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Sweden set to remove favorable treatment for subordinated debt

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Sweden set to remove favorable treatment for subordinated debt

Sweden is set to push through changes to tax law that woulddeprive banks and nonlife insurers of favorable treatment for subordinateddebt, including Additional Tier 1 bonds, Thomson Reuters' IFR reported Sept. 21.

The changes would mean that coupon payments on subordinateddebt would no longer qualify for a tax deduction, something analysts at Bank ofAmerica Merrill Lynch said would amount to additional tax receipts for Swedenequivalent to about 2% of total 2015 profit for the country's four largestbanks. The analysts also noted comments by Sweden's finance minister, MagdalenaAndersson, that the changes would push banks to issue more equity, somethingthat "can increase the banks' resilience in times of crisis," accordingto the report.

Sweden's legislature is expected to pass the measure in theautumn, with the new law taking effect in January 2017, IFR said.

One banker told the newswire that Swedish companies affectedby the change will have to continue issuing subordinated debt, given global andEuropean standards that require them to build up a backstop of loss-absorbingbonds.

Sweden's four biggest commercial banks are , ,Nordea Bank AB (publ)and Svenska Handelsbanken AB(publ).