Company Quick10K Filing
Quick10K
Swedish Export Credit
20-F 2018-12-31 Annual: 2018-12-31
20-F 2017-12-31 Annual: 2017-12-31
20-F 2016-12-31 Annual: 2016-12-31
20-F 2015-12-31 Annual: 2015-12-31
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QTRX Quanterix 524
DX Dynex Capital 440
LCUT Lifetime Brands 198
CWCO Consolidated Water 194
BGFV Big 5 Sporting Goods 51
MOST Mobilesmith 0
SEK 2018-12-31
Item 17 O Item 18 O
Part I
Item 1. Identity of Directors, Senior Management and Advisors
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Group and The Parent Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Mangement and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risks
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemption From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers.
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Note 1. Significant Accounting Policies
Note 2. Net Interest Income
Note 3. Net Fee and Commissions Expense
Note 4. Net Results of Financial Transactions
Note 5. Personnel Expenses
Note 6. Other Administrative Expenses
Note 7. Tangible and Intangible Assets
Note 8. Leasing
Note 9. Impairments
Note 10. Taxes
Note 11. Loans and Liquidity Investments
Note 12. Classification of Financial Assets and Liabilities
Note 13. Financial Assets and Liabilities At Fair Value
Note 14. Derivatives and Hedge Accounting
Note 15. Shares
Note 16. Other Assets
Note 17. Prepaid Expenses and Accrued Revenues
Note 18. Debt
Note 19. Other Liabilities
Note 20. Accrued Expenses and Prepaid Revenues
Note 21. Provisions
Note 22. Subordinated Liabilities
Note 23. Equity
Note 24. Pledged Assets and Contingent Liabilities
Note 25. Cirr-System
Note 26. Capital Adequacy
Note 27. Risk Information
Note 28. Transactions with Related Parties
Note 29. Events After The Reporting Period
Note 30. Risk and Capital Management
EX-2.6 a18-41682_1ex2d6.htm
EX-12.1 a18-41682_1ex12d1.htm
EX-13.1 a18-41682_1ex13d1.htm
EX-14.1 a18-41682_1ex14d1.htm

Swedish Export Credit Earnings 2018-12-31

SEK 20F Annual Report

Balance SheetIncome StatementCash Flow

20-F 1 a18-41682_120f.htm 20-F

Table of Contents

 

As filed with the Securities and Exchange Commission on February 25, 2019

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

 

o

Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

 

 

or

 

 

x

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2018

 

 

or

 

 

o

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

or

 

 

o

Shell company report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

 

For the transition period from                       to                        

 

Commission file number: 001-08382

 

AKTIEBOLAGET SVENSK EXPORTKREDIT

(Exact name of Registrant as Specified in Its Charter)

 

(SWEDISH EXPORT CREDIT CORPORATION)

(Translation of Registrant’s Name into English)

 

Kingdom of Sweden

(Jurisdiction of incorporation or organization)

 

Klarabergsviadukten 61-63, Stockholm, Sweden

(Address of principal executive offices)

 

Stefan Friberg, Swedish Export Credit Corporation,

P.O.Box 194, SE-101 23 Stockholm

Email: Stefan.Friberg@sek.se

Phone 46-8-613 88 05, Fax 46-8-20 38 94

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each Class

 

Name of each exchange on which registered

ELEMENTSSM Linked to the SPECTRUM Large Cap U.S. Sector Momentum Index developed by BNP Paribas due August 8, 2022

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the Rogers International Commodity Index® — Agriculture Total ReturnSM due October 24, 2022

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the Rogers International Commodity Index® — Energy Total ReturnSM due October 24, 2022

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the Rogers International Commodity Index® — Metals Total ReturnSM due October 24, 2022

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the Rogers International Commodity Index® — Total ReturnSM due October 24, 2022

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the ICE BofAML Commodity index eXtraBiofuels Exchange Series — Total Return due February 13, 2023

 

NYSE ARCA, Inc.

 

 

 

ELEMENTSSM Linked to the ICE BofAML Commodity index eXtra (GRains)— Total Return due February 14, 2023

 

NYSE ARCA, Inc.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None

(Title of Class)

 


Table of Contents

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

Debt Securities

(Title of Class)

 

Indicate the number of shares outstanding of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Shares

3,990,000

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes   o No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

Non-accelerated filer x

 

Emerging growth company o

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

o U.S. GAAP

 

x International Financial Reporting Standards as issued
by the International Accounting Standards Board

 

o Other

 

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o   Item 18 o

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

o Yes   o No

 


Table of Contents

 

TABLE OF CONTENTS —

 

PART I

4

 

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

4

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

4

ITEM 3. KEY INFORMATION

4

ITEM 4. INFORMATION ON THE GROUP AND THE PARENT COMPANY

12

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

23

ITEM 6. DIRECTORS, SENIOR MANGEMENT AND EMPLOYEES

31

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

40

ITEM 8. FINANCIAL INFORMATION

41

ITEM 9. THE OFFER AND LISTING

42

ITEM 10. ADDITIONAL INFORMATION

42

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

46

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

46

 

 

PART II

47

 

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

47

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

47

ITEM 15. CONTROLS AND PROCEDURES

47

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

48

ITEM 16B. CODE OF ETHICS

48

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

49

ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

49

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

50

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

50

ITEM 16G.CORPORATE GOVERNANCE

50

 

 

PARTIII

50

 

 

ITEM 17. FINANCIAL STATEMENTS

50

ITEM 18. FINANCIAL STATEMENTS

50

ITEM 19. EXHIBITS

51

 

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Table of Contents

 

INTRODUCTORY NOTES

 

In this annual report on Form 20-F (the “annual report”), unless otherwise specified, all amounts are expressed in Swedish kronor (“Skr”).

