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Swedish debt office sets MREL targets for 10 financial firms

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Swedish debt office sets MREL targets for 10 financial firms

The Swedish National Debt Office set the minimum requirements for own funds and eligible liabilities, or MREL, for ten financial institutions it deemed critical to the Swedish financial system.

The requirements apply from Jan. 1, 2018, and are already met by all ten institutions, the agency noted.

Nordea Bank AB (publ) and Skandinaviska Enskilda Banken AB were given MREL requirements of 28.9% and 26.9% of their risk-weighted assets, respectively, and total liabilities and own funds requirements of 7.1% and 7.7%. MRELs for Svenska Handelsbanken AB (publ) and Swedbank AB (publ) were set at 35.3% and 34.8%, respectively, with their total liabilities and own funds requirements at 6.6% and 7.3%.

SBAB Bank AB (publ) and Landshypotek Bank AB have the highest MREL targets at 52.1% and 51.5%, respectively. Their total liabilities and own funds requirements were set at 5.3% and 10.4%, respectively.

Insurer Länsförsäkringar AB (publ) and Swedish Export Credit Corporation were given MREL requirements of 28.8% and 28.0%, respectively, and total liabilities and own funds targets of 6.2% and 7.1%.

Skandiabanken AB (publ) and Sparbanken Skåne AB (publ)'s MREL targets were set at 19.3% and 22.3%, respectively, with their total liabilities and own funds requirements at 6.8% and 10.7%.

The debt office said it also intends to apply a number of principles for how MREL targets should be met and on characteristics that eligible liabilities must have.

One is the liabilities proportion principle, which requires that MREL should be met with a certain amount of debt instruments from Jan. 1, 2018. The debt office said it intends to apply the principle on the ten institutions beginning July 1, 2018.

Another is the subordinated liabilities principle, which requires that MREL be fully met with subordinated liabilities by Jan. 1, 2022, at the latest. The principle will initially apply to Nordea, SEB, Handelsbanken and Swedbank, the debt office said, adding that it will assess in 2018 whether there are grounds to make exceptions for the six other firms regarding the principle.

Separately, the Swedish central bank announced the completion of the Basel III Accord, which is intended to be introduced in full Jan. 1, 2027.

The regulator said it expects major banks' minimum capital requirements to increase from current levels as a result of the accord, although their total capital requirements will continue to be set by Finansinspektionen, the Swedish financial supervisory authority.

Parts of the accord that are expected to affect the banks' capital requirements the most are the floor for risk-weighted assets, changes to the framework for the banks' internal models and the leverage ratio requirement, the central bank noted.