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THE BANKING BUSINESS ACT

(SFS 1987:617)

[Amendments up to 1 March, 2000]

Chapter 1. Introductory provisions

Section 1. This Act contains common provisions for banks regarding the business which a bank may conduct and also regarding supervision, etc. In addition, this Act contains certain specific provisions for banking companies and provisions concerning auditing, general examinations, damages, etc., and names of savings banks and members banks. In this Act, “bank” means banking companies, savings banks, and members banks. In this Act, “banking company” means a limited liability company licensed to conduct banking business. That which is prescribed in relation to companies in general shall apply to banking companies, unless otherwise prescribed by this Act or as prescribed separately. Where references are contained in the Swedish Companies Act (SFS 1975:1385) to the provisions of the same Act and, where the provisions of this Act apply in lieu of, or in addition to, the provisions of the Companies Act, such references shall refer in lieu of, or in addition to, the provisions of this Act in conjunction with matters concerning banking companies. Provisions regarding the manner in which savings banks and members banks are established and their organisation, etc., are contained in the Savings Banks Act (SFS 1987:619) and the Members banks Act (SFS 1995:1570). In this Act, a bank’s “by-laws” means regulations for savings banks and by-laws for members banks. Each bank must have a head office in Sweden. Foreign banking undertakings which conduct business via branch offices in Sweden are subject to the provisions of this Act, where applicable, and are otherwise subject to the Foreign Branch Offices Act (SFS 1992:160). This Act shall not apply to operations conducted by the Central Bank of Sweden or the Swedish National Debt Office. (SFS 1999:911).

Section 2. In this Act, “banking business” means operations which include the acceptance of deposits on account where the balance is determined in nominal amounts and is available to the depositor on short notice. Banking business may only be conducted following authorisation (charter). Authorisation may only be given to banks. Provisions regarding the entitlement of foreign banking undertakings to conduct banking business are contained in sections 4 and 5. (SFS 1999:222).

Section 2a. Where an undertaking accepts customer funds on account, such do not constitute deposits as referred to in Section 2, first paragraph, provided the balance for each customer does not exceed SEK 15,000 and the balance is only available to the customer: 1. for payment for goods and services which are produced or sold by the undertaking or by another undertaking in the same group or in the same group of undertakings with close economic affiliation; or 2. in connection with the closure of the account. (SFS 1995:1572).

Section 2b. Banking business in accordance with Section 2, first paragraph shall not be deemed to exist when an economic association conducts deposit operations, provided the association: 1. receives deposits only from its own members; 2. only intends to use members’ deposits to satisfy the financing requirements of the members; 3. only accepts natural persons as members; and 4. has no more than 1,000 members. (SFS 1995:1572).

Section 2c. An undertaking which offers deposits on account in accordance with sections 2 a or 2 b shall specify in conjunction with its advertising, displays, and other marketing of account services that the balance on the account is not covered by the deposit guarantee in accordance with the Deposit Guarantees Act (SFS 1995:1571). Prior to execution of an account agreement in accordance with sections 2 a or 2 b, the account operator undertaking must inform the depositor that the balance on the account is not covered by the deposit guarantee. The information must be provided in writing. The Marketing Practices Act (SFS 1995:450) shall apply in the event an undertaking fails to provide the information set forth in the first or second paragraphs or information which is otherwise of particular significance from a consumer perspective. (SFS 1995:1572).

Section 3. For the purposes of this Act: 1. “EEA” means the European Economic Area; 2. “Qualified holding” means direct or indirect ownership in an undertaking where the holding represents ten per cent or more of the share capital or the voting capital or where the holding otherwise renders it possible to exercise significant influence over the management of the undertaking; 3. “Branch office” means an independently managed branch office. Where a foreign banking undertaking is established in Sweden in accordance with Section 4, first paragraph, sub- Section 1, or Section 5, sub-Section 1, the establishment shall be regarded as a single branch office notwithstanding that several operating locations have been established. A banking undertaking and another undertaking shall be deemed to have a close affiliation where: 1. one undertaking, directly or indirectly via a subsidiary or subsidiaries, owns 20 per cent or more of the share capital or controls 20 per cent or more of all voting capital in the other undertaking; 2. one undertaking directly or indirectly constitutes the parent company of the other undertaking, or there is another similar affiliation between the undertakings; or 3. both undertakings are subsidiaries of, or possess a similar affiliation with the same legal entity, or have a corresponding relationship to a single natural person. Close affiliation also exists between a natural person and a banking company where the natural person: 1. owns more than 20 per cent of the share capital or controls more than 20 per cent of all of the voting capital in the banking undertaking; or 2. in some other manner exercises such influence over the banking undertaking that the person’s position is equivalent to that held by a parent company in its relationship to a subsidiary, or where there is another similar affiliation between such natural person and the banking undertaking. (SFS 1996:746).

Section 4. A foreign banking undertaking may: 1. conduct banking business via branch offices following the grant of a licence to do so; or 2. following notification to the Swedish Financial Supervisory Authority, conduct operations which primarily relate to representation and brokering of banking services from offices or other permanent establishments (representative offices). An application for a licence in respect of the establishment of a branch office in accordance with the first paragraph, sub- Section 1 shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional significance shall be determined by the Government. A licence for the establishment of a branch office in accordance with the first paragraph, sub-Section 1 shall be granted where: 1. the planned business may be assumed to fulfil the requirements of a sound banking operation; and 2. deposits with the branch office are covered by the guarantee in accordance with the Deposit Guarantees Act (SFS 1995:1571), or by a foreign guarantee which covers deposits as referred to in Section 2 of the Deposit Guarantees Act and which have a maximum compensation level of not less than an amount corresponding to 20,000 euros prior to any deductions, where applicable, for excess in an amount not exceeding 10 per cent of an individual depositor’s guaranteed deposit. A licence may not be denied on the basis that no further banks are required. (SFS 1999:159). Banking undertakings domiciled in another country within the EEA

Section 5. A licence pursuant to Section 4 is not required for banking undertakings which maintain their registered office in a country within the EEA and which hold a licence to conduct banking business in such country (the “home country”). Such undertakings may: 1. conduct banking business via branch offices in Sweden commencing two months following receipt of notification by the Financial Supervisory Authority from a competent governmental authority in the undertaking’s home country containing the information set forth in Section 6, second paragraph, or prior thereto, where the Financial Supervisory Authority grants permission to commence such operations; 2. conduct banking operations by offering and providing services from its home country commencing at such time as the Financial Supervisory Authority receives notification from a competent governmental authority in the undertaking’s home country which contains the information set forth in Section 8. (SFS 1997:116). Operations in a country outside of the EEA

Section 6. A banking company may, pursuant to a licence from the Financial Supervisory Authority, establish a branch office in a country outside of the EEA. Such a licence shall be granted where the intended business may be assumed to fulfil the requirements of a sound banking operation. Applications for a licence must contain: 1. a plan for the contemplated branch office’s operations, with information in respect of the branch office’s organisation; and 2. information in respect of the country in which the branch office is to be established and the address of the branch office and the names of the responsible management. (SFS 1997:116).

Operations in a country within the EEA

Section 7. A banking company which intends to establish a branch office in another country within the EEA must inform the Financial Supervisory Authority prior to the commencement of operations. The notification must contain the information set forth in Section 6, second paragraph. Where there is no cause to call into question the bank’s administrative structure or financial situation, the Financial Supervisory Authority shall, within three months of receipt of the notification, forward the same to the competent governmental authority in the country in which the branch office is to be established. The Financial Supervisory Authority shall append to the notification information in respect of the size of the bank’s capital base and capital adequacy ratio, in addition to information regarding the deposit guarantee and the investor protection applicable to the bank’s customers. When the Financial Supervisory Authority forwards the notification pursuant to the second paragraph, the Financial Supervisory Authority shall inform the bank of the same. Where the Financial Supervisory Authority finds that there is no cause to forward the notification referred to in the second paragraph, the Financial Supervisory Authority shall render a decision in respect of the same within three months from the date of receipt of the notification. (SFS 1999:159).

Section 7a. The branch office may commence operations two months after the competent governmental authority in the other country receives the information pursuant to Section 7 or, prior thereto, where the governmental authority grants authorisation to commence operations. (SFS 1997:116). Section 7 b. Where any of the conditions set forth in the bank’s notification to the Financial Supervisory Authority pursuant to Section 7 must be amended after the branch office is established, the bank must notify the Supervisory Authority and the competent governmental authority in the other country not later than one month prior to the implementation of the amendment. Where the Financial Supervisory Authority finds that the amendment may not be effected, the Supervisory Authority shall render a decision in respect of the same within one month from the date of receipt of the notification by the Supervisory Authority. The competent governmental authority in the other country must be informed of the decision immediately. In the event of a change in the deposit guarantee or investor protection as referred to in Section 7, second paragraph, the Financial Supervisory Authority shall notify the competent governmental authority in the country in which the branch office is situated in respect of the change. (SFS 1999:159).

Cross-border operations

Section 8. A banking company which intends to conduct operations in another country within the EEA by offering and providing services without establishing branch offices in such country shall inform the Financial Supervisory Authority prior to commencing such operations. The notification shall contain information in respect of the country in which the operations will be conducted and the services to be offered. The Financial Supervisory Authority shall, within one month from the date of receipt of the notification, forward the same to the competent governmental authority in the country in which the operations will be conducted. (SFS 1997:116).

Other general provisions

Section 9. No body other than a bank, the Central Bank of Sweden, the Swedish General Mortgage Bank and such banking undertakings as referred to in sections 4 or 5 may use the word “bank” in its name or otherwise in conjunction with a description of its business. However, an association or other legal entity with a close affiliation to an undertaking as referred to in the first paragraph may, following authorisation by the Financial Supervisory Authority, use the word “bank” in its name. Notwithstanding the provisions of this section, an undertaking subject to the Pawnbrokers Act (SFS 1995:1000) may use the words “pawnbroker” in its name or otherwise in its business. (SFS 1995:1001).

Section 10.

An individual’s relationship to a bank may not be unduly disclosed. The provisions of the Secrecy Act (SFS 1980:100) shall apply instead to the public sector. A person who contravenes the prohibition set forth in the first paragraph shall not be subject to criminal liability pursuant to Chapter 20, Section 3 of the Swedish Penal Code. The above-stated shall also apply to an auditor who contravenes the prohibition against disclosing information regarding a bank’s operations set forth in Chapter 3, Section 14, first paragraph. Section 5 a of the Credit Information Act (SFS 1973:1173) contains provisions whereby the duty of confidentiality in accordance with the first paragraph does not prevent the exchange of information in certain cases for the purpose of obtaining credit information. (SFS 1997:557).