 

In this annual report, unless otherwise indicated, all descriptions and financial information relate to the consolidated group consisting of Aktiebolaget Svensk Exportkredit (publ), (Swedish Export Credit Corporation) (the “Parent Company”), including the Swedish system for officially supported export credits (the “CIRR-system”), which is described herein, and the Parent Company’s wholly owned, inactive subsidiary SEKETT AB (the “Subsidiary”).  These are jointly referred to as the “Consolidated Group” or the “Group”. During 2018, the winding-down of the subsidiary Venantius AB, including the latter’s wholly owned subsidiary VF Finans AB, was completed.

 

The Consolidated Financial Statements of SEK included in Item 18 (the “Consolidated Financial Statements”) comprise the financial statements for 2018 of the Parent Company and the Subsidiary and for 2017 and earlier of the Parent Company together with Venantius AB and its wholly owned subsidiary VF Finans AB. In certain cases, comparable figures for earlier financial periods are reported in parentheses after the relevant figure for the current period. For example, “(2017: Skr 10 million)” means that the relevant figure for 2017, or as of December 31, 2017, as the context requires, was Skr 10 million.

 

The Parent Company is a “public limited liability company” within the meaning of the Swedish Companies Act (2005:551). A Swedish limited liability company, even if its shares are not listed on an exchange and are not publicly traded, may choose to declare itself a “public limited liability company”. Only public limited liability companies are allowed to raise funds from the public through the issuance of debt instruments. A public limited liability company is required to add the notation “publ” to its name, unless it is evident from the company’s name that the company is a public limited liability company.

 

Additional information about SEK, including investor presentations and the Annual Report for the financial year of 2018, is available at www.sek.se/en/investor-relations. Information available on or accessible through SEK’s website is not incorporated herein by reference.

 

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FORWARD-LOOKING STATEMENTS

 

This annual report contains forward-looking statements. SEK has based these forward-looking statements on its current expectations and projections about future events. These statements include but are not limited to:

 

·                          statements regarding financial projections and estimates and their underlying assumptions;

·                          statements regarding plans, objectives and expectations relating to future operations and services;

·                          statements regarding the impact of regulatory initiatives on SEK’s operations;

·                          statements regarding general industry and macroeconomic growth rates and SEK’s performance relative to them; and

·                          statements regarding future performance.

 

Forward-looking statements are generally identified by the words “expect”, “anticipate”, “believe”, “intend”, “estimate”, “should”, and similar expressions.

 

Forward-looking statements are based on current plans, estimates and projections, and therefore readers should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and SEK undertakes no obligation to update any forward-looking statement in light of new information or future events, although SEK intends to continue to meet its ongoing disclosure obligations under the U.S. securities laws (such as the obligations to file annual reports on Form 20-F and reports on Form 6-K) and under other applicable laws. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and generally beyond SEK’s control. Readers are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, forward-looking statements. These factors include, among others, the following:

 

·                  disruptions in the financial markets or economic recessions, including as a result of geopolitical instability, may have an adverse effect on SEK’s financial performance;

·                  disruptions in the financial markets or economic recessions may negatively affect the credit quality of borrowers and cause risk to other counterparties, which may cause SEK to incur credit losses or affect the value of its assets;

·                  reduced access to international capital markets for the financing of SEK’s operations, or less favorable financing terms, may negatively impact SEK’s profitability and its ability to fulfill its obligations;

·                  changes in laws, regulations or accounting standards may adversely affect SEK’s business;

·                  SEK may experience negative changes in the value of its assets or liabilities and may incur other losses related to volatile and illiquid market conditions;

·                  SEK’s hedging strategies may not prevent losses;

·                  fluctuations in foreign currency exchange rates could harm SEK’s business;

·                  increasing competition may adversely affect SEK’s income and business;

·                  SEK is exposed to significant operational risk;

·                  risk related to financial reporting and other deficiencies in internal control over financial reporting and disclosure processes could result in regulatory action, legal liability and damage to the Group’s reputation;

·                  developments in emerging market countries may adversely affect the Group’s business;

·                  negative interest rates may have an impact on SEK’s profitability; and

·                  the transition from the use of London interbank offered rates (LIBOR) may adversely affect SEK’s profitability.

 

3


Table of Contents

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

 

Not required as this 20-F is filed as an Annual Report.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not required as this 20-F is filed as an Annual Report.

 

ITEM 3. KEY INFORMATION

 

A                   Selected Financial Data

 

The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and related notes. The Consolidated Statement of Comprehensive Income data for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 and the Consolidated Statement of Financial Position data as of December 31, 2018, 2017, 2016, 2015 and 2014 have been derived from SEK’s Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standard Board (IASB) (herein “IFRS”).

 

While complying with IFRS, SEK also complies with the additional requirements of the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559) (ÅRKL), the Recommendation RFR1 Supplementary Accounting Principles for Groups, issued by the Swedish Financial Reporting Board (RFR), and the accounting regulations of Finansinspektionen (the Swedish FSA) (FFFS 2008:25).

 

The following information should be read in conjunction with the more detailed discussion contained in Item 5 “Operating and Financial Review and Prospects”.

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME DATA

 

 

 

Year Ended December 31,

 

(In Skr mn, unless otherwise stated)

 

2018

 

2017

 

2016

 

2015

 

2014

 

Net interest revenues

 

1,442

 

1,683

 

1,747

 

1,662

 

1,578

 

Operating income

 

1,427

 

1,553

 

1,608

 

2,056

 

2,078

 

Operating profit

 

852

 

1,007

 

1,002

 

1,535

 

1,629

 

Net profit (after taxes)

 

648

 

772

 

780

 

1,187

 

1,260

 

Dividend per share (Skr)

 

48.70

(A)

58.05

 

58.65

 

89.22

 

94.74

 

Total comprehensive income

 

883

 

672

 

664

 

1,049

 

1,494

 

 


(A) The dividend for the year ended December 31, 2018 is to be proposed to the Annual General Meeting, which will be held on March 28, 2019, and is subject to approval at that meeting.

