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Last Updated: February 2010

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Sweden

	Score	Rank
Financial Standards Index	51.67 out of 100	32
Business Indicator Index	10.65 out of 12	26

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12 Key Standards Overview
Summary by Standard
Business Indicator Summary
Quick Facts & Global Indices

Overall Standards Summary

Sweden achieves medium overall compliance with international standards and codes, with a score of 51.67 out of 100 in our Standards Compliance Index. Sweden shows a high compliance level with Macroeconomic Policy and Data Transparency standards, fueled in part by the fact that the Sveriges Riksbank is one of the most transparent central banks in the world with regards to monetary policy. In the area of Institutional and Market Infrastructure standards, Sweden has varying levels of compliance. An area where the country falls short of international standards is accounting practices. While Sweden permits the use of International Financial Reporting Standards (IFRSs) in the consolidated accounts of all types of companies, annual accounts are to be prepared in accordance with the standards issued by the Swedish Financial Reporting Board, which differ from IFRSs. Regarding auditing standards, as of September 2009 the Swedish accounting and auditing authority was in the process of translating into Swedish the latest version of International Standards on Auditing, which is expected to be effective on January 1st 2011. Sweden modernized its real-time gross settlement payment system (RIX) in February 2009 by updating its operating system to further reduce running costs and increase efficiency. This modernized version, which was implemented in September 2009, was found to be in observance of all relevant core principles, except one. In the area of Financial Regulation and Supervision, the lack of current publicly available assessments prevents the assignment of a level of compliance for Swedish insurance supervisory practices, thereby reducing Sweden’s overall score.

Choose a standard for a detailed compliance report:

12 Key Standards for Sound Financial Systems	Compliance Level
Special Data Dissemination Standard	CP
Code of Good Practices on Transparency in Monetary Policy	FC
Code of Good Practices on Transparency in Fiscal Policy	CP
Effective Insolvency and Creditor Rights Systems	CP
International Financial Reporting Standards	NC
Principles of Corporate Governance	EN
International Standards on Auditing	ID
Anti-Money Laundering/Combating Terrorist Financing Standard	ID
Core Principles for Systemically Important Payment Systems	EN
Core Principles for Effective Banking Supervision	ID
Objectives and Principles of Securities Regulation	EN
Insurance Core Principles	II
II = Insufficient Information \| NC = No Compliance \| ID = Intent Declared \| EN = Enacted \| CP = Compliance in Process \| FC = Full Compliance

Macroeconomic Policy and Data Transparency

CPSpecial Data Dissemination Standard

Sweden became a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) in May of 1996. Sweden provides summary methodologies for all SDDS datasets, and disseminates advance release calendars on the IMF's SDDS website. Data coverage, timeliness, and periodicity are all in line with SDDS specifications, although Sweden avails itself of the timeliness flexibility option for its production index data. With regards to the integrity and quality dimensions of the SDDS, however, information provided on its website as of December 2009 indicates that Sweden provides no information for several data points regarding the dissemination of component detail and statistical cross-checks. The IMF's 2001 Report on the Observance of Standards and Codes (ROSC) for data dissemination found that Sweden provided a supportive legislative and institutional environment for its statistical system, used adequate resources for the tasks at hand, and displayed an appropriate level of awareness regarding the need for quality statistics. It found that professionalism, transparency, and ethics were recognized as important guiding principles and that appropriate practices were in place. In 2008, the IMF published an Annual Observance Report of the SDDS, and stated that Sweden met most requirements of the standard.