Section 11. Where a bank is part of a group, the provisions of this Act and the Capital Adequacy and Large Exposures (Credit Institutions and Securities Companies) Act (SFS 1994:2004) regarding the bank’s business and supervision of the bank shall apply, where applicable, to other undertakings within the group. The limitations imposed on the bank’s business shall relate to the undertakings jointly. The first paragraph shall not apply to insurance undertakings and such subsidiary undertakings of insurance undertakings which do not conduct any form of financial operations. Where special cause exists, an undertaking may be granted a further exemption from the provisions of the first paragraph. Issues regarding such exemptions shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance may be determined by the Government. Group contributions may only be given by the bank following the consent of the Financial Supervisory Authority. Other undertakings within the group shall provide the Financial Supervisory Authority with any information regarding their operations and any circumstances connected therewith which the Supervisory Authority requires in order to exercise its supervision of the bank. (SFS 1999:222).

Chapter 2. The business Operations

Section 1. A bank is obliged to accept deposits on account from the general public. (SFS 1992:1613).

Section 2. Subject to compliance with the provisions of this Chapter, a bank may: 1. borrow funds, inter alia, by issuing bonds or other similar debt instruments; 2. grant and broker loans, inter alia, in the form of consumer loans and loans secured by real property or instruments of indebtedness; 3. participate in conjunction with financing, inter alia, by acquiring claims and leasing personal property; 4. negotiate payments; 5. provide means of payment; 6. issue guarantees and assume similar obligations; 7. participate in issues of securities; 8. provide financial advice; 9. hold securities in safekeeping; 10. conduct documentary credit operations; 11. act as a custodian institution for securities funds; 12. participate in sales of insurance services; 13. provide debt collection services; 14. provide bank safe deposit services; 15. conduct currency trading; 16. conduct securities business subject to the conditions prescribed in the Securities Operations Act (SFS 1991:981); and 17. provide credit information subject to the conditions prescribed in the Credit Information Act (SFS 1973:1173). In addition, a bank may conduct operations which have a natural connection with deposits or with operations as set forth in the first paragraph, sub-sections 1-15. The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority, may issue detailed regulations regarding what operations a bank may conduct. Where special cause exists, a bank may be authorised to provide postal services. Issues regarding such authorisation shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. (SFS 1999:222).

Section 3. A foreign banking undertaking which conducts operations pursuant to Chapter 1, Section 4, sub-Section 1 or Chapter 1, Section 5, may conduct such operations as referred to in Section 2 only to the extent such operations are covered by the banking undertaking’s licence to conduct operations in the country in which the undertaking maintains its registered office. (SFS 1992:1613).

Section 3a. A bank’s operations must be conducted by the bank’s own personnel and at the bank’s own premises. However, withdrawals from accounts without passbooks may also be provided in another manner. The Financial Supervisory Authority may grant a bank a licence to provide the following services on behalf of the bank via agents outside the bank’s premises, namely: 1. deposits into bank accounts; 2. withdrawals from bank accounts with passbooks; and 3. payment transfer services. The Financial Supervisory Authority may also grant a bank a licence to provide specifically stated services other than those stated in the second paragraph through certain specified agents outside the bank’s premises. A licence in accordance with the second and third paragraphs may only be granted if: 1. the bank is liable for the operations to the customer; and 2. there are grounds to believe that the operations will be conducted in a monitored and secure manner. (SFS 1995:1572).

Section 4. A bank may acquire: 1. real property, site-leasehold interests in government land and tenant owners’ rights in order to obtain premises for the operations or to satisfy requirements connected therewith; 2. shares or interests in undertakings which have the sole object of managing real property or site-leasehold interests in government land which are intended for the purposes stated in sub- Section 1 above; 3. equipment which is acquired for the business or property owned by the bank or for premises otherwise held by the bank; 4. real property, site-leasehold interests in government land, and tenant owners’ rights to provide accommodation for any person employed by the bank; and 5. personal property to be leased. (SFS 1991:1018). Section 5. A bank may acquire another bank’s business, provided the acquisition is not be deemed to be prejudicial to the public interest. Authorisation is required for the acquisition where the acquisition relates to all or a significant part of the business. Issues regarding such authorisation shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. (SFS 1999:222). Section 6. Following authorisation, a bank may acquire shares or interests in a Swedish or foreign banking undertaking or in a Swedish or foreign undertaking the objects of which may be deemed beneficial for the banking system or the general public. Issues regarding such authorisations shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. The provisions of the first paragraph shall also apply to issues concerning guarantee fund certificates or subordinated debentures issued by undertakings referred to in the first paragraph. The issuance of guarantee fund undertakings shall be deemed to be the equivalent of the acquisition by the bank of guarantee fund certificates. Section 6 a applies to the acquisition of shares or interests in insurance undertakings. (SFS 1999:222).

Section 6a. A banking company may be authorised to acquire shares or interests in a Swedish or foreign insurance undertaking, and a savings bank or members bank may be authorised to acquire shares in a Swedish insurance company, where the acquisition is included as a part of the organisation of the operations. Issues regarding such authorisation shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. (SFS 1999:222).

Section 7. Repealed. (SFS 1991:1018).

Section 8. In order to secure a claim, a bank may: 1. at a public auction or on a Swedish or foreign securities exchange or an authorised marketplace, or at a public auction, purchase property which is subject to levy of execution or which constitutes security for the claim; and 2. as payment for the claim, take over property which constitutes security for the claim or other property where there is reason to assume that the bank otherwise would suffer significant loss. The first paragraph shall not apply to shares in the bank itself or shares in the parent company. The provisions of Chapter 7, Section 2 of the Companies Act (SFS 1975:1385) apply to the acquisition of such shares. Nor shall the first paragraph apply to certificates regarding interests in, or contributions to, members banks. The provisions of Chapter 5, Section 7, first paragraph of the Savings Banks Act (SFS 1987:619) apply to questions concerning a savings bank’s acquisition of certificates for contributions to guarantee funds or the paid-up capital of savings banks. In exchange for property purchased or taken over in accordance with the first paragraph, a bank may acquire shares in a company which is formed in order to manage the property or to continue operations which are conducted with such property. Where shares have been acquired in accordance with the first or third paragraphs, the bank may acquire further shares in the same company where there is an obvious risk that the bank will otherwise suffer significant loss. Where shares have been acquired pursuant to the first, third, or forth paragraphs the bank may exchange such acquired shares for shares in the transferee company in the event that the company transfers its assets to another company. Property acquired by the bank in accordance with this Section shall be disposed of as soon as such is deemed appropriate taking into account the market conditions. However, the property must be disposed of as soon as such a disposal may be made without giving rise to a loss for the bank. The bank shall annually submit a separate report regarding the property to the Financial Supervisory Authority. (SFS 1998:1500).

Capital adequacy and cash reserves

Section 9. Provisions regarding capital adequacy and large exposures are contained in the Capital Adequacy and Large Exposures (Credit Institutions and Securities Companies) Act (SFS 1994:2004). A bank’s capital base may not be less than the amount which was required in accordance with Chapter 9, Section 4, second paragraph of this Act, and Chapter 2, Section 2, second paragraph of the Savings Banks Act (SFS 1987:619), or Chapter 1, Section 4, second or third paragraphs of the Members banks Act (SFS 1995:1570) at the time the business was commenced. As regards a bank which has changed its accounting currency, the capital base may not be less than the highest of the amounts as referred to in sections 6 and 7 of the Change of Accounting Currency (Financial Undertakings) Act (SFS 2000:35).

Section 9a. Repealed. (SFS 1994:2007).

Section 10.

A bank must maintain satisfactory payment ability taking into account the scope and nature of the business. The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority, may issue detailed regulations regarding payment ability. (SFS 1995:1572).

Currency position

Section 11.

The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority, may issue regulations regarding a bank’s maximum permitted currency position. (SFS 1996:1001).

Section 12. Repealed. (SFS 1994:2007). Lending

Section 13.

Loans may only be granted provided there is due cause to believe the borrower will fulfil the loan obligation. In addition, satisfactory security is required in real property or personal property or in the form of a guarantee. The bank may waive such security, however, where such is deemed unnecessary or where there are specific reasons to waive the requirement for such security. The provisions set forth in Chapter 7, Section 2, first paragraph of the Companies Act (SFS 1975:1385) regarding the prohibition against a company accepting its own shares as security shall also apply to subordinated debentures issued by a banking company. A savings bank may not accept as security subordinated debentures issued by the savings bank, nor may it accept as security certificates of contributions to guarantee funds or to paid-up capital in the savings bank. A members bank may not accept as security subordinated debentures issued by the bank, nor may it accept as security certificates of interests in, or contributions to, the bank. (SFS 1998:1500).

Section 14.

A loan agreement executed between the bank and the customer may not include a provision subordinating the bank’s claim to the other claims of the borrower’s other creditors. Pursuant to authorisation, a bank may, however, agree upon such terms and conditions as referred to in the first paragraph in conjunction with the granting of loans to another bank, foreign banking undertakings, or such Swedish or foreign undertakings the purpose of which may be deemed to be beneficial to the banking system or the general public. Issues regarding such authorisation shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. Further provisions regarding the entitlement to grant loans subject to terms and conditions as stated in the first paragraph are set forth in Section 15 a. (SFS 1999:222).

Section 15.

Other than in accordance with the provisions of Section 15 a, a bank may not in loan agreements or its business generally reserve the right to a share of the profits of transactions which the bank is not entitled to conclude. Nor may a bank in any other manner be granted a share of the profits of operations which the bank is not entitled to conduct itself. The aforementioned, however, does not apply to share dividends or any other rights vested in the bank as an owner of shares. (SFS 1991:1768).

Section 15a. In addition to that which is set forth in sections 4, 6, 6 a, and 8, a bank may acquire shares equal to thirty per cent of the capital base and may grant loans subject to such terms and conditions as referred to in sections 14 and 15. Such holdings and obligations in a single undertaking may not exceed an aggregate of five per cent of the limit. Where the bank is part of a group, the limitations set forth in the first paragraph shall apply to each undertaking within the group with the exception of insurance undertakings and such subsidiaries of insurance undertakings which do not conduct any form of financial operations. A shareholding pursuant to the first paragraph may not, without the consent of the Financial Supervisory Authority, exceed five per cent of the voting capital for all of the shares in the company. Where the bank is part of a group, this limitation shall apply to the group’s total shareholdings. However, in conjunction with the calculation of the group’s holdings, shares which are held by insurance undertakings within the group or by subsidiaries of insurance undertakings shall be disregarded. Where, following the acquisition, any of the limits in this Section are exceeded, the holding or the obligations shall be disposed of to the extent of the excess as soon as such disposal is appropriate. (SFS 1999:1126).

Section 16.

Repealed. (SFS 1994:2007).

Section 17.

A bank may not grant a loan to the following persons subject to terms and conditions different than those normally imposed: 1. a member of the board of directors; 2. a delegate in a management position who, alone or together with a third party, is authorised to determine lending matters incumbent on the board of directors; 3. an employee who hold a senior position within the bank; 4. shareholders or owners of interests other than the State with a holding equal to at least three per cent of the issued share capital; 5. a spouse or cohabitee of a person referred to in sub-sections 1-4 above; or 6. a legal entity in which such persons as referred to in sub-sections 1-5 have a significant financial interest in their capacity as owners or members. Nor may a members bank grant a loan to a lay auditor of the bank subject to terms and conditions other than those normally applied by the bank. The Financial Supervisory Authority shall determine whether a delegate or employee holds such a management position as referred to in the first paragraph, sub-sections 2 and 3. The bank’s boards of directors shall include information in a register concerning loans granted to persons or undertakings referred to in the first and second paragraphs. The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority, may issue regulations regarding which information shall be included in the register. The first to fourth paragraphs shall apply mutatis mutandis to loans secured by guarantees or debt instruments issued by any person as referred to in the first or second paragraph. The aforementioned shall also apply to a claim which the bank acquires and for which any person referred to in the first or second paragraph is obligated to make payment. (SFS 1999:911).