 

4


Table of Contents

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA

 

 

 

Year Ended December 31,

 

(In Skr mn, unless otherwise stated)

 

2018

 

2017

 

2016

 

2015

 

2014

 

Total loans outstanding (B)

 

209,226

 

195,120

 

208,700

 

205,097

 

218,222

 

Total assets

 

302,033

 

264,392

 

299,442

 

280,411

 

325,166

 

Total debt

 

257,847

 

226,873

 

255,214

 

235,644

 

284,137

 

of which subordinated

 

 

2,040

 

2,266

 

2,088

 

1,945

 

Equity

 

18,239

 

17,574

 

17,136

 

16,828

 

16,157

 

of which share capital

 

3,990

 

3,990

 

3,990

 

3,990

 

3,990

 

Number of shares

 

3,990,000

 

3,990,000

 

3,990,000

 

3,990,000

 

3,990,000

 

Total liabilities and equity

 

302,033

 

264,392

 

299,442

 

280,411

 

325,166

 

 


(B) Loans outstanding consist of loans due from commercial and financial institutions including loans in the form of interest-bearing securities. Certain deposits with banks and states are not a part of total loans, although they are included in the items Loans to Credit Institutions and Loans to the Public in the Consolidated Statement of Financial Position. For a reconciliation of loans outstanding, see Note 11 to the Consolidated Financial Statements.

 

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B                   Risk Factors

 

The following discussion provides a description of the most significant risk factors that could affect SEK’s businesses, results of operations and financial condition and could cause SEK’s results to differ materially from those expressed in public statements or documents. Some of these risk factors, many of which are outside the Group’s control, are inherent in the financial services industry and others are more specific to SEK’s own businesses. There are also other factors beyond those discussed below or elsewhere in this annual report on Form 20-F, that could affect SEK’s businesses, results of operations and financial condition and, therefore, the risk factors below should not be considered a complete list of all potential risks that SEK may face.

 

Disruptions in the financial markets or economic recessions, including as a result of geopolitical instability, may have an adverse effect on SEK’s financial performance.

 

SEK’s business and earnings are affected by general business, economic and market conditions, especially within Sweden and Europe. Uncertainties remain concerning the outlook and the future economic environment related to recent events in those regions, such as a continuing weak economic outlook in certain European countries and the uncertainty surrounding the economic effect of the United Kingdom (the “UK”) submitting formal notification under Article 50 of the Lisbon Treaty to the European Council of the intention of the UK to withdraw its membership in the European Union (commonly referred to as “Brexit”). In November 2018, negotiators from the EU and the UK agreed on a draft exit agreement, which was later approved at the highest political level by the Heads of State or Government of the EU countries.  The UK House of Commons voted to reject the draft , increasing the uncertainty surrounding the actual consequences of membership withdrawal. Furthermore, political uncertainty related to the trade conflict between the US and China and the impact of the US presidential administration, including on free trade agreements between the US and other countries, could have a negative impact on SEK’s business and earnings.

 

Additionally, even in the absence of slow economic growth or recessions, other economic circumstances — including, but not limited to, volatility in energy prices, contractions in infrastructure spending, fluctuations in market interest or exchange rates, and concerns over the financial health of sovereign governments and their instrumentalities — may have negative consequences for the companies and industries that the Group provides financing to (as well as the financial condition of SEK’s financial counterparties) and could, in addition to the other factors cited above, have material adverse effects on the Group’s business prospects, financial condition or ability to fulfill its debt obligations.

 

Disruptions in the financial markets or economic recessions may negatively affect the credit quality of borrowers and cause risk to other counterparties, which may cause SEK to incur credit losses or affect the value of its assets.

 

Risks arising from the credit quality of borrowers and counterparties and the recoverability of loans and amounts due from counterparties in derivative transactions are inherent in SEK’s businesses. Consequently, SEK may incur credit losses or delinquency in debt repayments even in normal economic circumstances. Financial market disruptions or economic recessions may further affect SEK’s customers and counterparties, negatively affecting their ability to fulfill their obligations. Market and economic disruptions may affect, among other things, business and consumer spending, bankruptcy rates and asset prices, creating a greater likelihood of impact on an increased number of SEK’s customers’ or counterparties’ credit demand or that they may become delinquent in their loans or other obligations to SEK. For example, following the financial crisis, SEK was forced to write down the value of some of its assets as a result of disruptions in the financial markets. Such disruptions may affect the recoverability and value of SEK’s assets and may necessitate an increase in SEK’s provisions for delinquent and defaulted debt and other provisions, which could in turn have a material adverse effect on SEK’s business and/or its ability to repay its debts.

 

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Reduced access to international capital markets for the financing of SEK’s operations, or less favorable financing terms, may negatively impact SEK’s profitability and its ability to fulfill its obligations.

 

In order to finance its operations, SEK is dependent on the international capital markets, where it competes with other issuers to obtain financing. Although SEK has been able to successfully finance its operations to date, factors outside SEK’s control may have material adverse effects on the Group’s continued ability to obtain such financing or could cause the cost of such financing to increase. For example, during the first five months of 2018 SEK did not issue any Japanese structured debt due to the impact of the European Union legal framework Markets in Financial Instruments Directive (“MiFID II”).