FCCode of Good Practices on Transparency in Monetary Policy

Sweden's monetary policy is highly transparent, according to the IMF)'s 2002 Financial System Stability Assessment (FSSA). According to the FSSA, there is high compliance with the IMF's code on monetary policy transparency, and the roles, responsibilities, and objectives of the relevant agencies - the Sveriges Riksbank (Sweden’s central bank or SR), the Financial Supervisory Authority (FI), and the National Debt Office (RGK) - which are clearly delineated in law. The FSSA suggested that there could be greater clarification as to the SR's autonomy in exchange-rate activities and a greater distinction between the roles of the SR and the FI in certain areas of mutual responsibility. The IMF’s 2009 Article IV Consultation report noted that the SR operates an inflation targeting framework. The Fund stated that the SR is one of the most transparent central banks in the world with regard to this policy, which has served Sweden well over time. Sweden is a subscriber to the IMF's Special Data Dissemination Standard (SDDS), and meets or exceeds all requirements for timeliness, periodicity, and coverage as established by the SDDS.

CPCode of Good Practices on Transparency in Fiscal Policy

The 2000 IMF's ROSC for fiscal transparency found that, in general, Sweden's policies and practices are in accord with the IMF's fiscal transparency code, adding that efforts to improve transparency were ongoing. At the time of the report, progress had already been made to strengthen the budget process and legislative framework. A 2005 Article IV Consultation report from the IMF suggested the creation of an independent agency that could provide input in the budget process, particularly with regard to how well policy followed the prescriptions of the budget framework. At the time, Swedish authorities found the suggestion unnecessary and impracticable. The 2006 Article IV Consultation reiterated this suggestion, with Swedish authorities being more open to the idea, though they argued that such an agency would be better used to offer ex-post performance evaluations than ex-ante budget input. It was not clear from subsequent reports by the IMF whether such an agency was ultimately created. In 2008, the International Budget Partnership (IPB) rated Sweden's budget process transparency at 78 percent, or "significant," based on Sweden’s publication of seven out of the eight key budget documents tracked by the IBP. This represented a slight improvement over the score of 76 percent received by the same organization in 2006.

CPEffective Insolvency and Creditor Rights Systems

According to the European Commission's Expert Group "Best Project" final report dealing with restructuring and bankruptcy, published in 2003, Sweden had fully adopted 24 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. In addition, Sweden had almost fully adopted 12 of these principles, partially adopted three, and had not adopted one. The International Monetary Fund found in 2002 that Sweden's insolvency and bankruptcy system is "highly developed" and supported by an efficient court system. Since that time, a number of sources have noted reforms in Swedish insolvency legislation, all of which aim to strike a better balance between protecting the rights of creditors while permitting the reorganization of troubled but otherwise viable firms. Many of these reports specify the relative rarity of reorganization, and cite as a primary cause of this the existing scheme by which creditors' claims, particularly the claims of banks, tend to work toward the detriment of the reorganization process. As noted in the World Bank's 2010 Doing Business report, Sweden's average time and cost of bankruptcy proceedings are 2 years and 9 percent of the debtor estate, respectively, compared to the Organization for Economic Cooperation and Development (OECD) averages of 1.7 years and 8.4 percent. Return to creditors for Sweden at 75.1 cents on the dollar is slightly above the OECD average of 68.6.

NCInternational Financial Reporting Standards

According to the Swedish Accounting Standards Board (BFN) website, Swedish accounting practices are primarily governed by the mandatory Annual Accounts Act (AAA) and the Book-Keeping Act, supplemented by specific requirements for unlisted, listed, and financial companies. The BFN issues standards for unlisted entities which, per the 2002 update on the Deloitte IAS Plus website, are similar to the Swedish standards issued for listed entities, but offer significant relief for smaller companies. As far as listed companies are concerned, starting in January 2005, in line with the European Commission Regulation No. 1606/2002, these companies are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. A 2008 European Commission report on the implementation of Regulation No. 1606/2002 points out that Sweden permits IFRSs in the consolidated accounts of all types of companies, although the use of IFRSs in the annual accounts is prohibited for all companies. Annual accounts of listed companies are to be prepared in accordance with the Recommendations issued by the Swedish Financial Reporting Board (SFRB). These recommendations are based on IFRSs; however, changes have been made to the international requirements in order to adjust IFRSs to the Swedish legal and tax environment, as well as in the cases deemed necessary by the SFRB. Financial companies, including credit institutions and insurance companies, are subject to standards issued by the Swedish Financial Supervisory Authority. A 2009 PricewaterhouseCoopers publication on the adoption of IFRSs throughout the world states that the national standard-setters have not announced any convergence plans.

