Swedish Perspective on Financing Growth and the Capital Markets Union ICSA Annual Meeting, 23 May 2016 Karolina Ekholm State Secretary to the Minister of Finance

Relatively good performance of Swedish growth GDP growth, annual percentage change, 2016 forecast Source: Macrobond, own calculations

Supported by increasing investment Source: Eurostat, OECD

Sweden, like other European countries, is bank dependent Sources of financing for non-financial corporations 2014 2014 2013 Source: Eurostat, OECD

Increased bank lending despite high prudential requirements Swedish bank lending to non-financial corporations, bn SEK Outstanding corporate bonds, Swedish non-financial corporations, bn SEK Source: Finansinspektionen Source: SCB

Banks optimistic about future lending to corporate sector 2016 2015 2014 2013 2012 2011 2010 2009 2007 2006 2005 2004 How do you think your bank’s lending to the corporate sector will evolve over the coming year? Increase significantly Increase somewhat Remain unchanged Decrease somewhat Decrease significantly Source: CMA Research/Almi Företagspartner AB (2016)

High profitability of large Swedish banks Estimates of P-TBV and RoTBV for a sample of European banks, 2016

Initiatives in Sweden related to corporate financing Ongoing work on reshaping the system for corporate taxation to reduce the debt-bias Public guarantee/loan funds, equity and venture capital funds Creation of a public fund-of-funds to revitalise the private venture capital market

Swedish perspectives on the CMU objectives Sweden supports the overall goals of the Capital Markets Union together with the Investment Plan and Call for Evidence on the cumulative impact of EU regulatory frameworks for financial services Diversification of funding sources is welcome Helps intermediation and improves resilience Does not solve the nexus of underlying problems in the Euro area Weak banking sector, debt overhang, low expectations regarding future growth

Swedish priorities for the CMU milestones Remove barriers to the free movement of capital. Support financial market developments that contribute to sustainability. Review key legislation from a proportionality perspective… …but important to not lower prudential standards. Facilitate more funding choices for businesses, especially SMEs.

Thank you!

Extra

Financing growth in Sweden According to surveys, raising capital is not an obstacle in Sweden. Tax bias may incentivise debt instead of equity financing. Sweden, like the rest of the EU, is bank dependent. 75% of external funding of SMEs through bank loans Strong bank lending to the corporate sector 2015 all-time high for IPOs on regulated markets and MTFs in the Nordics

Nexus of underlying problems in large parts of the EU Weak banking sector Low profitability with high NPLs Weak economic development Debt overhang hampers growth at the same time as growth is needed to reduce debt ratios. Weak future outlook Low expectations a break on demand and investments, further impacting the vicious circle of low growth and debt overhang