Section 18. The provisions regarding loans set forth in sections 13-15 a and Section 17 shall also apply to guarantees issued by the bank. (SFS 1995:1572).

Section 19.

The maturity date for loans shall be determined in such a manner that the date is in accordance with the terms and conditions of the bank’s obligations. Where a loan is not redeemable within a period of one year, the bank shall reserve the right to demand repayment not later than within the stated period. However, the bank may grant loans with terms in excess of one year which are not subject to the reservation set forth in the second paragraph up to an aggregate amount which, from time to time, corresponds to not more than 25 per cent: 1. of the shareholders equity and deposits for banking companies and members banks; 2. of own funds and deposits for savings banks. The provisions of the second and third paragraphs shall not apply where the State, a municipality, or organisation comparable therewith is either wholly or partly liable for the repayment of a loan. (SFS 1995:1572).

Section 20.

Repealed. (SFS 1991:1018).

Specific provisions Section 21.

Passbooks or other evidence of funds on account issued by a bank must be issued to a specific person and must contain a provision that a transfer may only take place to a specific person and that the transfer should be notified to the bank. The bank may not agree to reserve the right to effect payment to any person other than the lawful holder of a passbook. Special provisions apply to notification of loss and cancellation of lost passbooks.

Section 22.

The decision of a bank to establish a branch office shall be notified to the Financial Supervisory Authority without delay. The above-stated shall also apply to a bank’s decision to acquire another bank’s business or part thereof pursuant to Section 5. Acquisitions undertaken to protect claims pursuant to Section 8 must be notified to the Supervisory Authority according to the detailed regulations issued by the Government or, pursuant to authorisation by the Government, by the Financial Supervisory Authority. (SFS 1991:1768).

Section 23. A person lacking legal capacity may, without the consent of the guardian, dispose of funds which the minor himself deposited with the bank from such time that he attains the age of sixteen. The bank may not disburse such funds to the guardian without the consent of the minor. The minor may no longer dispose of such funds where the guardian has obtained the consent of the chief guardian to take charge of the funds and has produced evidence of such consent. Such restriction on the minor’s entitlement must be recorded in the deposit receipt or in the passbook upon production of the receipt or passbook at the bank. Funds managed by a guardian, trustee, or administrator in accordance with the Code on Parents, Guardians, and Children may be only be withdrawn without the consent of the chief guardian where a reservation has been made in accordance with Chapter 14, Section 8 of the aforementioned Code or interest is withdrawn. Pursuant to Chapter 14, Section 21 of the Code on Parents, Guardians, and Children, the chief guardian may order that such a reservation shall not apply. The order shall be recorded on the receipt or in the passbook issued in relation to the deposit. The bank is obliged upon request of a chief guardian, guardian, trustee, or administrator to issue a receipt for the amount of the funds which are deposited or represent the balance and, where applicable, shall certify that the notified consent has not been utilised. Where parents are guardians, they may withdraw funds managed by them in accordance with the Code on Parents, Guardians, and Children without the consent of the chief guardian provided the funds have not been stated as having been deposited subject to the reservation that they may not be withdrawn without consent or that they are subject to specific chief guardian control in accordance with Chapter 16, Section 11, of the Code on Parents, Guardians, and Children. The chief guardian may, pursuant to Chapter 13, Section 19 of the aforementioned Code, order other restrictions on the parents’ entitlement to withdraw funds. The limitations on the entitlement to withdraw funds as referred to in this paragraph shall be recorded on the receipt or passbook issued in relation to the deposit. (SFS 1994:1445).

Chapter 3. Auditors of savings banks and members banks

Section 1. Savings banks and members banks must have at least two auditors. The auditors shall be elected by the general meeting unless it is otherwise prescribed in the by-laws that one or more of such persons, however, not all persons, shall be elected in another manner. An auditor’s term of office applies for the period specified in the by-laws. Where the term of office shall not apply for an indefinite period, the term shall be determined so that the office expires at the end of the annual general meeting at which an election of auditors shall be held. The general meeting may appoint one or more alternate auditors. The provisions of this Act, the Savings Banks Act (SFS 1987:619), and the Members banks Act (SFS 1995:1570) shall apply to alternate auditors, where applicable. (SFS 1998:1500).

Section 2. Each person entitled to vote in a savings bank or in a members bank is entitled to propose that a request be made to the Financial Supervisory Authority to appoint an auditor (additional auditor) to participate in the audit together with the other auditors. The proposal shall be presented to the general meeting where the election of auditors shall take place, or where the proposal according to the notice of the general meeting shall be addressed. The Financial Supervisory Authority shall, upon request of a person entitled to vote and following consultation with the bank’s board of directors, appoint an auditor for the period up to and including the annual general meeting during the next financial year, provided the proposal is supported: 1. in a savings bank, by not less than one tenth of all trustees or one third of all those trustees present; or 2. in a members bank, by not less than one tenth of all persons entitled to vote or one third of those persons present and entitled to vote. In a members bank, holders of subordinated debentures may make a request to the board of directors for the appointment of an additional auditor. Where such a request is made by holders of subordinated debentures with a total amount corresponding to at least one tenth of the total paid capital contributions, the board of directors shall submit a request to the Financial Supervisory Authority for the appointment of an additional auditor within a period of two months. In the event that such a request is not made, any person holding a subordinated debenture may make such a request. (SFS 1998:1500).

Section 3. Any person who is a bankrupt or subject to an injunction against trading or for whom an administrator has been appointed in accordance with Chapter 11, Section 7, of the Code on Parents, Guardians, and Children may not be appointed as an auditor of a savings bank or a members bank. Only those persons who are chartered accountants or approved accountants may be appointed as auditors of a savings bank or of a members bank. An auditor shall possess the knowledge in, and experience of, accounting and economics which, taking into account the nature and scope of the bank’s operations, are required in the performance of his duties. A registered firm of chartered accountants may also be appointed as auditor. The provisions regarding the person whom shall be primarily responsible for the auditing and notification obligations are contained in Section 12 of the Auditors Act (SFS 1995:528). The provisions in Section 5 regarding authority, in Section 8 a regarding the reporting duty, and in Section 13 regarding the entitlement to be present at general meetings shall apply to the person who is primarily responsible. (SFS 1999:911).

Section 4. At least one of the auditors elected by the general meeting of a savings bank or a members bank must be a chartered accountant. (SFS 1999:911).

Section 5. A person may not be an auditor of a savings bank or a members bank where such person: 1. is a member of the board of directors of the bank or its subsidiary undertakings, or a delegate of the bank or assists in the bank’s bookkeeping or administration of funds or the bank’s supervision thereof; 2. is employed by the bank or, in any other manner, holds a subordinate or dependent position to the bank or to any person referred to in sub-Section 1 or works in the same undertaking as any person who assists the bank in a professional capacity in conjunction with bookkeeping or administration of funds, or the supervision by the bank in respect thereto; 3. is married to, or cohabiting with, or is a sibling of, or relative in directly ascending or descending relation to a person referred to in sub-Section 1, or is related by marriage to such a person in directly ascending or descending relation or where one person is married to the other person’s sibling; or 4. is indebted to the bank or another undertaking in the same group or has obligations for which the bank or such an undertaking has provided security. Any person who is a trustee in a savings bank may not be appointed auditor as referred to in Section 4. Any person who is not authorised to be appointed auditor in accordance with this Section may also not be appointed auditor of a subsidiary undertaking of the bank. In conjunction with audits, an auditor may not appoint any person who is not authorised to be an auditor pursuant to this section. Where the bank has employees or delegates with the task of solely or primarily attending to the bank’s internal audits, the auditor may, however, appoint such persons to the extent compatible with generally accepted auditing practice. (SFS 1999:911).

Section 6. A term of office as an auditor of a savings bank or of a members bank shall be terminated prematurely where the auditor, or any person who appointed such person, so requests. Notification in respect of such termination must be made to the board of directors and, where an auditor not elected by the general meeting wishes to resign, to the person who appointed such auditor. An auditor of a savings bank or a members bank who was not appointed by the Financial Supervisory Authority and whose term of office is terminated prematurely shall immediately notify the Supervisory Authority in respect thereof. The notification shall contain a report by the auditor of his findings in conjunction with the audit during that part of the current financial year to which his duties extend. The provisions of Section 11, third and fourth paragraphs shall apply regarding the auditor’s report, where applicable, to the notification. A copy of the notification shall be forwarded to the bank’s board of directors. Where an auditor’s term of office is terminated prematurely or where he is prevented from continuing as auditor pursuant to sections 3 to 5 or the by-laws, and there is no alternate auditor for such person, the board of directors shall take measures to appoint a new auditor for the remainder of the term of office. Where special cause exists, the Financial Supervisory Authority may consent to the appointment of an auditor at the next annual general meeting. (SFS 1999:911).

Section 7. Unless rectification is effected without delay by the person who appoints the auditor, the board of directors shall notify the Financial Supervisory Authority where: 1. a chartered accountant is not elected in accordance with Section 4; 2. an auditor is not authorised in accordance with Section 3, first or second paragraphs or Section 5 or pursuant to the by-laws; or 3. a provision of this Act or the by-laws regarding the number of auditors has been breached. Any person may give notice in accordance with the first paragraph. Provisions regarding the Financial Supervisory Authority’s possibilities to cause rectification are set forth in Chapter 7. (SFS 1999:911).

Section 8. The auditors of a savings bank or of a members bank shall, to the extent compatible with generally accepted auditing practice, audit the bank’s annual report and financial statements and the management by the board of directors. Where a savings bank or a members bank is a parent undertaking (parent bank), the auditors shall also audit the group financial statements and the inter-group dealings in general. Auditors appointed by a party other than the Financial Supervisory Authority shall comply with the specific regulations adopted by the general meeting, provided such regulations are not contrary to law, the by-laws, or generally accepted auditing practice. (SFS 1998:1500).

Section 8a. Where an auditor, in the performance of his duties on behalf of a savings bank or a members bank, becomes aware of circumstances which: 1. may constitute a material breach of the legislation which regulates the bank’s operations; 2. may have a negative effect on the bank’s future operations; or 3. may lead to the auditor advising against the adoption of the balance sheet or profit and loss account or to rendering a qualified opinion in accordance with Section 11; the auditor shall immediately report such circumstances to the Financial Supervisory Authority. The auditor has a corresponding reporting obligation where he or she becomes aware of circumstances as referred to in the first paragraph in conjunction with the performance of his duties as an auditor of the bank’s parent undertaking or subsidiaries or in an undertaking which has a similar relation to the bank. (SFS 1998:1500).

