The past two years have seen corporate bonds emerge as a natural alternative to bank loans on the Swedish financial market. While traditional bank loans remain the first-choice financial solution for most corporations, demand for bonds has grown significantly over the past decade. Recently introduced national and European regulations have set out new information requirements for existing and new bond prospectuses.
The Financial Supervisory Authority recently agreed on more stringent amortisation requirements for home mortgages. The debt burden on Swedish households has long been a concern for regulators, and the authority is now taking an activist approach in an effort to mitigate the risk of a widespread crisis in case of a downturn in the housing market.
A case regarding the enforceability of an electronic promissory note was recently decided by the Supreme Court. The court investigated whether the relevant electronic loan document was to be viewed as a non-negotiable or negotiable instrument, and settled that it was indeed a non-negotiable promissory note. This meant that the requirement to present an original document to the Enforcement Authority did not apply.
The Supreme Court recently clarified how to interpret joint and several liability when the creditor settles with one of the debtors and simultaneously releases that party from any future claims. The court concluded that the foundation of a joint and several liability between debtors is that the debtor that repays more than its pro rata share of a loan has a right to recover and claim the exceeding amount from the other debtor or debtors.
Consumer credit may be granted only after the creditor has assessed the consumer's creditworthiness. The assessment must be based on sufficient information, as stipulated in the EU Credit Directive and the Consumer Credit Act. However, neither the directive nor the act defines 'sufficient information'. In a recent Administrative Court case, the Consumer Agency argued that a creditworthiness assessment based on details from a creditor's scoring model did not give sufficient information.
The government recently issued directives for a commission of inquiry to analyse the market for crowdfunding and peer-to-peer lending. As Sweden has yet to introduce regulations that explicitly address crowdfunding platforms or peer-to-peer lending, the directives contain instructions to consider which laws apply to the different forms of crowdfunding and whether new legislation and penalties are required.
The EU regulation enabling the new European account preservation order procedure – a single mechanism under which creditors can freeze all of a debtor's bank accounts in all participating member states – will apply from January 2017. To facilitate its application, procedural rules have been developed that designate the Swedish Enforcement Authority as responsible for obtaining the relevant information on a debtor's bank accounts.
Sweden has now implemented the EU Bank Recovery and Resolution Directive into law, mainly through the Act on Resolution and the Act on Prevention of State Aid to Credit Institutions. To comply with the Act on Resolution, Swedish financial institutions must ensure that a correctly drafted bail-in recognition clause is included in their agreements where any liabilities are governed by non-European Economic Area law.
The Supreme Court recently granted leave to appeal in a Court of Appeal case regarding the enforceability of an electronic copy of a negotiable promissory note. There is a lacuna in the law because although a negotiable promissory note can be executed using an electronic signature, it cannot be enforced without presenting the original paper copy of the promissory note.
The Supreme Administrative Court recently referred a case to the European Court of Justice (ECJ) for a preliminary ruling regarding value added tax (VAT) in respect of the virtual currency Bitcoin. The ECJ found that virtual currency exchanges shall be considered as the provision of services for compensation, and that such transactions are exempt from VAT.
The Supreme Court has granted leave to appeal in a case concerning loan prohibition under the Companies Act. The relevant legal provision states that a company cannot lend money or grant security to a specific category of affiliated persons – including shareholders, directors and deputy directors.
The Supreme Court recently granted leave to appeal in a case regarding the question of whether shares held by a company for industry-related purposes should be included in a business mortgage. The kind of shares that should be included in a business mortgage will be relevant to banks in order to decide the value of the business mortgage and whether there is a need for a separate pledge of a company's holding of minority shares.
The Supreme Court has granted leave to appeal in a case concerning a loan from a company to its deputy director, who argued that the loan had been made before his appointment. The court had to consider whether the borrower was part of the restricted group at the time of entering into the loan agreement or at the time of the loan payment.
The Supreme Court recently discussed whether transactions made by a partnership can be challenged based on capital protection rules that apply only to its general partner. The court accepted that the Companies Act and its capital protection rules may apply in relation to the actions taken by a limited liability company when acting as a general partner.
The new EU Capital Requirements Directive puts pressure on Swedish financial institutions to make necessary adjustments in their management bodies. To implement the new directive, the Swedish Ministry of Finance has proposed including provisions on limiting the number of directorships that any director of a financial institution can hold.
The Financial Supervisory Authority has issued binding provisions for credit institutions. The new regulation contains stringent requirements on internal rules, procedures and processes of credit institutions. However, some critics claim that its provisions are overly broad, and that it will be difficult for credit institutions to apply the regulation from a risk-based approach due to its high level of detail.
The Swedish Bankers' Association recently decided to implement EU principles in the framework regulating the Stockholm Inter-Bank Offered Rate (STIBOR). Before the reform, banks on the STIBOR panel were jointly responsible for how the benchmark rate was determined. To strengthen STIBOR's credibility the Swedish Bankers' Association assumed responsibility and established a STIBOR committee.
The Swedish Securities Dealers Association recently issued a form of standard terms and conditions for high-yield bonds on the securities market. The terms and conditions are designed to apply to secured or unsecured bonds, senior or subordinated bonds and fixed or floating rate bonds. They are expected to increase efficiency in the documentation of certain practical matters, where drafting has varied among issuers.
A Swedish appeal court recently ruled on a bank's liability for loss suffered by a borrower as a result of the bank's failure to obtain possession of a real estate mortgage certificate. The court ruled in favour of the bank and ordered the defendant to repay the amount due under the loan. The verdict implies that courts will impose a relatively high threshold for a pledgee to be considered negligent to the point of incurring liability for damages.
The Supreme Court recently ruled on the liability of two individuals who had assisted in a scheme to defraud Santander. The defendants had signed an agreement in which they falsely confirmed delivery of a boat and a cash payment. Santander sued for damages. The court's opinion was divided, but it was decided that the defendants should pay one-fifth of Santander's loss.