Sweden achieves medium overall compliance with international standards and codes, with a score of 48.33 out of 100 in our Standards Compliance Index. The country went down from a high overall compliance level since our last round of updates owing principally due to the lack of recent and public information regarding the country's compliance with Corporate Governance and Banking Supervision standards. Where relevant information is publicly available, Sweden generally scores well in its compliance with international standards, the only exception being accounting, where as a EU member state, Sweden requires the use of the International Financial Reporting Standards only in the consolidated and not the annual accounts of listed companies; and they are not permitted for use in the annual accounts of any type of companies. Sweden fairs well in the Macroeconomic Policy and Data Transparency standards achieving high compliance levels. Sweden's financial infrastructure such as payment systems is also well-functioning with only minor shortcomings. In the areas of Anti-Money Laundering and Securities Regulation Sweden has in place the necessary legal and institutional framework but lacks adequate enforcement thereby placing Sweden in the 'enacted' category. Lastly, in Auditing, Sweden as a EU member, plans to adopt International Standards on Auditing.

Macroeconomic Policy and Data Transparency

Sweden became a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) in May of 1996, and as of June 29, 2000, met all SDDS specifications for its posted metadata. Sweden provides summary methodologies for all SDDS datasets, and disseminates advance release calendars on the IMF's SDDS website. Data coverage, timeliness, and periodicity are all in line with SDDS specifications, although Sweden avails itself of the timeliness flexibility option for its production index data. With regards to the integrity and quality dimensions of the SDDS, however, information provided on its website indicates that Sweden does not provide advance notice of methodological changes for several data categories and has no information for several data points regarding the dissemination of component detail and statistical cross-checks. The IMF's 2001 data module Report on the Observance of Standards and Codes (ROSC) found that Sweden provided a supportive legislative and institutional environment for its statistical system, provided appropriate resources for the tasks at hand, and displayed an appropriate level of awareness regarding the need for quality statistics. It found that professionalism, transparency, and ethics were recognized as important guiding principles and appropriate practices were in place. However, the report noted areas where improvements could be made and a 2002 IMF ROSC update reported that work was in progress at the time to address these deficiencies. More »

Sweden's monetary policy is highly transparent, according to the IMF's 2002 Financial System Stability Assessment (FSSA). According to the FSSA, there is high compliance with the IMF's code of monetary policy transparency, and the roles, responsibilities, and objectives of the relevant agencies -- the Sveriges Riksbank (SR), the Swedish Financial Supervisory Authority (FI), and the National Debt Office -- are clearly delineated in law. The FSSA suggested that there could be greater clarification as to the SR's autonomy in exchange-rate activities and a greater distinction between the roles of the SR and the FI in certain areas of mutual responsibility. Sweden is a subscriber to the IMF's SDDS, and meets or exceeds all requirements for timeliness, periodicity, and coverage as established by the SDDS. More »

The IMF's 2000 Fiscal Report on the Observance of Standards and Codes found that, in general, Sweden's policies and practices are in accord with the IMF's fiscal transparency code, adding that efforts to improve transparency were ongoing. At the time of the report, progress had already been made to strengthen the budget process and legislative framework. A 2005 Article IV Consultation report suggested the creation of an independent agency that could provide input in the budget process, particularly with regard to how well policy accorded with the prescriptions of the budget framework. At the time, Swedish authorities found the suggestion unnecessary and impracticable. The 2007 Article IV Consultation reiterated this suggestion, again meeting resistance. Swedish authorities argued that such an agency would be better used to offer ex-post performance evaluations than ex-ante budget input. In 2006, the Open Budget Index rated Sweden's budget process at 76%, or "substantially open," based on its publication of six out of the seven key budget documents tracked by the Open Budget Initiative. More »

Institutional and market infrastructure

According to the European Commission's Expert Group "Best Project" final report dealing with restructuring and bankruptcy, published in 2003, Sweden had fully adopted 24 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. In addition, Sweden had almost fully adopted 12 of these principles, partially adopted three, and had not adopted one. The IMF found in 2002 that Sweden's insolvency and bankruptcy system is "highly developed" and supported by an efficient court system. Since that time, a number of sources have noted reforms in Swedish insolvency legislation, all of which aim to strike a better balance between protecting the rights of creditors while permitting the reorganization of troubled but otherwise viable firms. Many of these reports specify the relative rarity of reorganization, and cite as a primary cause of this the existing scheme by which creditors' claims, particularly the claims of banks, tend to work toward the detriment of the reorganization process. As noted in the World Bank's 2008 Doing Business report, Sweden's average time and cost of bankruptcy proceedings are 2 years and 9% of the debtor estate, respectively, compared to the Organization for Economic Cooperation and Development (OECD) averages of 1.3 years and 7.5%. Return to creditors for Sweden at 74.7 cents on the dollar is slightly above the OECD average of 74.1. More »