Section 9. The board of directors of a savings bank or a members bank shall afford the auditors the opportunity to perform the audit to the extent deemed necessary by the auditors and shall provide any information and assistance requested by the auditors. The above-stated obligation shall also apply to the management of the undertaking and the auditors of a subsidiary undertaking toward the auditors of the parent bank. (SFS 1998:1500).

Section 10.

Following completion of the audit by the auditors of a savings bank or a members bank, such persons shall write a reference to the auditor’s report in the annual report and, in respect of a parent bank, to the group financial statements. In the event the auditors determine that the balance sheet or the profit and loss account should not be adopted, they shall include a note to this effect. With respect to a parent bank, the same shall apply to consolidated balance sheets and consolidated profit and loss accounts. (SFS 1998:1500).

Section 11.

The auditors of a savings bank or a members bank shall submit an auditor’s report to the general meeting in respect of each financial year. The report must be provided to the bank’s board of directors not later than two weeks prior to the annual general meeting. The auditors shall return the accounting documents delivered to them to the board of directors within the same period. The auditors’ report shall contain a statement as to whether the annual report has been prepared in accordance with the Annual Reports (Credit Institutions and Securities Companies) Act (SFS 1995:1559). Where the annual report does not contain such information as required in accordance with the aforementioned Act, the auditors shall state this fact and provide the necessary information in their report, provided such can take place. Where the auditors, in their audit, find that any act or omission by a member of the board of directors may give rise to liability to pay compensation, or that a member has otherwise acted in contravention of this Act, the Annual Reports (Credit Institutions and Securities Companies) Act, the Savings Banks Act ((SFS 1987:619) or the Members banks Act (SFS 1995:1570), or in contravention of the by-laws, a statement to this effect shall be included in the report. The auditors’ report shall also contain a statement regarding discharge from liability of the members of the board of directors. The auditors may otherwise include information in the report which they wish to bring to the attention of the trustees or members. The auditors’ report shall also contain a statement as to whether the auditors are of the opinion that the bank has not fulfilled its obligations: 1. to make tax deductions in accordance with the Tax Payments Act (SFS 1997:483); 2. to submit tax returns in accordance with Chapter 10, sections 9 or 10 of the Tax Payment Act; or 3. to effect timely payment of taxes and fees referred to in sub-sections 1-2 above. Where the auditors’ report contains notes to the effect that the bank has failed to fulfil its obligations as specified in the fourth paragraph, sub-sections 1–3, the auditors shall immediately submit a copy of the report to the tax authorities. The auditors’ report must contain specific statements regarding adoption of the balance sheet and profit and loss account and in respect of proposals regarding allocations of the bank’s profits or losses which have been set forth in the management report. In a parent bank, the auditors shall provide a separate auditors’ report regarding the group. In such context, the first, second, third, and sixth paragraphs shall apply. (SFS 1998:1500).

Section 12.

Criticisms submitted by the auditors of a savings bank or a members bank to the board of directors which have not been noted in the auditors report shall be noted in minutes or some other document. The document shall be submitted to the board of directors and maintained by the board of directors in a secure manner. (SFS 1998:1500).

Section 13.

The auditors of a savings bank or a members bank shall be entitled to be present at the bank’s general meetings. They shall be obliged to be present at general meetings where, in consideration of the matters to be addressed, their presence may be deemed necessary. (SFS 1998:1500).

Section 14.

The auditors of a savings bank or a members bank may not disclose information to an individual trustee, member, or third party regarding affairs of which they become aware in the performance of their duties and where such may be prejudicial to the bank. Chapter 1, Section 10 prescribes that an individual’s relationship to a bank may not be unduly disclosed. The auditors are obliged to: 1. present to the general meeting all information which may be requested by the general meeting, provided such would not be significantly prejudicial to the bank or to the significant disadvantage of an individual; 2. furnish all necessary information regarding the bank’s affairs to co-auditors, lay auditors, examiners as referred to in Section 15, new auditors and, where the bank has been placed into insolvent liquidation, to a liquidator; and 3. upon request, furnish information regarding the bank’s affairs to the officer in charge of a criminal investigation. Provisions regarding the auditor’s reporting obligation to the Financial Supervisory Authority are contained in Section 8 a. (SFS 1999:911).

Section 15.

Each person entitled to vote in a savings bank or in a members bank may submit a proposal that the Financial Supervisory Authority shall appoint an examiner to conduct a special examination of the management and financial statements of the bank during a specified period of time or of particular actions or circumstances within the bank. The proposal must be submitted at an annual general meeting or a general meeting where the matter shall be addressed pursuant to the notice of the general meeting. The Financial Supervisory Authority shall, upon request of a person entitled to vote and after having consulted the bank’s board of directors, appoint one or more examiners where the proposal is supported: 1. in a savings bank, by not less than one tenth of all trustees or one third of those trustees present; or 2. in a members bank, by not less than one tenth of the total number of persons entitled to vote or one third of those present and entitled to vote. In a members bank, the holders of subordinated debentures may submit a request to the board of directors for the appointment of an examiner. Where such a request is submitted by subordinated debenture holders representing a total amount corresponding to not less than one tenth of the contributed capital, the board of directors shall submit a request with respect hereto to the Financial Supervisory Authority within two months. In the event that this request is not made, any debenture holder may submit such a request. The provisions relating to auditors set forth in Section 3, first and fourth paragraphs, sections 5, 8 a, 9, 13 and 14, and Chapter 5, sections 2, 4, 6 and 7 shall also apply in relation to examiners. A minor may not be appointed examiner. A report in respect of the examination must be presented to the general meeting. The report must be open for inspection by trustees, members, or other persons entitled to vote, during a period of at least one week prior to the general meeting and must be sent immediately to each person who so requests. The report must also be presented to the general meeting. In the same manner, the report must also be available for, and must be sent to, subordinated debenture holders where the examiner has been appointed upon request of such a holder. (SFS 1999:911).

Chapter 4. General examinations Lay auditors

Section 1. Unless otherwise prescribed in its by-laws, a savings bank or a members bank may appoint one or more persons (lay auditors) to perform such examination as referred to in Section 4. (SFS 1999:911).

Section 2. One or more alternate lay auditors may be appointed for each lay auditor. The provisions of this Act relating to auditors shall also apply, where applicable, to alternate lay auditors. (SFS 1999:911).

Section 3. The provisions of this Act relating to auditors shall not apply to lay auditors. (SFS 1999:911).

Duties of lay auditors

Section 4. The lay auditor shall examine whether the bank’s operations have been conducted in a manner consistent with their purpose and, from a financial perspective, in a satisfactory manner and whether the bank’s internal controls are sufficient. The examination shall be as thorough and extensive as required by customary practice for this type of examination. (SFS 1999:911). Section 5. The lay auditor shall comply with the instructions issued by the general meeting, unless such instructions are contrary to law, the by-laws, or customary practice. (SFS 1999:911).

Section 6. The lay auditor shall submit a report to the general meeting following each financial year. Provisions regarding the contents of the report and the time of submission of the report to the company’s board of directors are set forth in Section 14. (SFS 1999:911).

Section 7. The lay auditor may not sign an auditor’s report as referred to in Chapter 3, Section 11, first paragraph. (SFS 1999:911). Provision of information, etc.

Section 8. The board of directors shall afford the lay auditor the opportunity to perform the examination to the extent the lay auditor deems necessary and shall provide any information and assistance requested by the lay auditor. The above-stated obligation is also incumbent upon the management of the undertaking, the auditors, and the lay auditors of subsidiaries toward the lay auditor of the parent bank. (SFS 1999:911).

Procedure for appointment of lay auditors

Section 9. The lay auditor shall be elected by the general meeting, unless the by-laws contain provisions for appointment of such person in another manner. (SFS 1999:911).

Grounds for disqualification

Section 10.

Any person who is a minor or a bankrupt or subject to an injunction against trading or for whom an administrator has been appointed pursuant to Chapter 11, Section 7 of the Code on Parents, Guardians, and Children may not serve as a lay auditor. (SFS 1999:911). Conflicts of interest

Section 11.

No person may serve as a lay auditor who: 1. is a member of the board of directors of the bank or its subsidiary undertakings or is a delegate of the bank, or assists in the bank’s bookkeeping or management of funds or the bank’s supervision thereof; 2. is employed by the bank or, in any other manner, holds a subordinate or dependent position to the bank or to any person referred to in sub-Section 1 or works in the same undertaking as any person who represents the bank in a professional capacity in conjunction with bookkeeping or management of funds or the supervision by the bank in respect thereto; 3. is married to, or cohabiting with, or is a sibling of, or relative in directly ascending or descending relation to a person referred to in sub-Section 1, or is related by marriage to such a person in directly ascending or descending relation or where one person is married to the other person’s sibling; or 4. is indebted to the bank or another undertaking in the same group or has obligations for which the bank or such an undertaking has provided security. The provisions of the first paragraph, sub-Section 4 shall only apply in relation to lay auditors where the amount of the debt or the security exceeds what is normally associated with membership of the bank. A person who is disqualified as a lay auditor in accordance with this Section may not serve as a lay auditor of a subsidiary undertaking of the bank. (SFS 1999:911).

Retaining the services of assistants

Section 12.

The lay auditor may not, for the purposes of an examination, retain the services of any person who is disqualified as a lay auditor in accordance with Section 11. Where the bank has employees or delegates with the task of solely or primarily performing the bank’s internal bookkeeping, the lay auditor may, however, appoint such persons to the extent compatible with customary practice. (SFS 1999:911).

Removal of lay auditors

Section 13.

The term of office of a lay auditor shall terminate where the lay auditor or the person who appointed the lay auditor gives notice that the term of office shall be terminated. Notification must be made to the board of directors. Where a lay auditor who is not appointed by the general meeting wishes to resign, he must also notify the person who appointed him. (SFS 1999:911). The lay auditor’s examination report

Section 14.

The examination report shall be submitted to the board of directors of the bank not later than two weeks prior to the annual general meeting. The examination report shall contain a statement by the lay auditor of those circumstances referred to in Section 4 and such circumstances regarding which he is obliged to examine in accordance with Section 5. Where the lay auditor finds cause to criticise any member of the board of directors, he shall state such in the report together with information regarding the cause for the criticism. The lay auditor may also include information in the examination report where he is of the opinion that the trustees of a savings bank or members and holders of subordinated debentures of a members bank should be made aware of such information. (SFS 1999:911).

Section 15.

The examination report shall be sent to the trustees of a savings bank in the same manner as stated in Chapter 4, Section 9, fourth paragraph of the Savings Banks Act (SFS 1987:619) and shall be presented to the general meeting. The examination report shall be made available and sent to members and holders of subordinated debentures of members banks in the same manner as stated in Chapter 7, Section 8, fourth paragraph of the Members banks Act (SFS 1995:1570) and shall be presented to the general meeting. (SFS 1999:911).

Presence of the lay auditor at general meetings

Section 16.

The lay auditor shall be entitled to be present at general meetings. He shall be obliged to be present at general meetings where his presence may be deemed necessary taking into consideration the matters to be addressed. (SFS 1999:911).

