Sweden

Country Name Sweden
Country Region Western Europe

Economic and Political Environment

The Banking Environment

The banking industry is very advanced with nearly all types of services offered both to the individual corporate customer and to the individual private consumer. All leading domestic banks are universal banks, offering mortgages and insurance. 

There was much consolidation in the 1990s following the secondary banking crash. The market is dominated by a small number of large banks.

The central bank is the Riksbank. It is a member of the European System of Central Banks.

Financial supervision is vested in the “Finansinspektionen”.

Compared to most European countries prices and fees for banking services are quite high in Sweden, although there are no lifting fees for cross-border payments. Sweden has adopted the EU regulation on cross-border payments: an “EU-payment” can cost as little as SEK1,50; prices on higher amounts are always expressed as flat fees..

Both current accounts in SEK and foreign currencies are offered. Interest is applied for credit balances depending on the currency and the balance held.

Overdraft facilities are granted. Terms and conditions are negotiated on a case by case basis.

The “Stockholm Interbank Offered rate” (STIBOR) is the benchmark interest rate in SEK.

All fiscally resident companies are subject to a 28% corporation tax on their profits.

Cash Management Features

Activity is highly automated with major activity inside the Bankgirot and Plusgirot systems. Rather than hold accounts in both and maintain liquidity in both, it is possible to hold accounts just at the Nordea group, into which the Plusgirot has been subsumed.

The EUR has emerged as a parallel domestic currency for business, notwithstanding Sweden’s rejection in 2003 of EUR membership. The old E-RIX system that was connected to TARGET and used to settle domestic EUR trade has been abolished. EBA is now used to settle EUR transactions.

Group account (Balance netting) is the preferred Liquidity Management technique domestically, and can be used for both single and multi-currency. Zero balancing is also available domestically and is getting more common than earlier due to multinational corporate customer. 

Tax Considerations

 See Tax and Legal template for Sweden.

Central Bank Reporting

All payments between residents and non-residents have to be reported, it used to be to the Riksbank but has now changed into the National Tax Board when the amount exceeds SEK100,000. The banks usually provide the resident with forms pre-filled from the transaction details and ask that the form be returned within 12 working days.

Where residents hold bank accounts outside Sweden and the account turnover in the month exceeds SEK100 million, the transactions and balance on that account must be reported to the National Tax Board.

Foreign Exchange Controls

None.  

Payments and Collections 
Payment infrastructure in Sweden 

Most Swedish companies have a business account in a Swedish bank. The majority of domestic non-cash payments are effected through the two giro systems, PlusGirot and Bankgirot.

PlusGirot

The PlusGiro system is a part of Nordea. Thus, Nordea is the only bank in Sweden that can provide a connection to both PlusGirot and Bankgirot in SEK or EUR, meaning an all-in-one account for all the payments regardless if they are routed through the PlusGiro or the Bankgiro system.

Bankgiro

The Bankgiro system is operated by Bankgirocentralen AB (BGC), a bank-owned subcontractor of payment processing services. All banks in Sweden participate in the Bankgiro system. It functions as an automated clearing house (ACH). Payments can be made in SEK or EUR.

3.1 Payment Instruments

The vast majority of activity clears electronically: there is a high degree of automation. This is supported by very high usage of internet for payment initiation. There is still a form of paper-based credit transfer but the clear growth is in electronic initiation.

This extends to electronic bill presentment, where the debtor can initiate a credit transfer in their electronic banking by clicking through form the bill itself.

In terms of volume, credit transfers and debit cards are the most used, whilst in terms of value it is credit transfers.

Sweden has a high density of ATMs and EFTPOS, and this is the part of the payments market that is growing most dynamically.

Cheques

Cheque usage is negligible in Sweden.

This is due largely to high fees applied by banks and the fact that cheque guarantees only apply to amounts below SEK 2,000, which effectively limits cheque usage to low-value retail transactions.

Electronic Payments

The RTGS system in Sweden is operated by the Riksbank.

Domestic credit transfers are made in one of three ways:
· Bankgirot network (the BankGiro system which is run by the BankGiroCentralen or BGC, and which is fully interoperable with Plusgirot)
· Plusgirot network (this is the former Postgirot Bank or Postal Giro system but which is now part of Nordea)
· Data Clearing subsystem of Bankgirot – for faster credit transfers and where no giro number is quoted. The system is also the one that clears truncated cheques, and retail card operations

Bankgirot can also process domestic credit transfers in EUR between accounts at its participants.

K-RIX

This is the SEK RTGS system and runs on the same principles as any other RTGS.

There is no minimum transaction size. However, operations up to SEK500,000 are settled in batches at predetermined points in the day with net settlement of the batches. Operations over SEK500,000 settle individually and at once. K-RIX operates from 07:00 until 17:00 CET.

21 institutions participated in it as of 2005, all direct. The accounts they hold at the Riksbank are the ones on which balances in “Bankgirot” and its “Data Clearing” subsystem settle, as well as transactions from other subsystems (stock exchange, derivatives exchange).

