Financial Supervisory Authority needs additional
‘Developments in the financial sector place new demands on supervision of the players. In my opinion, increased resources for the Financial Supervisory Authority are required in order to safeguard Sweden’s financial stability.’
Deputy Governor Lars Nyberg said this in a speech at the head office of Föreningssparbanken.
‘These resources could be generated by enabling the Authority to dispose of the charges that are being paid by banks and other institutions.
‘The issue of financial supervision is important, particularly in view of the financial sector’s rapid expansion in recent years. The risks in the financial system, as well as the ways of managing them, are now very different from what they were just a decade ago. The experiences from the international financial crisis in 1997 and 1998 demonstrate that the need for financial supervision has grown and its nature has changed.
‘The need for financial supervision to be increasingly focused on risk and quality has been highlighted by, among others, the Basle Committee on Banking Supervision. New supervisory requirements have also been pointed out in Sweden by the Bank Law Committee (SOU 1998:160) and, just recently, by the Financial Market Enquiry (SOU 2000:11).
‘In many countries, Sweden included, the new requirements mean that the supervisor has to work in ways that are partly new. For Sweden’s Financial Supervisory Authority this also means that new kinds of competence need to be added to the organisation. If a lack of resources prevents the supervisor from developing in step with the financial markets, the risks in the financial system will ultimately grow.
‘The operations of the Financial Supervisory Authority are currently financed via the government budget. The costs for supervision are covered with charges on the financial institutions. I find this roundabout procedure unnecessary and unfortunate.
‘Additional appropriations for supervision have to vie with other budget items for room under the spending ceiling. It seems more reasonable to do the same as in the United Kingdom, for example, where the supervisory authority charges the financial institutions directly for its operations. Direct fee financing would create financial room for a necessary renewal of the Financial Supervisory Authority. An effective supervision strengthens confidence in the financial sector and is, in my opinion, something the financial institutions are prepared to pay for. For society, too, such supervision is clearly desirable.’