ENPrinciples of Corporate Governance

The Swedish corporate governance framework is characterized by several features distinguishing it from that of many other countries, mainly in terms of its long tradition of self-regulation, structure of corporate governance, and concentrated ownership dispersion. Regarding the legal and regulatory framework, a 2002 report by Weil, Gotshal, and Manges notes that Swedish legislation (particularly the Companies Act) and listing rules include detailed corporate governance requirements. However, a 2002 International Monetary Fund's Financial System Stability Assessment suggested that the regulation of issuers was below international standards, particularly regarding enforcement. In January 2006, revisions were made to the Companies Act, focusing on the implementation of European Union (EU) directives, as well as on shareholders rights and corporate governance issues. The Swedish Code of Corporate Governance was enacted in July 2005 on a “comply or explain” basis as a supplement to the Companies Act and other legislation. Its purpose was to improve overall corporate governance through self-regulation and to address issues of poor corporate governance and decreasing investor confidence. A revised version of the Code went into effect on July 1, 2008, and extended its obligations to all companies on the NASDAQ OMX Nordic (formerly Stockholm Stock Exchange), and the Nordic Growth Market Equity Exchange. According to the website of the Swedish Corporate Governance Board, new legislation concerning mandatory corporate governance reports and disclosure of the implementation of the Code came into effect on March 1, 2009. The website also reports that further revisions have been made to the Code and are to be implemented as of February 1, 2010.

IDInternational Standards on Auditing

According to the 2009 action plan prepared by the Swedish accounting and auditing authority (FAR SRS) for the International Federation of Accountants (IFAC), Sweden adopted International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Board (IAASB) as the Swedish Standards on Auditing (SSAs). As explained in the action plan, effective January 1, 2004 the FAR SRS adopted ISAs existing as of 2000 with modifications to reflect local legal requirements. A 2009 publication by the IFAC on the adoption of ISAs around the world explains that the additions to ISAs and the differences between SSAs and ISAs are clearly identified in the text of the standards. In line with its commitment to the convergence with the international standards, as of September 2009 the FAR SRS was in the process of translating into Swedish the latest version of ISAs issued in 2009 as an outcome of the IAASB’s Clarity Project. The expected effective date of the new Swedish standards is January 1, 2011.

IDAnti-Money Laundering/Combating Terrorist Financing Standard

The Financial Action Task Force (FATF) published a mutual evaluation report on Sweden in 2006 and concluded that the legal framework prevailing in the country to prevent money laundering and terrorist financing is generally comprehensive and encompasses most of the elements of the Vienna and Palermo Conventions. The report, however, assigns a partially compliant rating for Sweden against recommendations 5 and 13. Both these recommendations are designated as core recommendations by the FATF, implying that a country needs a rating of compliant or largely compliant with these recommendations to be adjudged as observing the FATF's requirements. Further the FATF’s assessment notes that Sweden's anti-money laundering/combating the financing of terrorism (AML/CFT) regime does not appear to be effective in terms of implementation, evidenced from the low number of prosecutions and convictions. Preventive measures and the sanctions regime for financial institutions and designated non-financial businesses and professions (DNFBPs) are also generally broad, but with weak enforcement. The Swedish financial intelligence unit, the Financial Police, is found to be competent, but lacks adequate resources. The FATF in its 2006 report recommended, among other things, that Sweden broaden its AML/CFT regime to enable more robust supervision, broaden customer due diligence and record keeping requirements for financial institutions, designate AML/CFT supervisors for the DNFBP sector, and maintain more statistics on AML/CFT law enforcement. According to the International Bar Association’s Anti-Money Laundering Forum, the Third EU Money Laundering Directive was implemented by Act No. 62 of 2009 on Measures to Prevent Money Laundering and Terrorist Financing, which came into effect on March 15, 2009. However, there does not yet seem to be any publically available information regarding the effectiveness of the implementation of this law. The FATF, in its 2008-2009 Annual Report, named Sweden as one of the jurisdictions that have endorsed the FATF's 40+9 recommendations.