 

A key factor affecting the cost and availability of financing is SEK’s credit rating. Although the Group currently has favorable credit ratings from various credit rating agencies, those credit ratings depend on many factors, some of which are outside of SEK’s control. Significant factors in determining SEK’s credit ratings or that otherwise could affect its ability to raise financing include its ownership structure, asset quality, liquidity profile, short- and long-term financial prospects, risk exposures, capital ratios, and prudential measures, as well as government support and SEK’s public policy role. Notwithstanding regular confirmation from SEK’s owner (the Swedish State) of its continued support for SEK’s current public policy role, there is a risk that this view could change in the future. Deterioration in any one of these factors or in any combination of these factors may lead rating agencies to downgrade SEK’s credit ratings. If the Group were to experience a downgrade in its credit ratings, it would likely become necessary to offer increased interest margins in the capital markets in order to obtain financing, which would likely substantially lower the Group’s profit margins and earnings, harm its overall liquidity and negatively affect its business and its ability to fulfill its obligations.

 

Changes in laws, regulations or accounting standards may adversely affect SEK’s business.

 

SEK’s business is subject to regulation and regulatory oversight. Any significant regulatory development could affect the manner in which SEK conducts its business and SEK’s results of operations. SEK continues to monitor new local, regional and international regulations in an effort to remain compliant with the governing law.  Changes to existing laws, or the interpretation or enforcement of laws, may directly impact SEK’s business, results of operations and financial condition.

 

In particular, SEK is subject to financial services laws, regulations, administrative actions and policies in each location in which it operates. Financial regulators around the world have responded in the wake of the financial disruptions from 2008 and onwards by proposing significant changes to the regulatory regime applicable to financial service companies such as SEK. Changes to the current system of supervision and regulation, or any failure to comply with applicable rules (and particularly those in Sweden), could materially and adversely affect SEK’s business, financial condition or results of operation and/or ability to repay its debt. For example, in 2017, the Swedish FSA required most financial institutions in Sweden, including SEK, to pay a higher resolution fee to a fund to support the recovery of credit institutions, which adversely affected SEK’s results of operations.

 

The European Bank Recovery and Resolution Directive (the “BRRD”) provides an EU-wide framework for the recovery and resolution of credit institutions and investment firms, their subsidiaries and certain holding companies.  In Sweden, the requirements of the BRRD generally were implemented into Swedish law by the Resolution Act 2016 (as amended, the “Resolution Act”) as of February 1, 2016. In accordance with the BRRD, SEK is subject to a minimum requirement for own funds and eligible liabilities, which is a parallel requirement to the CRR (as defined below) in the EU. SEK is currently in compliance with the minimum requirement for own funds and eligible liabilities determined for it by the national resolution authority, which in Sweden is the Riksgäldskontoret (Swedish National Debt Office). If SEK does not comply in the future, the Swedish National Debt Office may require SEK to fulfill the requirements by issuing capital that is subordinated to SEK’s outstanding senior debt. SEK may experience difficulties in issuing this subordinated debt or the interest rate on this subordinated debt may be considerably higher than on senior securities issued, which would negatively impact SEK’s profitability. For more information, see Item 4 “Information on the Group and the Parent Company—B. Business Overview—Swedish Government Supervision—Supervisory Authorities”.

 

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The Resolution Act confers substantial powers on the Swedish National Debt Office to enable it to take a range of actions in relation to Swedish financial institutions that are considered to be at risk of failing, including a debt write-down tool. The exercise of any resolution power, or any suggestion of the exercise of any resolution power, may have a material adverse effect on the SEK’s ability to obtain financing, or could cause the cost of financing to increase and/or could affect SEK’s ability to fulfill its obligations

 

In addition, in the wake of the financial disruptions from 2008 and onwards, the Basel Committee on Banking Supervision (the “Basel Committee”) has revised the Basel regime to provide for new, stricter regulations with regard to capital adequacy and liquidity coverage. These stricter regulations (many of which have already come into force, while others are expected to become effective in the near future) will mean that, in general, financial institutions will need to maintain relatively more own funds (capital base) in relation to their risk-weighted assets as well as better matched borrowing in relation to their obligations. Furthermore, tighter rules on which assets can be defined as liquidity reserves as well as stricter requirements on the clearing of derivatives may also affect international capital markets. In addition, MiFID II became applicable in the European Union on January 3, 2018. Among other requirements, MiFID II imposes new requirements on the issuance and distribution of bonds and, therefore, may affect international capital markets, as well.  Compliance with these new rules and regulations may increase the costs of borrowing for all financial institutions, including SEK. For example, as a consequence of efforts to adapt to the MiFID II requirements, SEK did not issue any structured debt in the Japanese market in the first five months of 2018. For more information, see Item 4 “Information on the Group and the Parent Company—B. Business Overview—Swedish Government Supervision” below.

 

The Basel Committee issued in December 2017 final revisions to the Basel III capital framework (the “2017 Revisions”). The main objective of the 2017 Revisions is to reduce variability of risk-weighted assets within the banking system. The 2017 Revisions include an output floor, altered standardized approaches for credit risk and operational risk, constraints on the use of internally-modelled approaches and changes in the leverage ratio. It is expected to enter into force on January 1, 2022. From a Swedish perspective, the 2017 Revisions must first be implemented through EU legislation before they could impact SEK’s capital requirements. Even though SEK is expected to meet the revised requirements based on current market assumptions, the 2017 Revisions, once implemented, may materially constrain SEK’s business plans and negatively impact profitability.

 

European Market Infrastructure Regulation (EMIR), a regulation regarding OTC-derivatives, central counterparties and trade repositories, came into effect on August 16, 2012. Since then, various parts of the regulation have become effective. During 2018, additional parts of the regulation related to central clearing of certain OTC-derivatives came into effect. SEK may be required to post additional collateral related to its derivatives and may face higher costs as a result of these regulatory requirements.