The lay auditor’s duty of confidentiality

Section 17.

A lay auditor may not disclose information to an individual trustee, member, or third party regarding such matters of which he becomes aware in the performance of his duties where such disclosure would be prejudicial to the bank. Chapter 1, Section 10 prescribes that information regarding an individual’s relationship to a bank may not be unduly disclosed. (SFS 1999:911). The lay auditor’s duty of disclosure

Section 18.

The lay auditor shall be obliged to furnish any information requested by the general meeting, unless this would be materially prejudicial to the bank or to the significant disadvantage of an individual. (SFS 1999:911). Section 19. The lay auditor shall be obliged to provide auditors, other lay auditors, special examiners as referred to in Chapter 3, Section 15 and, where the bank has been placed into insolvent liquidation, liquidators with any information required regarding the bank’s affairs. In addition, the lay auditor shall also be obliged, upon demand, to provide information regarding the bank’s affairs to the officer in charge of a criminal investigation. (SFS 1999:911).

Chapter 5. Provisions for savings banks and members banks regarding damages, etc.

Section 1. Where a founder, trustee, members of the board of directors or delegate either intentionally or negligently causes a loss to a savings bank or a members bank in the performance of his duties, such person shall compensate for such loss. The above-stated shall also apply where the damage is caused to a member or any other person as a result of a breach of this Act, the Annual Reports (Credit Institutions and Securities Companies) Act (SFS 1995:1559), the Savings Banks Act (SFS 1987:619), the Members banks Act (SFS 1995:1570), or the bank’s by-laws. (SFS 1998:1500).

Section 2. An auditor or a lay auditor of a savings bank or of a members bank shall be liable to pay compensation according to the grounds referred to in Section 1. The auditor or the lay auditor is also liable for any loss which is intentionally or negligently caused by one of his assistants. (SFS 1999:911). Where a registered firm of chartered accountants is the auditor, the obligation to pay compensation shall be borne by such undertaking and the person who is primarily responsible for the audit.

Section 3. A member of a members bank or a person entitled to vote who is not a member shall be obliged pay compensation for a loss which he intentionally or through gross negligence causes to the members bank, a member or a third party as a result of his participation in a breach of this Act, the Annual Reports (Credit Institution and Securities Companies) Act (SFS 1995:1559), the Members banks Act (SFS 1995:1570) or the bank’s by-laws. (SFS 1998:1500).

Section 4. Where any person is obliged to pay compensation in accordance with sections 1-3 above, the damages may be adjusted by the amount deemed reasonable taking into account the nature of the act, the amount of the loss, and the circumstances in general. Where more than one person shall pay compensation in respect of the same loss, each person shall be jointly and severally liable in damages to the extent the obligation to pay damages has not been adjusted in accordance with the first paragraph. Any person who has paid damages shall have a right of contribution from the other persons according to what is reasonable in the circumstances.

Section 5. Repealed. (SFS 1998:1500). Claims in damages which are based upon criminal offences may always be commenced by the board of directors.

Section 6. Claims in damages brought by a savings bank in accordance with sections 1 or 2 may be commenced where, at a general meeting of a savings bank, those trustees representing the majority or a minority of not less than one third of the trustees, have supported a proposal to commence an action for damages or who voted against a proposal to grant any member of the board of directors a discharge from liability. A settlement regarding liability in damages may only be entered into by the general meeting of the savings bank and only on condition that not more than one tenth of the total number of trustees opposes the proposal for a settlement. Notwithstanding the provisions of the last sentence, an action against a delegate for damages to the savings bank may be commenced by the board of directors. Claims on behalf of the savings bank against a member of the board of directors for damages based upon a resolution or an action during a financial year must be commenced not later than one year from such time that the annual report and the auditors’ report for the financial year is presented to the general meeting of the savings bank. Where a resolution has been adopted to grant a discharge from liability or to refrain from commencing an action in damages without at least the number of trustees as referred in the first paragraph having voted in favour of the resolution, or where the time for the commencement for the action has expired in accordance with the second paragraph, an action may, however, be commenced in accordance with the first paragraph where the annual report or the auditors report or other information provided to the general meeting contain materially false and incomplete information regarding a resolution or a measure upon which the claim is based. Claims in damages which are based upon the commission of criminal offences may always be commenced by the board of directors.

Section 7. Claims in damages on behalf of a members bank in accordance with sections 1 to 3 may be commenced where, at a general meeting of the members bank, a majority or a minority consisting of not less than one tenth of the total number of persons entitled to vote have voted in favour of a proposal to commence an action for damages or have voted against a proposal to grant any member of the board of directors a discharge from liability. A settlement regarding liability in damages may only be entered into by the general meeting of the members bank and only on condition that no more than one tenth of the total number of persons entitled to vote oppose the proposal for a settlement. A claim in damages by a member of the bank on behalf of the bank may not be settled without the consent of such member. Notwithstanding the aforementioned, an action by the bank for damages against a delegate may be commenced by the board of directors. Claims in damages on behalf of a members bank may be commenced by persons entitled to vote who constitute not less than one tenth of the total number of persons entitled to vote. Where a person entitled to vote withdraws after proceedings have been commenced, the other members may complete such proceedings. Any person who has commenced proceedings is liable for the litigation costs, but shall be entitled to compensation from the bank for any sums awarded to the bank in the litigation. Claims on behalf of members banks against a member of the board of directors for damages relating to a resolution or an action during a financial year must be commenced not later than one year from the date when the annual report and the auditor’s report was presented to the general meeting of the members bank. Where a resolution has been adopted to grant a discharge from liability or to refrain from commencing a claim in damages without the minimum number of persons entitled to vote as referred to in the first paragraph having voted against the resolution, or where the period for the commencement of the action has expired in accordance with the third paragraph, an action may, however, be commenced in accordance with the first or second paragraph where the annual report or the auditors report or other information provided to the general meeting contain materially false and incomplete information regarding a resolution or a measure upon which the claim is based. Claims in damages which are based upon criminal offences may always be commenced by the board of directors. (SFS 1995:1572).

Section 8. Proceedings on behalf of the bank in accordance with sections 1 to 3 above which are not based upon criminal offences may not be commenced against: 1. members of the board of directors five years after the end of the financial year during which the resolution or the measure upon which the action is founded was adopted or taken; 2. delegates three years after the end of the financial year during which the resolution or the action upon which the action is founded was adopted or taken; 3. auditors five years after the end of the financial year to which the auditors’ report relates; 4. lay auditors five years after the end of the financial year to which the examination report relates; 5. examiners as referred to in Chapter 3, Section 15 five years after the date when the statement in respect of the special examination was presented to the general meeting; 6. founders five years after the date of the resolution to incorporate the bank adopted at the first general meeting; and 7. trustees or members of members banks or persons entitled to vote who are not members two years after the resolution or the measure upon which the action is based. Where a bank is placed into insolvent liquidation pursuant to a petition presented before the end of the period stated in the first paragraph, the estate in liquidation may commence proceedings in accordance with sections 1 to 3 notwithstanding that a discharge from liability in damages has been granted in accordance with sections 6 or 7. However, following the expiration of the aforementioned time, an action may not be commenced later than six months from the date of the hearing in respect of administration of oaths. (SFS 1999:911). Section 9. Where a loss has been incurred by a savings bank in the circumstances referred to in sections 1 or 2, the Financial Supervisory Authority may allow an action to be commenced against any person who is liable therefor unless the limitation period has expired pursuant to sections 6 and 8. (SFS 1992:1613).

Chapter 6. Names of savings banks and members banks

Section 1. The name of a savings bank must include the word “savings bank”. The name of a members bank must include the word “members bank”. The name must be registered in the bank register. Where the name shall be registered in two or more languages, all versions shall be specified in the bank’s by-laws. (SFS 1998:1500).

Section 2. A savings bank’s or a members bank’s name shall be clearly distinguishable from other existing names registered in the bank register and from names of foreign banking undertakings which are commonly known in Sweden. The provisions of the Trade Names Act (SFS 1974:156) shall otherwise apply to the registration of names. (SFS 1998:1500).

Section 3. The board of directors of a savings bank or a members bank may adopt secondary names. The provisions of Section 1, second paragraph and Section 2 regarding the name also apply to secondary names. The words “bank”, “savings bank” or “members bank” may only be used in secondary names for banking operations. (SFS 1998:1500).

Section 4. Documents which are issued for a savings bank or a members bank should be signed in the bank’s name. Where the board of directors or other representatives of the bank have issued a document without such being signed on behalf of the bank, and it is not clear from the contents of the document that it has been issued on behalf of the bank, the persons who signed the document shall be jointly and severely liable for any obligations assumed pursuant to the document. However, the aforementioned shall not apply where it was evident from the circumstances at the time of the document’s creation that it was issued on behalf of the bank and where the person to whom the document was issued by the bank receives a duly signed acknowledgement of the document without unreasonable delay after a request is made in respect thereof or personal liability is asserted against the signatories. (SFS 1998:1500).

Section 5. The Trade Names Act (SFS 1974:56) contains provisions regarding restrictions on the use of names and deregistration of names.

Section 6. Repealed. (SFS 1998:1500).

Chapter 7. Supervision The manner in which the supervision of banks shall be conducted

Section 1. A bank is subject to the supervision of the Financial Supervisory Authority and must be registered with the Supervisory Authority. The bank must furnish the Supervisory Authority with any information regarding its operations and circumstances connected therewith requested by the Supervisory Authority. The Supervisory Authority may carry out investigations at the bank at such times as the Supervisory Authority considers such to be necessary. (SFS 1992:1613).

Section 2. The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority may issue regulations regarding: 1. information which a bank shall provide to the Supervisory Authority; 2. safekeeping and inventory of securities and financial instruments; and 3. crime prevention measures at the bank. (SFS 1992:1613).

Section 3. In conjunction with its supervision of banks, the Financial Supervisory Authority shall ensure the furtherance of a sound development of the operations. (SFS 1992:1613).

Section 4. The board of directors of a savings bank or a members bank is obliged to immediately cause a separate balance sheet to be prepared where there is reason to assume that the bank is unable to fulfil the capital adequacy requirements pursuant to the Capital Adequacy and Large Exposures (Credit Institutions and Securities Companies) Act (SFS 1994:2004). The balance sheet shall be examined by the auditors. Where the assumption regarding the bank’s financial position is confirmed, the board of directors shall immediately inform the Financial Supervisory Authority. (SFS 1998:1500).

Section 5. The Financial Supervisory Authority shall appoint one or more auditors to participate in the audit of the bank together with the other auditors. The Supervisory Authority may revoke the appointment of an auditor and appoint a new auditor. The auditor is entitled to reasonable compensation from the bank for his work. The amount of his fee shall be determined by the Supervisory Authority. The Financial Supervisory Authority shall issue instructions for auditors appointed by the Supervisory Authority. (SFS 1995:1572).

Section 6. The Financial Supervisory Authority may, at such times as it deems necessary, convene a meeting of the board of directors of a bank. In the event the board of directors has not complied with a request by the Supervisory Authority to convene an extraordinary general meeting, such general meeting may be convened by the Supervisory Authority. Representatives of the Supervisory Authority may be present at general meetings and such board meetings convened by the Supervisory Authority and may take part in the deliberations. (SFS 1992:1613).