According to the Swedish Accounting Standards Board (BFN) website, Swedish accounting practices are primarily governed by the mandatory Annual Accounts Act (AAA) and the Book-Keeping Act, supplemented by specific requirements for unlisted, listed and financial companies. The BFN issues standards for unlisted entities which, per the 2002 update on the IAS Plus website, are similar to the Swedish standards issued for listed entities, but offer significant relief for smaller companies. As explained in the 2005 KPMG report, prior to 2005 listed entities were required to comply with Financial Accounting Standards Council-issued accounting standards (RRs), interpretations, and guidelines. RRs differ from the International Financial Reporting Standards (IFRSs) in that modifications were made to reflect local legal requirements. Moreover, departures from AAA when those were in conflict with international requirements were not permitted. However, starting in January 2005, in line with the European Commission Regulation No. 1606/2002, listed companies in Sweden are required to use IFRSs in their consolidated accounts. The 2006 European Commission report on the implementation of Regulation No. 1606/2002 points out that Sweden permits IFRSs in the consolidated accounts of all types of companies, although the use of IFRSs in the annual accounts is prohibited for all companies. Financial companies, including credit institutions and insurance companies, are subject to standards issued by the Swedish Financial Supervisory Authority. More »

According to a 2002 report by Weil, Gotshal, and Manges, Swedish legislation (particularly the Companies Act) and listing rules include detailed corporate governance requirements. However, the 2002 IMF's Financial System Stability Assessment suggests that the regulation of issuers is below international standards, particularly regarding enforcement. In July 2005, the Swedish Code of Corporate Governance was enacted on a comply-or-explain basis as a supplement to the Companies Act and other legislation. Its purpose is to improve overall corporate governance through self-regulation and to address issues of poor corporate governance and decreasing investor confidence. However, the 2006 OMX Surveillance annual report indicates that determining company compliance with the Code is difficult, as the corporate governance reports contain only general information, and supporting information is sometimes difficult to find. A 2006 report by Anders Backman indicates that a new Companies Act, including amendments to the corporate governance framework, entered into effect in January 2006. Also in 2006, legislation was proposed to improve shareholders rights and disclosure. Overall, however, the publicly available information does not comprehensively address Sweden's compliance with the Organization of Economic Cooperation and Development's Principles of Corporate Governance. More »

According to the December 2006 self-assessment by the Swedish accounting and auditing authority (FAR SRS), Sweden adopts International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Board (IAASB) as the Swedish Standards on Auditing (SSAs), although with modifications to reflect local legal requirements. No further information on the extent of compliance of SSAs with ISAs is publicly available. On May 17, 2006, Directive 2006/43/EC of the European Parliament and the Council came into force, requiring all statutory audits of annual and consolidated accounts to be carried out on the basis of ISAs as adopted by the European Commission. Accordingly, European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. More »

The Financial Action Task Force (FATF) published a mutual evaluation report on Sweden in 2006 and concluded that the legal framework prevailing in Finland to prevent money laundering and terrorist financing is generally comprehensive and encompasses most of the elements of the Vienna and Palermo Conventions. However, Sweden's anti-money laundering/combating the financing of terrorism (AML/CFT) regime does not appear to be effective in terms of implementation, evidenced from the low number of prosecutions and convictions. Preventive measures and the sanctions regime for financial institutions and designated non-financial businesses and professions (DNFBPs) are also generally broad, but with weak enforcement. The Swedish financial intelligence unit, the Financial Police, is found to be competent, but it lacks adequate resources. Other law enforcement officials in Finland are also competent. The country also has a comprehensive framework for national and international cooperation. The FATF in its 2006 report recommended, among other things, that Sweden broaden its AML/CFT regime to enable more robust supervision, broaden customer due diligence and record keeping requirements for financial institutions, designate AML/CFT supervisors for the DNFBP sector, and maintain more statistics on AML/CFT law enforcement. The FATF report finds that Sweden is in the process of aligning its legislation with the third European Union Money Laundering Directive, which requires member countries to fully implement all FATF recommendations and special recommendations. More »