E-RIX

Domestic interbank transactions in EUR previously processed by E-RIX are now processed bilaterally between banks or by Euro Banking Association’s pan-European EURO1 multilateral netting system (in which Sweden’s largest four banks participate).

Cross-border payments in EUR formerly processed by E-RIX can either be processed by EURO1, by TARGET (via Swedish banks’ branches in the eurozone) or bilaterally between banks.

ACH

As stated above, there are three circuits for credit transfers

Bankgirot and Plusgirot are separate systems, each handling the same kind of transaction. Plusgirot is in effect Nordea-internal, but the two are also interoperable.

Bankgirot at the end of 2006 had 19 direct and 78 indirect participants.

Data Clearing handles credit transfers and all other payments means. Flows through the system are captured by BGC as part of the settlement of the Bankgirot activity and are included in the credits and debits to participants’ accounts in K-RIX. Data Clearing had 23 participants at the end of 2006.

Plusgirot is portrayed, in the 2006 ECB Blue Book, as having had 1,020,000 participants at the end of 2004, then none at all in 2005. The 2004 participants are all classed as “Others”, i.e. not Credit, Public, Postal, Clearing or Financial institutions – it meant the number of account holders.

The breakdown of activity across the three systems in 2005 was as follows, instrument-by-instrument, squaring up with the total activity in the ECB statistics:

BGC has recently announced a plan to use the UK Vocalink platform for its processing, rather than to re-invest in owned technology.

ACH Credits

Most companies and individuals hold an account in both Plusgirot and Bankgirot systems, even though they are now interoperable. Prior to that, Plusgirot transfers are made by quoting the recipient’s Plusgirot number, if the bank account number were to be quoted, the transaction would be picked up as a priority item and be cleared through the Data Clearing instead.

Bankgirot transfers are made by quoting the recipient’s giro number, the Bankgiro number is only a payment address and not a real bank account. The bankgiro number must always be connected to a real bank account in any of the Swedish banks. For instance, the bankgiro number can be connected to the PlusGiro bank account number giving the Plusgiro the advantage of making all types of payments from one single account. Both Plusgirot and Bankgirot payments can be cleared same-day, up to late afternoon, though it is cheaper for the client to have them cleared on a next-day basis, for which the system closes to further payments at 19:00 each evening.

Since the Plusgirot accounts are all with Nordea, there is no “settlement” process at the end of the day. Nordea would simply not make the payment if the ordering party did not have the cash on the account or a credit line.

The settlement of the Bankgirot system occurs by means of the BGC totalling the balances of payments sent bilaterally between participants, and then the results are credited or debited to the participant’s account in K-RIX.

ACH Debits

There are two types of Direct Debit:
· Autogiro Privat (=private or consumer)
· Autogiro Foretag (=company)

Direct debits are made payable to a Bankgirot number.

The “Privat” version involves the consumer authorising a company to present them, and the presentation is not final: the consumer enjoys reclaim rights.

The “Foretag” version involves the debtor company authorising its bank specifically to pay claims presented by the creditor, such that the debtor has limited rights of reclaim through the banking system.

Cards

Debit cards linked to bank accounts are the dominant card, and they invariably have the following features:
· Can be used at any ATM
· Widely used at any of the 176,000 or so EFTPOS terminals
· Link to Visa or Mastercard
· “Cash card” function (see below)

Mainstream debit card has been the fastest growing part of the market.

Credit cards have never played a major role in Sweden.

The transactions from Cash card and debit cards are cleared through Data Clearing. The Proton technology behind the Cash card collects all cash card transactions stored in EFTPOS terminals once a day, and providers each issuing bank with a file of what monies are due from the Cash cards they issued to account-holders at their own bank and other banks. These files are effectively BGC payments that are then included in the next-following Data Clearing cycle.

Liquidity Management

While in principle a customer would need accounts in Postgirot and for Bankgirot, a Nordea-held account is good for both.

Concentration or Group accounts (Balance Netting) are the preferred techniques within Sweden because:

• All accounts can be held at one bank since there are nationwide banks, eliminating the need to move funds across banks
• There is no withholding tax on interest between residents so this complication on inter-company loans does not exist
• Swedish banks have difficulty in offering notional pooling because they cannot achieve the necessary offsets against their capital ratios

For the same reason that there is no withholding tax restriction on interest, it is frequent to include Swedish companies’ balances in regional pools:

• SEK in a pan-Scandinavian pool
• EUR in a pan-European pool

It should be noted, though, that there is a Swedish legal restriction against loans by a Swedish company to a parent that is outside the EU or EEA, for example directly to a US parent. This is regarded as a disguised dividend potentially reducing the capital in Sweden available to pay creditors

In addition, the Swedish Companies Act contains wording that stops the shareholders and the board from taking any action that is “likely to give undue advantage to a shareholder or third-party to the detriment of the company or other shareholders”. This is also a consideration for the board of a Swedish company when being asked to participate in a regional scheme.

Electronic Banking