 

IFRS 9 replaced IAS 39 on January 1, 2018, with regard to accounting rules for financial instruments.   The transition to IFRS 9  did not have a material negative impact on SEK´s equity, but the implementation of a new model for expected credit loss may increase the volatility of SEK’s earnings over time.

 

SEK may experience negative changes in the value of its assets or liabilities and may incur other losses related to volatile and illiquid market conditions.

 

Market volatility, illiquid market conditions and disruptions in the credit markets have made it difficult to value certain of SEK’s assets and liabilities during certain periods. For example, SEK is exposed to changes in fair value due to changes in credit spreads on its own debt and due to changes in currency basis spread, which it has not hedged, and such changes in fair value can have a negative impact on SEK’s results as reported under IFRS, even though SEK historically has not experienced any material realized losses related to such exposures. Subsequent valuations, in light of factors then prevailing, may result in significant changes in the value of such assets or liabilities in future periods. In addition, at the time of any sale of any such assets, the prices SEK ultimately realizes will depend on the demand and liquidity in the market at that time and may be materially lower than such assets’ current fair value. Any of these factors could require SEK to negatively change the

 

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carrying amount of such assets or liabilities, which may have an adverse effect on the Group’s financial condition in future periods.

 

SEK’s hedging strategies may not prevent losses.

 

SEK uses hedging instruments in an attempt to manage interest rate, currency, credit, basis and other market-related risks. If any of the variety of instruments and strategies the Group uses to hedge its exposure to these various types of risk is not effective, the Group may incur losses, impairing its ability to timely repay or refinance its debts. In addition, there can be no assurance that the Group will continue to be able to hedge risks related to current or future assets or liabilities in accordance with its current policies in an efficient manner or at all. Disruptions such as market crises and economic recessions may put a strain on the availability and effectiveness of hedging instruments or strategies and could have an adverse effect on SEK’s financial condition and its ability to fulfill its obligations.

 

Fluctuations in foreign currency exchange rates could harm SEK’s business.

 

As an international lending institution, the Group is subject to some exchange-rate risk. The adequacy of the Group’s financial resources may be impacted by changes in currency exchange rates that affect the value, in Swedish currency, of the Group’s foreign-currency obligations. For example, during 2018, there were fluctuations in major currencies due to political unrest, even though that did not have a significant impact on SEK’s financial condition during the year. The values of a majority of the items presented in the Consolidated Statements of Financial Position are subject to fluctuations as a result of changes in the exchange rate between the Swedish krona and other currencies, such as the U.S. dollar and the Euro. Countries could undertake actions that could significantly impact the value of their currencies such as “quantitative easing” measures and potential withdrawals from common currencies. Higher inflation in certain countries, including in Europe, may also result in devaluation of currencies. Even though the Group carefully monitors and hedges its foreign currency exposures, changes in currency exchange rates adverse to the Group could harm SEK’s business, its profitability and its ability to repay its debts. Furthermore, SEK does not hedge its exposure towards currency exchange-rate effects related to unrealized changes in the fair value of its assets and liabilities. Also, any strengthening of the Swedish krona against other currencies may reduce demand for the products sold overseas by SEK’s Swedish clients and thus reduce demand for its loans from end-purchasers of such products, or cause such clients to experience increased difficulty in repaying their loans to SEK. Such eventualities could therefore have an adverse effect on SEK’s financial condition and its ability to fulfill its obligations.

 

Increasing competition may adversely affect SEK’s income and business.

 

Competition in the Group’s business is based on service, product innovation, product features, price, commission structures, financial strength and name recognition. The Group competes with a large number of other credit institutions, including domestic and foreign banks, as well as with the direct or indirect financing programs of exporters themselves. Some of these institutions offer a broader array of products or have more competitive pricing or greater financial resources than SEK. Increasing competition may have significant negative effects on the Group’s financial performance if the Group is unable to match the products and services of its competitors or has to lower its prices or rates in order to compete for customer business, investments or financing. Such changes could have material adverse effects on SEK’s business and its ability to repay its debts.

 

SEK is exposed to significant operational risk.

 

Broadly, operational risk can arise from fraud, errors by employees, failure to document transactions properly or to obtain proper internal authorizations, equipment failures, natural disasters, information security failures, data loss, cyber-attacks and breaches from known malware or malware that may be developed in the future or the failure of external systems such as, for example, those of SEK’s suppliers or counterparties.  SEK did not experience any incidents relating to security failures, data losses, cyber-attacks or breaches during 2018 that had a material effect on SEK’s operations. SEK’s businesses are dependent on the ability to process complex transactions efficiently and accurately. Failure to address operational risk may lead to additional costs, losses or damages to SEK’s reputation which may negatively affect customers’ and investors’ confidence, and thus SEK’s business,

 

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financial performance and/or ability to repay its debt. SEK has in the recent past incurred additional costs related to the enhancement of IT-systems due to increased regulatory burdens. If, for example, SEK failed to properly comply with its obligations under financial guarantee contracts or other credit risk reducing arrangements or if the contracts were not properly drafted, this could result in SEK not being able to effectively seek recourse to such guarantees or other arrangements in the event the relevant borrower was unable to repay its debt to SEK.

 

There is also a risk that SEK’s reputation will be damaged if SEK fails to comply with current legislation and best practices or in any other way fails to meet its commitments, including those that are not explicit. Although operational risks can be reduced by properly documented processes, adequate systems, a culture of sensitivity to risk, compliance with regulations, effective corporate governance and other factors supporting internal control, such procedures may not be effective in controlling each single operational risk SEK faces. A significant failure in managing SEK’s operational risk could materially and adversely affect the Company’s business, financial condition, results of operation and/or ability to repay its debt.

 

Risk related to financial reporting and other deficiencies in internal control over financial reporting and disclosure processes could result in regulatory action, legal liability and damage to the Group’s reputation.