Section 7. During a bank’s liquidation, the Financial Supervisory Authority shall possess the same authority regarding the liquidators and general meetings as otherwise vests in the Supervisory Authority regarding the boards of directors and general meetings. (SFS 1992:1613). Specific provisions regarding supervision of branch offices of foreign banking undertakings domiciled within the EEA

Section 8. The Financial Supervisory Authority shall exercise supervision in co-operation with the competent governmental authority in the home country to ensure that the liquidity of a branch office established in Sweden by a banking undertaking domiciled in the EEA is satisfactory. Following notification to the Financial Supervisory Authority, a competent governmental authority in another country within the EEA may undertake investigations at a branch office established in Sweden of a banking undertaking domiciled in the other country. (SFS 1992:1613).

Section 9. As regards foreign banking undertakings domiciled within the EEA which conduct operations in Sweden via branch offices or through the direct provision of services, the Financial Supervisory Authority shall provide any information to the competent governmental authority in the bank’s home country which such authority requires in order to exercise its supervision of the bank. (SFS 1992:1613). Ownership determination, etc.

Section 10. A direct or indirect acquisition of shares or interests in a bank which causes the acquirer’s total holdings to amount to a qualified holding may only take place pursuant to consent by the Financial Supervisory Authority. The above-stated shall also apply to acquisitions which involve an increase in a qualified holding so that it amounts to or exceeds 20, 33, or 50 per cent of the share capital or the voting capital for all shares or interests or which cause the bank to become a subsidiary. Consent in accordance with the first paragraph must be granted prior to the acquisition. Where the acquisition has occurred as a result of division of joint marital property, by inheritance, by will, corporate distribution, or in any other similar manner, consent shall instead be required for the acquirer to retain the shares or interests which are obtained. The acquirer shall apply for consent to such an acquisition within six months from such time as the shares or interests are obtained. (SFS 1996:746).

Section 11.

Consent shall be granted to the acquisition as referred to in Section 10 where it may be assumed that the acquirer will not hinder the sound development of the bank’s operations and where the acquirer is otherwise suitable to exercise a significant influence over the management of the bank. Consent may not be granted where the acquirer, to a significant extent, has failed to perform his obligations in commercial operations or in other financial affairs or has been convicted of a serious criminal offence. Where the acquisition would result in close affiliation between the bank and a third party, consent shall be granted only where the affiliation does not hinder an effective supervision of the bank. The Financial Supervisory Authority may prescribe a certain period within which an acquisition must be completed. The Financial Supervisory Authority shall render a decision in the matter in accordance with this Section within three months from the date of the application for consent. (SFS 1996:759).

Section 12.

The Financial Supervisory Authority must be informed in the event that any person intends to divest himself of a qualified holding or such a significant part thereof that the holding will accordingly be less than any of the limits as specified in Section 10. (SFS 1992:1613).

Section 13.

When a banking company or a members bank becomes aware that shares or interests in the bank have been acquired in the manner referred to in Section 10 or are the subject of such a divestiture as referred to in Section 12, the bank shall notify the acquisition or divestment to the Financial Supervisory Authority as soon as possible. When a banking company or a members bank in other cases becomes aware that it has a close affiliation with a third party, the bank shall notify the Financial Supervisory Authority as soon as possible. A banking company or a members bank shall submit an annual statement to the Financial Supervisory Authority containing the names of persons who hold a qualified holding of shares or interests in the bank and the amount of such holding. (SFS 1996:746).

Section 13a. Where a legal entity holds a qualified holding in a bank, such legal entity shall inform the Financial Supervisory Authority as soon as possible concerning any changes to its management. (SFS 1996:746).

Section 14.

Where any person which holds a qualified holding of shares or interests exercises, or may be deemed to be able to exercise its influence in a manner which hinders sound development of the operations of the bank, the Financial Supervisory Authority may determine that such person, in conjunction with general meetings, may not represent more shares or interests than those which correspond to a holding which is not qualified. The aforementioned shall also apply where such a holder, to a significant extent, has failed to perform its obligations in commercial operations or in other financial affairs or has been convicted of a serious criminal offence. Where a person which holds a qualified holding of shares or interests fails to submit an application for consent to an acquisition as referred to in Section 10, the Supervisory Authority may determine that such person, in conjunction with general meetings, may not represent the shares or the interests to the extent such are covered by a requirement for consent. Where any person, in contravention of a decision by the Supervisory Authority, possesses a qualified holding of shares or interests, such person may not represent the shares or interests at a general meeting to the extent the holding is in contravention of the decision. The Financial Supervisory Authority may order an owner as referred to in the first paragraph to divest himself of a sufficient number of the shares or interests such that thereafter the holding is no longer qualified. An owner as referred to in the second or third paragraph may be ordered to divest himself of a sufficient number of the shares or interests such that the holding is no longer in contravention of the Supervisory Authority’s decision. Shares which are subject to injunctions or orders in accordance with this Section shall not be taken into account when calculating the consent required of owners of a certain number of shares in the company for a decision to be valid or authority to be exercised. However, this shall not apply to a nominee appointed in accordance with Section 14 a. (SFS 1998:1500).

Section 14a. Where special cause exists, the Financial Supervisory Authority may request that the district court appoint an appropriate person as nominee to represent such shares or interests which, pursuant to Section 14, may not be represented by the owner. Such an application shall be determined by the district court in the district where the owner is domiciled or, if the owner is not domiciled in Sweden, by the Stockholm District Court. A nominee shall be entitled to reasonable compensation for his work and disbursements. The compensation shall be paid by the owner of the shares or interests and shall be advanced by the bank upon request. Where any person liable to make payment fails to accept the nominee’s claims for compensation, the amount of compensation shall be determined by the district court. (SFS 1996:746).

Section 14b. Where a bank has a close affiliation with a third party and such affiliation hinders the effective supervision of the bank, the Financial Supervisory Authority may order the holder of shares or interests which gives rise to close affiliation to divest itself of a sufficient number of shares or interests such that close affiliation no longer subsists. The Financial Supervisory Authority may also determine that person(s) who are subject to a decision in accordance with the first paragraph may not represent the shares or interests at general meetings. In such circumstance, the provisions set forth in Section 14 a shall apply. (SFS 1996:746).

Intervention against banks

Section 15.

Where a Swedish bank has taken a decision which is in contravention of this Act or any other legislation which regulates the bank’s operations, or against a regulation issued by virtue of such legislation or against the bank’s articles of association, the Financial Supervisory Authority may enjoin the execution of the decision. Where the decision has already been executed, the Supervisory Authority may order the bank to rescind the decision, where possible. (SFS 1992:1613).

Section 16.

A Swedish bank’s charter shall be revoked where: 1. the bank has not submitted an application for registration within the prescribed period or the application has been withdrawn or cancelled as a result of a decision which has become final; 2. the bank has not commenced banking operations within one year after the grant of the charter or the bank, prior thereto, has declared that it will not be utilising the charter; 3. the bank has transferred its entire business; 4. the bank has not conducted banking operations during a continuous period of six months; 5. the bank, as a result of the breach of a provision referred to in Section 15 or in any other manner, has proved itself to be unsuitable to exercise such operations to which the charter relates; 6. the bank’s capital base is less than the minimum amount which is required in accordance with Chapter 2, Section 9, second paragraph and the deficiency has not been covered within three months from the discovery of the deficiency by the bank; 7. the bank has failed to fulfil its obligations in accordance with the Deposit Guarantees Act (SFS 1995:1571) and has not undertaken rectification within one year from such time as the Supervisory Authority ordered the bank to comply with its obligations with a warning that the bank’s charter will otherwise be revoked; or 8. any person who is a member of the bank’s board of directors, or its managing director, or the acting managing director fails to fulfil the requirements set forth in Chapter 9, Section 3, third paragraph, sub-Section 3, fourth paragraph of this Act, Chapter 2, Section 3, fourth paragraph, sub-Section 2 of the Savings Banks Act (SFS 1987:619), or Chapter 2, Section 2, fourth paragraph, sub-Section 3 and paragraph five of the Members banks Act (SFS 1995:1570). In those circumstances referred to in the first paragraph, sub-sections 4 and 5, a warning may be issued in lieu of revocation of a charter where such is deemed sufficient. Issues regarding revocation of charters and the issuance of warnings shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. The Government’s determination shall take place following notification by the Financial Supervisory Authority. Where special cause exists, the Supervisory Authority may grant an extension to cover the deficiency in those circumstances referred to in the first paragraph, sub-section 6. In those circumstances referred to in the first paragraph, sub-Section 8, the charter may only be revoked where the Financial Supervisory Authority has taken a decision to complain about a person being a member of the board of directors and that he or she, following a specified period determined by the Supervisory Authority, remains a member of the board of directors. Where the charter is revoked, the governmental authority which decided to revoke the charter may determine the manner in which the winding up of the business shall take place. An injunction against future operations may be ordered together with a decision in respect of revocation. (SFS 1999:222).

Section 17.

Where the Financial Supervisory Authority is informed by a competent governmental authority in another country within the EEA of the fact that a Swedish bank has violated the laws of that country applicable to the bank, the measures stated in sections 15 and 16 may be taken against the bank where any circumstance corresponding to that which is set forth therein exists. The Supervisory Authority shall inform the competent governmental authority in the other country of the measures undertaken. (SFS 1999:222). Specific provisions regarding intervention against foreign banking undertakings

Section 18.

Where a banking undertaking which is domiciled in a country outside the EEA conducts banking operations from branch offices in Sweden and, in such context, breaches a provision as referred to in Section 15 or in any other manner proves itself to be unsuitable to conduct banking operations, the branch office’s licence shall be revoked or a warning shall be issued if such is deemed to be sufficient. Issues regarding revocation of branch office licences and the issuance of warnings shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. The Government’s determination shall occur following notification by the Supervisory Authority. Where deposits at the branch office are covered by a guarantee as a result of a decision in accordance with Section 3, second paragraph of the Deposit Guarantees Act (SFS 1995:1571) and the licence for establishment of the branch office would not have been issued without such a decision, the Supervisory Authority may, in the event that the banking undertaking fails to fulfil its obligations in accordance with the Deposit Guarantees Act, order the banking undertaking to undertake rectification with a warning that the branch office’s licence will otherwise be revoked. The licence may be revoked in the event that the banking undertaking has not undertaken the rectification within one year from the date of the order. The provisions of the second paragraph shall apply, where applicable, in conjunction with such determination. The provisions of Section 16, paragraphs five and six shall apply, where applicable, in the event the branch office’s licence is revoked. The Supervisory Authority shall inform the supervisory authority in the country where the banking undertaking has its registered office of the measures undertaken pursuant to this section. (SFS 1999:159).

Section 19.

