggest banks — Nordea Bank AB (publ), Skandinaviska Enskilda Banken AB, Svenska Handelsbanken AB (publ) and Swedbank AB (publ).

The other liabilities proportion principle, which requires that MREL should be met with a certain amount of debt instruments from Jan. 1, 2018, already applies to all 10 financial institutions.

The new regulations require banks to build a solvency buffer that can absorb losses in the event of a resolution.