ENCore Principles for Systemically Important Payment Systems

There are several payment systems operating in Sweden. However, for the purposes of measuring compliance with the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS), the two relevant systems are the real-time gross settlement system, the RIX, and the retail payment system, the Bankgirocentralen (BGC). Both systems were assessed by the Swedish central bank, Sveriges Riksbank (SR) recently, the RIX in 2009, and the BGC in 2008. The 2009 RIX assessment finds the system to be in observance of all relevant principles, except one. The 2008 BGC assessment also finds the system to be in observance of all relevant principles. Sweden modernized the RIX in February 2009 by updating its operating system to further reduce running costs and increase efficiency. This modernized version was implemented in September 2009. The RIX assessment was performed against the modernized version. Prior to its modernization, the RIX was comprised of the K-RIX, which settled in Swedish kroner, and the E-RIX, which settled in euro and was part of the pan-European payment system known as Trans-European Automated Real-time Gross settlement Express Transfer (TARGET) system. However, as Sweden opted out of TARGET2, the successor of TARGET, E-RIX was discontinued at the end of 2006. Assessing Sweden's payment system infrastructure in 2002, the IMF concluded that Sweden’s payment systems have a well-founded legal basis, with transparent rules and regulations, high operational reliability, and a clear statement of the rights and obligations of all parties. A 2008 World Bank survey produced similar findings. Since the publication of these reports, however, there have been changes to Sweden's payment systems architecture.

IDCore Principles for Effective Banking Supervision

The IMF in its FSSA of Sweden in 2002 concluded that overall the unified regulator in charge of banking supervision in the country, the Swedish Financial Supervisory Authority, exhibits a high degree of compliance with international standards and codes. The report, however, does not specifically address Sweden's overall compliance with the Basel Core Principles (BCPs). The FSSA also noted that although Sweden has a sound legal framework and prudential regulations in place, there were, at the time, several shortcomings in regulations and implementation that impeded Sweden's compliance with the BCPs. The main shortcomings identified by the report related to the FI's inadequacies in staff and resources, the FI's limited scope for remedial action, and the lack of proper regulations relating to country risk, operational risk and exchange rate risk. The Swedish authorities, per the FSSA, were cognizant of some of the deficiencies in the supervisory regime, and had started working towards their amelioration. A more recent IMF report, the 2009 Article IV, notes that the legislative framework for bank resolution still needs improvement.

ENObjectives and Principles of Securities Regulation

Sweden’s framework for regulation and supervision of the securities markets is well developed and satisfactory. There is full or partial observance of all of the International Organization of Securities Commissions' Principles, according to the IMF's 2002 FSSA, which has been the IMF’s last comprehensive assessment on Sweden. The assessment did raise a number of issues, however, chief among these is the fact that the FI lacked sufficient legal authority to adequately enforce compliance with securities laws or to react effectively to non-compliance concerns short of withdrawing a license. As the FI can not apply penalties directly to regulated entities, it has to rely on the public prosecution function and as a result, enforcement tools are limited. Enforcement is further hampered by the FI's lack of authority over individual employees of investment firms or ability to compel evidence or production of documents from third parties. Given the increasing integration of Nordic/Baltic financial markets through the OMX exchange group, supervisory arrangements between the regulation authorities, currently in the form of Memoranda of Understanding, may have to be strengthened, as a 2007 IMF paper contemplated.