 

SEK’s external reporting of financial and non-financial data is reliant on the Group’s internal control over financial reporting including the integrity of systems and people. Failure to report data accurately and in compliance with external standards could result in regulatory action, legal liability and damage to the Group’s reputation. For additional information on SEK’s internal control over financial reporting see Item 15.

 

Developments in emerging market countries may adversely affect the Group’s business.

 

The Group operates in a number of emerging markets. Economic and political developments in emerging markets, including economic crises or political instability, may have material adverse effects on the Group’s business prospects, results of operations and financial conditions.

 

Negative interest rates may have an impact on SEK’s profitability.

 

Negative interest rates may result in lower net interest income and might negatively affect the value of assets and liabilities. For example, negative interest rates may render hedges less effective if interest rate is to be paid on the hedge while there is no compensation on the hedged item. Furthermore, increased prepayments on loans and lower spread between rates on assets and liabilities might also have a negative impact on net interest income. Negative interest rates lead to valuation risk due to potential changes in market practice for how to incorporate negative interest rates in the valuation. Relatively low interest rates create a risk that the bond market may be adversely affected due to lower turnover and less liquidity, even though the general upturn in interest rates in recent times has slightly mitigated this risk. Finally, low interest rates translate into greater risk of increased debt levels, rising asset prices and heightened financial risk taking.

 

LIBOR transition may adversely affect SEK’s profitability

 

As a result of recent regulatory and other legal proceedings, actions by regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined, its discontinuance or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the U.K. Financial Conduct Authority (FCA), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. Such an announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. Notwithstanding the foregoing, it appears highly likely that LIBOR will be discontinued or modified by 2021. At this time, it is not possible to predict the effect that these developments, any discontinuance, modification or other reforms to LIBOR or any other reference rate (for example, the Euro Interbank Offered Rate, also known as Euribor, and the Stockholm Interbank Offered Rate, also known as Stibor, which are also significant reference rates for SEK), the establishment of alternative reference rates, or the impact of any such events on

 

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contractual mechanisms may have on the markets, SEK or the Company’s floating rate debt securities. Uncertainty as to the nature of such potential discontinuance, modification, alternative reference rates or other reforms may negatively impact market liquidity, SEK’s access to funding required to operate the business and the trading market for the Company’s floating rate debt securities. Furthermore, the use of alternative reference rates or other reforms could cause the interest payable on SEK’s outstanding floating rate debt securities to be materially different, and potentially higher, than expected.

 

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ITEM 4. INFORMATION ON THE GROUP AND THE PARENT COMPANY

 

A                   History and Development

 

Aktiebolaget Svensk Exportkredit (publ) (Swedish Export Credit Corporation) is a “public limited liability company” under the Swedish Companies Act. It is wholly owned by the Swedish State through the Ministry of Enterprise and Innovation (“Sweden”, the “Swedish State” or the “State”).

 

The Parent Company was founded in 1962 in order to strengthen the competitiveness of the Swedish export industry by meeting a need for long-term financing for both exporters and their foreign customers. SEK’s objective is to engage in financing activities in accordance with the Swedish Banking and Financing Business Act and, in connection therewith, to promote the development of Swedish commerce and industry as well as otherwise engaging in Swedish and international financing activities on commercial terms. The duration of the Parent Company is indefinite.

 

SEK’s mission has evolved since it began its operations in 1962. SEK’s range of products has expanded from its roots in export loans; however it remains a niche operator in the financial markets.

 

The address of the Parent Company’s principal executive office is AB Svensk Exportkredit (Swedish Export Credit Corporation), Klarabergsviadukten 61-63, Stockholm, Sweden; and the Parent Company’s telephone number is +46-8-613-83 00. The Parent Company’s authorized representative in the United States is Business Sweden, whose contact information is as follows:

 

Business Sweden New York

The News Building,

220 E 42nd Street

Suite 409A,

New York, NY 10017

Tel. No.: (212) 507-9001

usa@business-sweden.se

 

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B                   Business Overview

 

SEK’s mission is to ensure access to financial solutions for the Swedish export industry on commercial and sustainable terms, with the aim of promoting the development and international competitiveness of Swedish industry and trade. Its mission includes, as a public policy assignment, administration of the Commercial Interest Reference Rate-system (the “CIRR-system”). Pursuant to agreements established in 1978 and amended from time to time thereafter, the Group administers the CIRR-system on behalf of the Swedish State in return for compensation.

 

SEK extends loans on commercial terms at prevailing fixed or floating market interest rates as well as loans on State-supported terms at fixed interest rates that may be lower than prevailing fixed market rates in the CIRR-system. The compensation from the CIRR-system to SEK is recorded as a part of interest income in the Consolidated Statement of Comprehensive Income. See Note 1(f) to the Consolidated Financial Statements. Because Sweden is a member of the Organization for Economic Co-operation and Development (the “OECD”), the CIRR-system is designed to comply with the Arrangement on Guidelines for Officially Supported Export Credits of the OECD (the “Export Credit Guidelines”).

 

SEK’s product offerings are aimed at Swedish exporters and their customers and, currently, the customers are mainly found among the 100 largest Swedish exporters with sales exceeding Skr 4 billion. Starting in 2015, SEK has also expanded its product offerings to reach medium-sized exporters with sales of more than Skr 500 million.

 

SEK works mainly in lending and as a result, SEK acts as a complement to, and works in cooperation with, Swedish and international banks as well as other financial institutions. SEK also has close partnerships with other export promotion agencies in Sweden such as Almi, Business Sweden, the Swedish Exports Credit Guarantee Board (the “EKN”) and Swedfund.

