“The stability plan gives the government a mandate to manage problems such as liquidity shortages or potential solvency problems in the future, under predictable forms and where taxpayers’ interests are protected,” the government said in a statement.
Swedish Finance Minister Anders Borg has repeatedly stated that the country’s banks are in good financial shape and not in need of any handouts from the state.
But the banks have been affected by the global liquidity shortage.
Banks and financial institutes with liquidity problems will therefore be allowed to apply for loans from the 1500 billion kronor “guarantee programme”.
The loans will be granted for a fee and with specific conditions attached, including restrictions on management’s bonuses, raises and golden handshakes.
In addition, the government said it would create a 15 billion kronor “stability fund” to help banks in case of potential solvency problems in the future.
The proposal also enables the state to provide capital to banks in exchange for shares, and in certain situations to become a shareholder through forced redemption of shares.
The plan will be available to Swedish banks and financial institutes until April 30, 2009, though the government reserved the right to extend it until December 31, 2009 at the latest.
Analysts welcomed the proposal.
“This is a very ambitious guarantee programme, which is going to soothe concerns in the financial sector,” chief analyst at SEB bank Henrik Mitelman told Swedish news agency TT.
“It’s going to ease banks’ refinancing during the next six months,” he said.
Cecilia Hermansson, chief analyst at Swedbank, said: “This is positive. Especially the guarantee programme which is aimed at restoring confidence.”
“This will reduce banks’ loan costs, which benefits households and companies and that is exactly what is needed right now,” she said.
According to TT, the centre-right majority government is expected to present the proposal to parliament for a vote on October 27, and it would take effect on October 28.