IIInsurance Core Principles

The insurance sector in Sweden is supervised by the FI, the integrated financial sector supervisor. The main laws that govern insurance business and supervision are the Insurance Business Act and the Insurance Contracts Act. In 2002, the IMF in its FSSA of Sweden, which finds the country to be fully or partially compliant with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) in 2000. However, the IAIS revised its principles in 2003 and there is little subsequent information publicly available as to Sweden's compliance with the new, more stringent ICPs. Per the FSSA, Sweden has the general prerequisites for adequate supervision largely in place, and as of 2002, the insurance sector laws were in conformity with the European Union directives. The FSSA, however, notes that gaps in the regulatory framework and a paucity of staff resources have weakened the FI's capabilities for effective risk-based supervision of the insurance sector. The IMF calls for an amendment of the Insurance Business Act. According to an October 2008 article by Brandt et al, an amendment of the law was drafted in 2006. As of January 2010, however, there is insufficient information indicating whether it has been passed into law.

Business Indicators

With an overall score of 10.65/12, Sweden is at standard on the economic, legal, and political indicators that make up our Business Index. Sweden has a market-based, private sector economy, where total government expenditures, including consumption and transfer payments, are traditionally very high, following in the tradition of the social welfare state. At the same time, Sweden has one of the most open and competitive markets in the world ranking third behind the U.S. and Finland. Most sectors in Sweden are open to foreign investment, with the government maintaining a monopoly in certain sectors such as the retail sales of pharmaceuticals and alcoholic beverages. Investors are also not faced with barriers with respect to capital transactions or current tansfers, real estate purchases, and repatriation of profits. Both domestic and foreign investors are also allowed to acquire shares in any company listed on the Stockholm Stock Exchange. Property rights are well protected and contracts are respected in Sweden. Sweden has comprehensive laws on corruption which are fully enforced. The country is ranked amongst the most corruption free economies in the world as reflected in the Transparency International's 2009 Corruption Perception Index.

Global Indices & Quick Facts

Sweden is ranked in the 1st quintile in almost all global indices benchmarking political, economic, business, and human capital climates, as shown below. The exception is its ranking in the Fraser Institute’s Economic Freedom of the World Index, in which it ranks in the 2nd quintile, largely due to the size of government. It scores among the top ten countries in terms of capital access due to the very high level of involvement of deposit-taking institutions in financing businesses. Although it enjoys high levels of economic freedom, as highlighted by the Heritage Foundation Index, Sweden has one of the highest income tax rates in the world (60 percent), and total government spending equals more than half of GDP. Restrictive labor market regulations and extensive tax regulations remain problematic factors for doing business in Sweden, as is disclosed by the Global Competitiveness Index.

Name	Year	Rank	Score	Quintile
Bertelsmann Transformation Status Index	2010
Heritage Foundation Economic Freedom Index	2010	21/179	72.4%	1
Economic Freedom of the World Index	2009	40/141	7.28/10	2
World Economic Forum Global Competitiveness Index	2009	4/133	5.51/7	1
Milken Institute Capital Access Index	2009	11/122	7.13/10	1
World Bank Ease of Doing Business Index	2009	18/183	N/A	1
UNDP Human Development Index	2009	7/177	0.96/1	1
Transparency International Corruption Perceptions Index	2009	3/180	9.2/12	1
Freedom House Index	2009	Free	1/7

Credit Ratings

AAA/Stable Fitch

Aaa/Stable Moody's

AAA/Stable Standard & Poor's

Macroeconomic Data

2009 GDP (Current Prices): 359.1 billion USD (IMF)

2009 GDP (Per Capita): 38,960 USD (IMF)

2010 GDP (Growth Forecast): 1.2% (IMF)

2009 Inflation (CPI): 2.2% (IMF)

2008 Unemployment: 6.2% (CIA)

2008 Foreign Direct Investment

FDI (Inward): 43.7 billion USD (UNCTAD)

FDI (Outward): 37.40 billion USD (UNCTAD)

2007 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 4,339 million USD (OECD)