 

SEK can provide loans in a number of different currencies and with different maturities. The majority of its lending is in Swedish kronor, US dollars or euros, but SEK also offers loans in several other currencies.

 

SEK’s borrowing activities in the international capital markets have given SEK expertise in financial instruments.

 

SEK’s niche specialization in long-term export-related financing, combined with its financial capacity and flexible organization, are key factors in the management of its operations.

 

2018

 

·                  SEK’s new lending to Swedish exporters and their customers amounted to Skr 57.0 billion (2017: Skr 89.3 billion), of which new lending to Swedish exporters was Skr 18.0 billion (2017: Skr 21.6 billion) and new lending to exporters’ customers amounted to Skr 39.0 billion (2017: Skr 67.7 billion).

·                  SEK has focused on broadening its client base and product offerings. SEK has performed strongly in soliciting new clients and the customer base has significantly increased. SEK has gained 17 new customers, consisting of customers in both of SEK’s customer groups: large and medium-sized companies.

·                  Toward the end of 2018, SEK decided on a new organizational structure. Effective January 1, 2019, SEK has implemented the reorganization aimed at focusing client operations and strengthening business support. The Lending business area was split into two separate functions, Large Corporates and Mid Corporates. Two new functions have been established: Business Development, Business Support and Transformation; and Strategic Partnerships and Relations. Moreover, the accounting and treasury units have been reorganized as one function under the Chief Financial Officer (the “CFO”).

·                  SEK’s new lending to green projects totaled Skr 2.0 billion in 2018 (2017: Skr 2.4 billion).

·                  SEK’s net interest income amounted to Skr 1,442 million (2017: Skr 1,683 million). Net interest income was affected negatively by a higher resolution fee of Skr 266million (2017: Skr 193 million) which SEK is required to pay to a fund to support the recovery of credit institutions.

·                  SEK has a credit facility with the Swedish National Debt Office of Skr 125 billion, renewed through the end of 2019 by the Swedish Parliament, in order to further enhance the ability to promote the Swedish export industry. SEK has not yet utilized the credit facility. The credit facility is only available for CIRR loans.

 

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·                  The Board of Directors of SEK (the “Board”) has resolved to propose at the Annual General Meeting that a total dividend of Skr 194 million (2017: Skr 232 million) be paid in accordance with SEK’s dividend policy of 30 percent of the profit of the year.

 

Competition

 

SEK is the only institution authorized by the Swedish State to grant export financing loans under the CIRR-system. With support from the State, SEK helps Swedish export companies compete with other export companies within OECD member countries, which have similar support from their respective domestic export credit agencies and which also provide government-supported export credits. SEK’s lending, excluding the CIRR-system, faces competition from other Swedish and foreign financial institutions, as well as from the direct and indirect financing programs of exporters themselves.

 

The following table summarizes SEK’s loans outstanding and debt outstanding as of December 31, 2018 and 2017:

 

 

 

Year ended December 31,

 

 

 

Skr mn

 

2018

 

2017

 

Changes in percent

 

Total loans outstanding(A)

 

209,226

 

195,120

 

7

%

of which CIRR-system

 

69,922

 

49,124

 

42

%

Total debt outstanding (B)

 

257,847

 

226,873

 

14

%

of which CIRR-system

 

70,144

 

49,252

 

42

%

 


(A) Loans outstanding consist of loans due from commercial and financial institutions including loans in the form of interest-bearing securities. For a reconciliation of loans outstanding, see Note 11 to the Consolidated Financial Statements.

 

(B) Debt outstanding includes subordinated debt of Skr - million and Skr 2,040 million as of December 31, 2018 and 2017, respectively.

 

Lending Operations — General

 

The following table sets forth certain data regarding the Group’s lending operations, including the CIRR-system, during the two-year period ending December 31, 2018:

 

 

 

Year ended December 31,

 

 

 

Skr mn

 

2018

 

2017

 

Changes in percent

 

Offers of long-term loans accepted

 

57,015

 

89,305

 

-36

%

Total loan disbursements

 

-77,598

 

-61,157

 

27

%

Total loan repayments

 

78,912

 

75,109

 

5

%

Total net increase/ (decrease) in loans outstanding

 

14,106

 

-13,580

 

NM

 

Loans outstanding

 

209,226

 

195,120

 

7

%

Loan commitments outstanding but undisbursed(A)

 

50,814

 

72,914

 

-30

%

 


(A) If a loan has been accepted by the borrower it can be disbursed immediately. However, disbursement may be delayed due to a number of factors. In some cases, including as a result of changes in the commercial and financial institutions’ need for funds, an accepted loan may never be disbursed. Currency exchange-rate effects also impact the amount of loan commitments that will result in loans outstanding. Therefore, the volume of loans accepted does not equal the volume of loans disbursed as presented in the Statement of Cash Flows in the

 

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Consolidated Financial Statements for a single fiscal year. Loans accepted but not yet disbursed are presented under the heading “Commitments” as “Committed undisbursed loans”. See Note 11 to the Consolidated Financial Statements.

 

Total loans outstanding, type of loans

 

 

 

As of December 31,

 

Skr mn

 

2018

 

2017

 

2016

 

2015

 

2014

 

Lending to exporters’ customers

 

119,467

 

102,060

 

113,738

 

118,284

 

128,165

 

of which CIRR-system

 

69,922

 

49,124

 

49,802

 

43,128

 

47,377

 

 

 

 

 

 

 

 

 

 

 

 

 

Lending to Swedish exporters

 

89,759

 

93,060

 

94,962

 

86,813

 

90,057

 

of which CIRR-system

 

 

 

 

 

 

Total

 

209,226

 

195,120

 

208,700

 

205,097

 

218,222

 

of which CIRR-system

 

69,922

 

49,124

 

49,802

 

43,128

 

47,377

 

 

Most of the loans granted by SEK are granted to purchasers of Swedish exports. Western European markets are the largest markets for exported Swedish goods by revenue. However, exports to other markets, including less developed markets, are also important. Accordingly, the need for export financing may be related to transactions involving buyers in many different countries, with varying levels of creditworthiness. Pursuant to its credit risk exposure policy, SEK is selective in accepting such risk exposure. This policy seeks to ensure that SEK is neither dependent on the creditworthiness of individual buyers of Swedish goods and services, nor on the countries in which they are domiciled, but rather on the creditworthiness of individual counterparties to which SEK accepts credit risk exposure. SEK relies to a large extent on guarantees in its lending. For additional information on SEK’s approach to risk, see Note 27 and Note 30 to the Consolidated Financial Statements.

