SWEDEN: An Introduction to Banking & Finance: Regulatory
Sweden: A Country of ESG Early Adopters and the Global FinTech Hub
We can safely say that financial regulatory is a dynamically growing area in most of the countries of the world and certainly in the European Union. However, Sweden is a particularly interesting case, for a number of reasons.
The financial regulatory market in Sweden is regulated by Finansinspektionen (“The Swedish Financial Supervisory Authority,” or “The Authority”). It promotes a stable financial system that contributes to sustainable development and a high level of consumer protection. It publishes rules for financial firms and monitor compliance with these rules. The Authority’s experts also analyse the risks that could lead to instability in the financial system.
The Authority acts decisively and proactively to ensure the rules apply to everyone concerned, with no exceptions. The Authority is active in sanctioning non-compliant companies and the consequences for non-compliance may be very serious. This entails tangible financial risk as fines are not necessarily marginal amounts.
Mitigate Risks and Increasing Competitive Advantage
An “a-ha” moment for numerous companies in Sweden came when Swedbank, a large listed bank, was punished in 2020 with an administrative fine of SEK4 billion (EUR400 million) for “serious deficiencies” in its anti-money laundering programme. If a bank listed on Nasdaq Stockholm in the Large Cap segment received a hefty fine, then how about a smaller company?
This was a strong signal to the market. The Authority continuously acts in a clear manner, leaving no doubt that tolerating non-compliance by companies can lead to disastrous consequences and that there is no preferential treatment for anyone.
As a result, ensuring a professional financial regulatory compliance function is no longer viewed as a needless burden, but rather as a business-critical function with a direct impact on performance and strategic perspectives.
If handled properly, financial regulatory compliance can become a competitive advantage, eg, making it easier to attract new investors or leading to an increased company valuation.
Financial Regulatory Advisory Services: No Longer an Optional Cost
Some 15 or even ten years ago it was rather a daunting task to convince businesses to spend significant resources on properly handling financial regulatory matters. It was viewed as an optional and unnecessary cost.
Today, experienced professionals, whether working in-house or acting as external advisers, are very much in demand and nobody questions whether good service should be adequately remunerated.
Over the past few years, the number of professional service firms focusing on financial regulatory assistance has also been increasing significantly.
Such boutique advisory firms continue to emerge on the market. Some of them are regulated by the Swedish Bar Association (law firms), but there are also numerous small consulting firms.
An Idea for Future Students: Become a Financial Regulatory Expert
Demand for senior regulatory advice is growing all the time and the lack of truly experienced professionals is one of the most important issues on the market.
It sometimes may lead to situations where a relatively junior professional with just a few years’ experience may be viewed as a “senior adviser.” It also translates into a relatively high turnover of employees in financial institutions and in-house financial regulatory functions.
From the business perspective, it often also means that less experienced professionals are more inclined to say “no” to everything, because it is easier and safer. A good and experienced financial regulatory expert should be able to explain “how” in accordance with existing rules.
Welcome to the Country of ESG Early Adopters
ESG (Environmental, Social, Governance) was a big thing in Sweden long before it became a buzzword.
As a result, the Swedish financial sector has know-how, capabilities and - above all - real-life experience in ESG-related matters, which can serve as inspiration and example to companies from other countries. Today, this has proved to be - to a large extent - jurisdiction-agnostic.
In today’s international business environment ESG is becoming a standard requirement rather than just a buzzword.
We see increasing numbers of financial institutions from other jurisdictions coming to Sweden for assistance and inspiration concerning their ESG undertakings.
Stockholm: The Financial Capital of Scandinavia?
A few years ago, the City of Stockholm promoted itself with a tagline, “Stockholm – The Capital of Scandinavia.” In fact, Stockholm could be considered as the financial capital of Scandinavia and Sweden – as a global FinTech hub.
The continuously high level of activity of Swedish financing banks and asset managers is one aspect. But following Brexit we have seen a number of UK financial institutions setting up their new subsidiaries in Stockholm with the aim of benefiting from the EEA passporting system, effectively treating Stockholm as their European hub.
FinTech is a clear growth area in Sweden. Today, Klarna is one of the world’s most recognised players on the financial services arena, with USD80 billion of turnover reported for 2021.
However, there are hundreds - if not thousands – of innovative FinTech companies in Sweden, with Stockholm being viewed as a particularly attractive place for starting and developing FinTech business.
Newcomers particularly appreciate the vibrant FinTech community and easy access to potential business partners, clients and investors. They are also attracted by the Swedish lifestyle, good living conditions and friendly environment for foreigners.
Last but not least, a stable and predictable financial regulatory system is also one of the important factors attracting new players to the Swedish market.