Where a banking undertaking domiciled in another country within the EEA conducts operations in Sweden via branch offices or through the direct provision of services and, in such context, breaches a provision referred to in Section 15 or in any other manner proves itself to be unsuitable to conduct such operations, the Financial Supervisory Authority may order the banking undertaking to effect rectification. Where the banking undertaking fails to comply with the order, the Supervisory Authority shall inform the competent governmental authority in the undertaking’s home country. Where rectification is not effected notwithstanding the above-stated order, the Supervisory Authority may enjoin the banking undertaking from assuming further obligations in Sweden. Prior to the issuance of the injunction, the Supervisory Authority shall inform the competent governmental authority in the banking undertaking’s home country. In cases of urgency, the Supervisory Authority may issue the injunction without prior notification to the home country authority. The home country authority must thereafter be notified as soon as possible. (SFS 1992:1613).

Section 20.

Where the operating licence of a banking undertaking which is domiciled in another country within the EEA and which conducts operations in Sweden via branch offices or through the direct provision of services has been revoked in its home country, the Financial Supervisory Authority shall immediately enjoin the banking undertaking from entering into further obligations in Sweden. (SFS 1992:1613). Intervention against any person without a licence

Section 21.

Where any person conducts banking business without being licensed to do so, the Financial Supervisory Authority shall order such person to cease such operations. Where there is doubt as to whether the operations include deposits, the Supervisory Authority may order the person conducting the operations to furnish any and all information regarding the operations which is required in order to determine whether deposit operations are being conducted. As regards foreign undertakings, an order pursuant to this Section may be addressed to both the undertaking as well as any person conducting operations in Sweden on behalf of the undertaking. (SFS 1995:1572).

Fees to the Financial Supervisory Authority

Section 22.

Swedish banks and foreign banking undertakings with branch offices in Sweden shall bear the costs of the operations of the Financial Supervisory Authority through the payment of an annual fee pursuant to detailed regulations issued by the Government. (SFS 1995:1572).

Conditional fines

Section 23.

The Financial Supervisory Authority may issue orders or injunctions in accordance with this Act on pain of a conditional fine. (SFS 1992:1613).

Section 24.

The Financial Supervisory Authority’s decisions in accordance with sections 6 and 21, second paragraph may not be appealed. The above-stated shall also apply to the Supervisory Authority’s decision to submit a matter to the Government for determination. Decisions of the Supervisory Authority in accordance with Chapter 1, sections 4 and 6, Section 7, fourth paragraph and Section 7 b, second paragraph, Chapter 2, sections 5 and 6 a, sections 16-18 of this Chapter in relation to revocation of charters and branch office licences and Chapter 9, sections 3, 23 and 28 may be appealed to the Administrative Court of Appeal. The above-stated shall also apply to the Supervisory Authority’s decisions in accordance with Chapter 2, Section 3, Chapter 7, sections 5 and 8, and Chapter 8, Section 6 of the Savings Banks Act (SFS 1987:619) as well as Chapter 2, Section 2, and Chapter 10, sections 5 and 8 of the Members banks Act (SFS 1995:1570). Other decisions issued by the Supervisory Authority pursuant to this Act, the Savings Banks Act, and the Members banks Act may be appealed to the County Administrative Court. The aforementioned shall not apply, however, to decisions in matters referred to in Section 20, first paragraph, sub-Section 5 of the Administrative Procedure Act (SFS 1986:223). Leave to appeal is required for appeals to the Administrative Court of Appeal from a decision of the County Administrative Court. The Supervisory Authority may determine that a decision regarding an injunction, an order, or revocation shall apply with immediate effect. (SFS 1999:222).

Section 25.

Where a decision in a matter regarding a charter has not been issued within six months from receipt of the application, the applicant shall be entitled to be informed by the Supervisory Authority of the reasons therefor. The applicant may thereafter request a declaration by the Administrative Court of Appeal that the matter has been unreasonably delayed. Where a decision has not been issued within six months from the date of the declaration, the application shall be deemed to have been denied. Where the Financial Supervisory Authority fails to forward a notification as referred to in Chapter 1, Section 7, first paragraph to the competent foreign governmental authority within three months from receipt of the notification and a decision is not issued within the same period, the Supervisory Authority shall inform the applicant of the reasons therefor. The applicant may thereafter request a declaration from the Administrative Court of Appeal that the matter has been unnecessarily delayed. Where notification has not been forwarded within three months from the date of the declaration, a decision shall be deemed to have been issued in accordance with Chapter 1, Section 7, fourth paragraph. (SFS 1999:222).

Specific provisions

Section 26.

When a bank has been placed into insolvent liquidation, the Financial Supervisory Authority shall appoint a public representative. The public representative shall act as the liquidator in the administration of the estate in liquidation together with the liquidator or liquidators appointed pursuant to the Insolvency Act (SFS 1987:672). The public representative may, as regards additional liquidators, make such proposals as referred to in Chapter 7, Section 5 of the Insolvency Act. The public representative may participate in the administration of the estate in liquidation in its entirety notwithstanding the issuance of a decision in respect of the administration of such estate. The provisions of the Insolvency Act regarding fees to liquidators also apply to the public representative. (SFS 1992:1613).

Section 27.

Any person who is a member or alternate member of the board of directors of the Financial Supervisory Authority or an officer of the Financial Supervisory Authority may not serve as a member of the board of directors of a bank or be employed by a bank. Nor may such a person own shares in a banking company or be a trustee of a savings bank. The Government may issue specific provisions regarding the granting of loans to such persons as referred to in the first paragraph. (SFS 1992:1613). Section 28. The Financial Supervisory Authority shall ensure that the assets of a pension foundation or a personnel foundation which belongs to a bank and the assets of which are primarily derived from funds provided by the bank are invested in such a manner which ensures reasonable security. In such context, the foundation’s objects shall be observed and consideration shall be given to the provisions of this Act regarding the investment of a bank’s funds. Where the foundation’s assets are not invested in a satisfactory manner, the Supervisory Authority may order the foundation to undertake rectification. Any person who represents the foundation shall, upon request by the Financial Supervisory Authority, make available for examination the foundation’s cash and other assets as well as books, financial statements, and other documents. Such person shall also furnish the Supervisory Authority with any and all information regarding the foundation requested by the Supervisory Authority. (SFS 1992:1613). Chapter 8. Registration, etc.

Bank register

Section 1. The Financial Supervisory Authority shall maintain a bank register for registration in accordance with this Act, the Companies Act (SFS 1975:1358), the Savings Banks Act (SFS 19987:619), the Members banks Act (SFS 1995:1500), or other legislation. (SFS 1998:1500).

Registration, etc., of savings banks and members banks

Section 2. The Financial Supervisory Authority shall give public notice in the Official Gazette (Post- och Inrikes Tidningar) without delay of any information recorded in the bank register regarding savings banks and members banks, with the exception of notices in accordance with: 1. Chapter 2, Section 14 of the Savings Banks Act (SFS 1987:619) and Chapter 2, Section 7, of the Members banks Act (SFS 1995:1570) regarding the date of the public notice regarding the opening of the business; 2. Chapter 6, Section 19 of the Savings Banks Act and Chapter 9, Section 20 of the Members banks Act from the district court that the bank has been placed into insolvent liquidation, that a decision regarding insolvent liquidation has been revoked, or that the insolvent liquidation is completed; and 3. Chapter 7, Section 5 of the Savings Banks Act and Chapter 10, Section 5 of the Members banks Act regarding consent to a merger. A public notice which relates to changes in a circumstance previously entered on the register shall only state the nature of the change. (SFS 1998:1500).

Section 3. Any information registered in the bank register in respect of savings banks and members banks shall be deemed to have come to a third party’s notice where published in the Official Gazette (Post- och Inrikes Tidningar) in accordance with Section 2 and where it is not clear from the circumstances that such third party knew or should have known of the information contained in the notice. (SFS 1998:1500).

Section 3a. Repealed. (SFS 1998:1500).

Section 4. Where, in conjunction with an application for registration, an applicant has failed to comply with the provisions regarding the application, the applicant shall be ordered within a stated period of time to submit comments or undertake rectification. The above-stated shall also apply where the Financial Supervisory Authority considers that a decision, which is notified for registration and the validity of which does not require the consent of the Government or the Supervisory Authority, or a document which is appended to the application: 1. has not been duly submitted; 2. contravenes this Act or other legislation or the by-laws; or 3. is materially ambiguous or misleading. The application shall be refused where the applicant fails to correct the application following an order to do so. A notice regarding this sanction shall be included in the order. Where an impediment to registration exists notwithstanding the submission of the statement, and where the applicant has been given the opportunity to comment in respect of the impediment, registration shall be refused in the absence of a reason to afford the applicant the opportunity to enter a new order against the applicant. The provisions of the first paragraph shall not prevent the registration of a decision of a general meeting where the limitation period in respect of the decision has expired pursuant to Chapter 4, Section 17, second paragraph of the Savings Banks Act (SFS 1987:619) or Chapter 7, Section 18, second paragraph of the Members banks Act (SFS 1995:1570). (SFS 1999:222).

Section 4a. Repealed (SFS 1998:1500).

Section 5. The Financial Supervisory Authority shall immediately inform a savings bank or a members bank in writing when the Supervisory Authority: 1. declares that a merger has lapsed in accordance with Chapter 7, Section 7, third paragraph of the Savings Banks Act (SFS 1987:619) or Chapter 10, Section 5, third paragraph of the Members banks Act (SFS 1995:1570); 2. imposed a conditional fine in accordance with this Act; or 3. declared that a savings bank’s conversion into a banking company has lapsed in accordance with Chapter 8, Section 8 of the Savings Banks Act. (SFS 1998:1500).

Section 6. The Trade Names Act (SFS 1974:156) contains provisions regarding the deletion of a name from the register following a final judgment regarding the cancellation of a name registration.

Section 7. Repealed. (SFS 1998:1500).

Section 8. A decision of the Financial Supervisory Authority denying an application or registration of an application in accordance with Section 4, second paragraph may be appealed to a general administrative court within two months from the date of the decision. The above-stated shall also apply to decisions of the Financial Supervisory Authority as referred to in Chapter 7, Section 7, third paragraph and Chapter 8, Section 8 of the Savings Banks Act (SFS 1987:619) as well as Chapter 10, Section 5, third paragraph of the Members banks Act (SFS 1995:1570). Leave to appeal is required in conjunction with an appeal to the Administrative Court of Appeal. (SFS 1998:1500).

Chapter 9. Specific provisions for banking companies Application for charter

Section 1. A charter may be issued to a Swedish limited liability company. A charter application may be submitted prior to the formation of the company. Where such an application has been submitted within six months from the execution of the instrument of incorporation, the period prescribed in Chapter 2, Section 9, first paragraph of the Companies Act (SFS 1975:1385) shall be calculated from the decision regarding the charter. (SFS 1998:1500).

