Sweden’s fund industry is grappling with two key pieces of regulation and law that look set to influence the propensity to use funds by certain end investors, according to comments from the Swedish Investment Fund Association (Fondbolagens förening).
On 13 November, the Swedish Financial Supervisory Authority, Finansinspektionen, announced new rules around amortisation requirements. It proposed that from 1 March 2018, new loans secured against residential property, where the value of the loan exceeds 4.5x gross income, will see borrowers required to amortise at a minimum rate of 1% – in addition to any existing amortisation requirements.
FI said that the objective if the new regulation is to increase the resilience of Swedish households to macroeconomic “disturbances”.
The ultimate decision on introducing the proposal rests with the Swedish government, but Per Bolund, minister for Financial Markets and Consumer Affairs, commented that he would press for introduction of the rules as soon as possible.
For households, the new rules could have an impact on their propensity to use funds as part of their overall savings plans, according to the Fund Association.
“If FI’s new proposal of a demand for increased amortisation goes through it will of course, for certain groups in society, result in that amortisation taking a bigger share of any room for savings,” the Association said in a statement provided to InvestmentEurope.
“We believe that it is important to ensure low levels of household debt, but also to ensure that households have balance in their savings and the opportunity to create a buffer for different needs, both for living as well as pensions, saving for children and so on,”
There are, however, other regulatory influences affecting the local fund market that the Association and its members are facing.
“For the securities market there are new commission rules. Companies that describe themselves as offering independent advice will not be able to receive and retain commission, nor provide advice about own products. Other advisers will have to show that commission raises the quality of the service to the customer and that the commission is proportional relative to the benefit the customer receives.”
“For insurance brokers the rules for advice are likely to look different in Sweden, just like in the original EU proposal. On the insurance side the rules are expressed as the advisers, when they take a commission, should be able to show that the customer is not hurt by the advice.”
“The objective of the new legislation is of course to increase consumer protection. We believe that it is confusing for consumers that different rules apply to different types of financial advisers. It is reasonable to believe that the regulatory framework will harmonise sooner or later.”
Sweden’s new law on the distribution of insurance comes in response to the EU’s Insurance Distribution Directive. Sweden’s proposed legislation (available here: en-ny-lag-om-forsakringsdistribution-ds-201717 ) has raised questions in regards to the impact on the local fund industry, because of the impact on financial advisers who are technically regulated by the stream of insurance law, rather than being treated simply as financial advisers in the area of investments.
The Association noted its concerns when the legislation was put out for consultation. It is meant to come into effect 23 February 2018, according to Sweden’s Ministry of Finance.