The Riksbank takes action to support the distribution of the SEK 500 billion – will the SFSA follow?

That´s the SEK 500 billion question.

The Swedish Riksbank has decided (policy meeting at the 26th of March) to temporarily enlarge the circle of monetary policy counterparties whereby all credit institutions under supervision of the SFSA are entitled to apply and participate in the SEK 500 billion credit expansion programme primarily targeting SMEs.

By signing a special agreement, the institutions will become temporary monetary policy counterparties and thereby have access to loans, issued against collateral, at a variable interest rate corresponding to the Riksbank’s repo rate, presently 0 per cent.

FCG appreciates the initiative by the Riksbank to broaden the range of institutions that can access the facility but highlights the hurdle that the collateral requirements are posing. Since the collateral requirements coincides with the collateral that is mandated under the current liquidity requirement regulation, this makes it complicated for mid- and small sized institutions to participate since it may have a significant impact on the LCR calculation. Many of these institutions interacts with the corporate segment that is in the most need of the additional temporary credits and FCG highlights two potential solutions:

• A decision from the SFSA that collateral used for accessing the Riksbank facilities can be acknowledged, partially or fully, in the liquidity reserve.
• A temporary change in terms and conditions from the Riksbank which allow other types of collateral to be posted when accessing the facilities. Examples would be portfolios of prime credits on the balance sheet.

Which alternatives do you see that will enable you to take part of the emergency loans so you will have the opportunity to pass it through to struggling SMEs?

Please let us know if you need advice on the application process or on how your liquidity and capital requirements might be effected.