Section 2. A plan for the intended operations and a proposal for the articles of association or amendments thereto must be appended to the charter application. (SFS 1998:1500). Charter conditions and approval of the articles of association

Section 3. Charter applications and approval of articles of association shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. In conjunction with the processing of an application for approval of the articles of association, it shall be determined whether the articles of association accord with this Act, the Companies Act (SFS 1975:1385), and other legislation, and to what extent specific provisions are required, taking into account the scope and nature of the company’s operations. The articles of association shall be approved and a charter granted where: 1. the planned business is deemed to fulfil the requirements of a sound banking operation; 2. it may be assumed that the persons who will possess a qualified holding in the company will not impede the sound development of the company’s operations and that such persons are otherwise suitable to exercise a significant influence over the management of a bank; and 3. the persons who will constitute the company’s boards of directors or serve as the managing director or the acting managing director possess sufficient insight and experience in order to participate in the management of a bank and are otherwise suitable for such a task. The articles of association may not be approved and a charter application may not be granted where it may be assumed that any person who will possess a qualified holding in the bank has failed, to a significant extent, to comply with his obligations in commercial operations or in other financial affairs or has been convicted of serious criminal offences. Where the company will have a close affiliation with a third party, the articles of association may only be approved and a charter granted where the relations will not impede the effective supervision of the bank. Any amendments to the articles of association must be approved. In such context, paragraphs one to three shall apply, where applicable. A charter may not be refused on the basis that no further banks are required. (SFS 1999:222).

The banking company’s share capital

Section 4. A banking company’s share capital shall be determined taking into account the scope and nature of the planned business. Following commencement of the business, a banking company must have a restricted equity which, at the time of the decision regarding a charter, amounts to not less than five million euros. Chapter 5, Section 4, third paragraph of the Annual Reports of Credit Institutions and Securities Companies Act contains provisions concerning what constitutes restricted equity. (SFS 1998:1500). Amendments to the articles of association

Section 5. Repealed. (SFS 1999:222).

Subscription for shares

Section 6. Where subscription for shares would result in any person, who has not been subject to a determination in accordance with Section 3, third paragraph, sub-Section 2 or paragraph four, holding a qualified holding in the banking company, the company may not be formed until the determination is conducted. The company may not be formed in the event that the person is deemed to be unsuitable. (SFS 1999:222).

Reduction of the share capital

Section 7. The Financial Supervisory Authority may consent to the reduction of the share capital without authorisation by the court in accordance with Chapter 6, Section 6, first paragraph of the Companies Act (SFS 1975:1385) where the banking company, concurrently with the reduction, undertakes measures which guarantee that neither the company ‘s restricted equity nor its share capital will be diminished as a result of the decision regarding reduction. (SFS 1998:1500).

Section 8. The provisions of this Section shall apply in lieu of the provisions in Chapter 6, Section 6, second to fourth paragraphs of the Companies Act (SFS 1975:1385). An application for court authorisation must be lodged not later than two months from registration of the decision regarding reduction of the share capital. Evidence of registration must be appended to the application. The court shall obtain a report by the Financial Supervisory Authority without delay as to whether and, in such case, to what extent the reduction may affect the rights of depositors. The application shall be immediately denied where, taking into consideration the contents of the report, the court finds that the reduction should not be implemented. In other cases, the court shall summon the company’s creditors and request such persons who wish to oppose the application to submit notice in writing to the court not later than a specific date. The notice must state that those persons who do not submit an objection shall be deemed to have consented to the application. A concise summary of the Supervisory Authority’s report shall also be included in the notice. The court shall ensure that the notice is published expeditiously in the Official Gazette (Post- och Inrikes Tidningar). Consent shall be granted where the application is not opposed or where those creditors who oppose the application receive full payment or satisfactory security for their claims. The fact that a depositor opposes the application shall not, however, constitute any impediment where the report of the Supervisory Authority sets forth grounds for granting consent. (SFS 1998:1500). Own shares as security

Section 9. A banking company may accept its own shares or shares in its parent company as security where such shares constitute a minor part of the shares which are provided as security for a loan. The Government or, pursuant to authorisation by the Government, the Financial Supervisory Authority may issue detailed regulations as to the limitations which shall apply in such circumstances. (SFS 1998:1500).

The company’s management

Section 10.

The board of directors of a banking company shall consist of not less than three members. The majority of the members must be persons who are not employed by the bank or an undertaking which is part of the group of which the bank is the parent company. (SFS 1998:1500).

Section 11.

The managing director shall be appointed by the boards of directors. The company’s managing director may not be the chairman of the boards of directors. (SFS 1998:1500).

Section 12.

The right to sign the company name on behalf of a banking company may only be exercised by two or more persons acting jointly unless otherwise prescribed in Chapter 8, Section 30 of the Companies Act (SFS 1975:1385) regarding the managing director’s entitlement to sign on behalf of the company. No other restrictions may be registered. (SFS 1998:1500).

Section 13.

Prior to elections of members of the board of directors of a banking company, the chairman of the general meeting must provide information to the general meeting regarding positions held by those persons to be elected in other undertakings. (SFS 1998:1500). General meetings

Section 14.

In addition to that which is prescribed regarding the duty to provide information and supervision in Chapter 9, sections 22 and 24 of the Companies Act (SFS 1975:1385), information may only be disclosed where such may occur without significant prejudice to an individual. The provisions of Chapter 9, Section 23 of the Companies Act shall also apply where the board of directors finds that information requested in accordance with Chapter 9, Section 22, cannot be provided to the shareholders without significant prejudice to an individual. (SFS 1998:1500).

Auditing, etc.

Section 15.

At least one of the auditors elected by the general meeting of a banking company must be a chartered accountant. An auditor appointed by the Financial Supervisory Authority shall comply with any instructions which the Supervisory Authority issues for him or her, notwithstanding any instructions from the general meeting. Where a chartered accountant is not elected at the annual general meeting, the provisions regarding the appointment of an auditor by the County Administrative Board in Chapter 10, sections 24 and 26 of the Companies Act (SFS 1975:1385) shall apply. (SFS 1999:911).

Section 16.

In addition to that which is prescribed regarding the duty to provide information in accordance with Chapter 10, Section 41, Chapter 11, sections 18 and 21 of the Companies Act (SFS 1975:1385), information may only be disclosed where such may occur without significant prejudice to an individual. (SFS 1998:1500).

Section 17.

Where, during the performance of his duties for a banking company, an auditor or a special examiner becomes aware of circumstances which: 1. may constitute a significant breach of the legislation which regulates the operations of banks; 2. may have a negative effect upon the bank’s future operations; or 3. may lead to the auditor advising against the adoption of the balance sheet or profit and loss account or to qualification in accordance with Chapter 10, sections 30 or 31 of the Companies Act (SFS 1975:1385); the auditor shall immediately report such circumstance to the Financial Supervisory Authority. The auditor and the special examiner have a corresponding reporting obligation where he or she becomes aware of circumstances as referred to in the first paragraph in conjunction with the performance of duties for the bank’s parent undertaking or subsidiaries, or an undertaking which has a similar relation to the bank. (SFS 1998:1500). Loan prohibition, etc.

Section 18.

The provisions of this Section and Chapter 2, sections 17 and 18, shall apply in lieu of the provisions of Chapter 12, sections 7-9 of the Companies Act (SFS 1975:1385). A banking company may not grant a loan for debtors to acquire shares in the company where the total amount of such loan would thereafter exceed the company’s unrestricted equity. (SFS 1998:1500).

Liquidation

Section 19.

With the exception of those cases set forth in Chapter 13, sections 3 and 4 of the Companies Act (SFS 1975:1385), the court shall order that a banking company be placed into liquidation where its charter has been revoked. (SFS 1998:1500).

Section 20.

A petition for liquidation in accordance with Section 19 of this Chapter or Chapter 13, Section 2 of the Companies Act (SFS 1975:1385) may also be lodged by the Financial Supervisory Authority. (SFS 1998:1500).

Merger

Section 21.

Only a banking company may acquire another banking company’s total assets and liabilities by merger. (SFS 1998:1500). Section 22.

The provisions of Chapter 14, sections 13-18 of the Companies Act (SFS 1975:1385) shall not apply in conjunction with a merger with a banking company. The provisions of sections 23-25 of this Chapter shall apply in lieu thereof. (SFS 1998:1500).

Section 23.

Following approval of a merger plan by the companies, the transferor company and the transferee company shall apply for consent to execute the plan. Issues regarding such consent shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. In addition, in conjunction with a merger through consolidation, the companies shall apply for a charter and approval of the articles of association for the transferee company in accordance with Section 3. The application must be submitted within one month from the date that the merger plan was approved for both companies and not later than two years after the public notice of the merger plan in accordance with Chapter 18, Section 2 of the Companies Act (SFS 1975:1385). (SFS 1999:222).

Section 24.

In conjunction with the determination of an application for consent to execute a merger plan, consideration shall be given to whether the companies’ creditors will be afforded satisfactory security where such security is required taking into account the merging companies’ financial circumstances and whether the creditors have not already received such security. (SFS 1999:222).

Section 25.

An application in accordance with Section 23 shall be denied where: 1. the merger has been prohibited in accordance with the Swedish Competition Act (SFS 1993:20), or by legislation, agreements, or other decisions which result from Sweden’s accession to the European Union, or where such a determination of the merger is pending; 2. in conjunction with consolidation, it is not apparent from the merger plan that the transferor company’s total actual value to the transferee company amounts to at least the share capital in the transferor company; or 3. the company’s creditors are not ensured such satisfactory security as referred to in Section 24, or the merging companies’ financial circumstances in general are such that the merger may not be deemed to be compatible with depositors’ or other claimants’ interests. Where the application cannot be granted due to the fact that a determination is pending in accordance with the first paragraph, sub-Section 1, and the determination may be assumed to require a short time, the question of consent may, however, be suspended for a period of not more than six months. (SFS 1999:222).

Section 26. An application in accordance with Chapter 14, Section 19 of the Companies Act (SFS 1975:1385) must be submitted within two months from such time that consent has been granted. (SFS 1999:222).

Section 27.

A merger through the merger of a wholly-owned subsidiary into its parent may take place notwithstanding that there is property in the subsidiary which the banking company may not acquire in accordance with this Act. Such property must be divested not later than one year following registration. Where special cause exists, the Financial Supervisory Authority may extend this period. (SFS 1998:1500).

Section 28.

The provisions of Chapter 14, sections 26 and 27 of the Companies Act (SFS 1975:1385) shall not apply in conjunction with the merger of a wholly-owned subsidiary into its parent. The provisions of this Section shall apply in lieu thereof. The parent company shall apply for consent to execute the merger plan not less than one month and not more than two months following public notice of registration of the merger plan. Issues regarding such consent shall be determined by the Financial Supervisory Authority. However, cases involving matters of principle or of exceptional importance shall be determined by the Government. The provisions of sections 24- 25 shall apply, where applicable, in relation to such matters. References to the transferor company shall be deemed to refer to subsidiary companies and references to the transferee company shall be deemed to refer to parent companies. (SFS 1999:222).

Company names

Section 29.

A banking company’s name must include the word “bank”. (SFS 1998:1500).

Section 30.

A banking company which has acquired the business of a savings bank in conjunction with conversion in accordance with Chapter 8 of the Savings Banks Act (SFS 1987:619), may, following the consent of the Financial Supervisory Authority, use the words “savings bank” in its name. The above-stated shall apply to a banking company which has subsequently acquired such a business. (SFS 1998:1500).

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