The two main payment systems in Sweden are the real-time gross settlement system, the RIX, and the retail payment system, the Bankgirot (BGC). Although the Swedish central bank, Sveriges Riksbank (SR), does assess both systems against the Core Principles for Systemically Important Payment Systems (CPSIPS), only the RIX has been clearly defined as a systemically important payment system by the SR. In its 2002 assessment of Sweden's payment system, the IMF concluded that the RIX broadly complies with the CPSIPS and noted that the system has a well-founded legal basis, with transparent rules and regulations, high operational reliability, and a clear statement of the rights and obligations of all parties. Further, a 2007 report by SR details the results of a self-assessment on the RIX system against the CPSIPS. The report indicates that RIX observes all but one core principle (CP), namely CP II, which it broadly observes. RIX, as a component of the Euro area's now deactivated Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET), was assessed by the European Central Bank (ECB) in 2004 and was found to have fully observed seven out of the ten CPSIPS and broadly observed two. One principle was not applicable in the Swedish context. A 2007 report by the ECB states that Sweden has decided not to participate in TARGET2 (the successor to TARGET), which came into force in November 2007. As a result, the E-RIX system (the euro component of RIX) was discontinued at the end of 2006. The country is in the process of modernizing the RIX by updating its operating system to further reduce running costs and increase efficiency. More »

Financial Regulation and Supervision

The IMF conducted a Financial System Stability Assessment (FSSA) of Sweden in 2002 and concluded that overall the unified regulator, the Swedish Financial Supervisory Authority (FI), exhibits a high degree of compliance with international standards and codes. The report, however, does not specifically address Sweden's overall compliance with the Basel Core Principles (BCPs). The FI is the authority in charge of banking supervision in the country. The FSSA also noted that although Sweden has a sound legal framework and prudential regulations in place, there are several shortcomings in regulations and implementation that impedes Sweden's compliance with the BCPs. The main shortcomings identified by the report relate to the FI's inadequacies in staff and resources, the FI's limited scope for remedial action, and the lack of proper regulations relating to country risk, operational risk and exchange rate risk. The Swedish authorities, per the FSSA, were cognizant of some of the deficiencies in the supervisory regime, and had started working towards their amelioration. A more recent IMF report, the 2006 Article IV, notes that the legislative framework for bank resolution still needs improvement. More »

The framework for regulation and supervision of the securities markets is well developed and satisfactory, and there is full or partial observance of all of the International Organization of Securities Commissions' Principles, according to a 2002 FSSA by the IMF. The assessment did raise a number of issues, however. Chief among these is the fact that the FI lacked sufficient legal authority to adequately enforce compliance with securities laws or to react effectively to non-compliance concerns short of withdrawing a license. As the FI cannot apply penalties directly to regulated entities, it has to rely on the public prosecution function and as a result, enforcement tools are limited. Enforcement is further hampered by the FI's lack of authority over individual employees of investment firms or ability to compel evidence or production of documents from third parties. Given the increasing integration of Nordic/Baltic financial markets through the OMX exchange group, supervisory arrangements between the regulation authorities, currently in the form of Memoranda of Understanding, may have to be strengthened, as a 2007 IMF paper contemplated. More »

The insurance sector in Sweden is supervised by the FI, an integrated financial sector supervisor. The main laws that govern insurance business and supervision are the Insurance Business Act and the Insurance Contracts Act. The 2002 FSSA conducted by the IMF found Sweden fully or partially compliant with the Insurance Core Principles promulgated by the International Association of Insurance Supervisors (IAIS) in 2000. However, the IAIS revised its principles in 2003 and there is little subsequent information publicly available as to Sweden's compliance with the new, more stringent Insurance Core Principles. Per the FSSA, Sweden has the general prerequisites for adequate supervision largely in place, and as of 2002, the insurance sector laws are in conformity with the European Union directives. The FSSA, however, notes that gaps in the regulatory framework and a paucity of staff resources have weakened the FI's capabilities for effective risk-based supervision of the insurance sector. The IMF calls for an amendment of the Insurance Business Act. The 2008 Press Release by the FI, available from its website, indicates that the FI has introduced a traffic-light model of risk assessment to monitor and evaluate the insurance companies' capital reserves, resistance to extreme turbulence in the financial markets, and ability to fulfill their commitments to their customers in adverse conditions. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 455.3 billion USD (IMF)

2007 GDP (Per Capita): 49,655 USD (IMF)

2008 GDP (Growth Forecast): 2% (IMF)

2008 Inflation (CPI): 2.8% (IMF)

2007 Unemployment: 4.5% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 27.2 billion USD (UNCTAD)

FDI (Outward): 24.6 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 3955 million USD (OECD)