 

SEK has no exposure to loans that it would characterize as high-risk lending, including loans which have been modified or would otherwise qualify as distressed debt, other than the limited amount of such assets disclosed in Note 9 to the Consolidated Financial Statements.

 

CIRR-system

 

SEK treats the CIRR-system as a separate operation for accounting purposes. Although the deficits (or surpluses) of programs under the CIRR-system are reimbursed by (or paid to) the Swedish State, any loan losses that may be incurred under such programs are not reimbursed by the Swedish State. Accordingly, SEK has to obtain appropriate credit support for those loans as well. All of the lending under the CIRR-system is reported on SEK’s Consolidated Statement of Financial Position. SEK has consequently presented the operations of the CIRR-system in the Consolidated Statement of Comprehensive Income as the amount of net commission received, accounted for as interest income rather than presenting the gross amounts collected and paid in accordance with the agreement with the Swedish State. In general, loans under the program are guaranteed by the EKN. All such loans granted by SEK must also undergo SEK’s customary approval process.

 

Pursuant to an owner instruction adopted by the sole shareholder, the Swedish State, at the Annual General Meeting in April 2016, the difference between interest income related to lending and liquid assets under the CIRR-system on the one hand, and interest expenses related to borrowing, all other financing costs and any net foreign exchange losses incurred by SEK under the CIRR-system, on the other hand, are reimbursed by (or paid to) the Swedish State.

 

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SEK reports loans in the following categories:

 

Loan Types and Underwriting Policies

 

(a) Lending to Swedish exporters

 

(b) Lending to exporters’ customers

 

·                  export credits;

 

·                  loans for the funding of export lease agreements;

 

·                  trade finance; and

 

·                  project finance.

 

Within the CIRR-system, SEK extends loans only for the medium and long-term financing of durable goods exports. CIRR-system lending includes financing in collaboration with intergovernmental organizations and foreign export credit agencies.

 

SEK’s credit underwriting policies and requirements are similar regardless of loan type, and pertain equally to the CIRR-system. The majority of SEK’s loans are guaranteed by export credit agencies or banks, or by credit default swaps issued by banks or other financial institutions.

 

SEK’s initial loan offer and subsequent commitment set forth the maximum principal amount of the loan, the currency in which the loan will be denominated, and the repayment and disbursement schedule.

 

For more information, see the table under the heading “Outstanding loans as per product type” under Note 11 to the Consolidated Financial Statements.

 

Interest Rates

 

Outside the CIRR-system, export financing is extended at prevailing market rates of interest. The Group normally makes loan offers at a quoted interest rate that is subject to change prior to acceptance of the loan offer (a non-binding offer). When a borrower accepts a non-binding loan offer, the interest rate is normally set at the then-prevailing market rate (which might have changed since the loan commitment was made), and a binding loan commitment arises. Binding offers can also be provided and are offers with a higher degree of commitment to the customer with regard to disbursement of the loan than non-binding offers, regardless of whether the interest rate is fixed or not.

 

Because Sweden is a member of the OECD, the CIRR-system is designed to comply with the Export Credit Guidelines, which establish minimum interest rates, required down payments and maximum loan periods for government-supported export loan programs.

 

SEK offers CIRR loans established by the OECD in accordance with the Export Credit Guidelines. The CIRR rates for new loans are subject to periodic review and adjustment by the OECD. The Export Credit Guidelines stipulate that loan offers may remain valid for a period of not more than 120 days. EU rules and Swedish regulations state that the commercial contract relating to the loan offer must be signed within that 120-day period. Thereafter, the CIRR rate can be locked in for a maximum period of six months in order for the loan agreement to be finalized. No commitment fee is charged by SEK for CIRR loans. SEK receives compensation from the Swedish government in the form of an administrative fee of 0.25 percent per annum, which is calculated based on the loan amount outstanding. The arranging or agent-bank, generally a commercial bank, receives compensation in the amount of 0.25 percent per annum, based on the loan amount outstanding, to cover its costs for arranging and managing loans.

 

SEK participates with government agencies in an export-financing program (the “Concessionary Credit Program”) financed by the Swedish State to promote exports to certain developing countries, incorporating a foreign aid element of at least 35 percent. SEK has a portfolio of concessionary credits but Sweden is no longer

 

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providing new concessionary credits under the program. Terms varied according to the per capita income of the importing country.

 

The aid element is reflected in the form of lower rates of interest and/or deferred repayment schedules. The Swedish government reimburses SEK through the CIRR-system for the costs incurred as a result of SEK’s participation in the Concessionary Credit Program as well as any costs for CIRR financing.

 

Guarantees and Credit Default Swaps

 

SEK relies to a large extent on guarantees in its lending. The guarantors are principally made up of government export credit agencies, such as the EKN, the Export Import Bank of the United States (“USEXIM”), the Exports Credits Guarantee Department of the United Kingdom (“ECGD”), Compagnie Française d’Assurance pour le Commerce Extérieur (“Coface”) of France and Euler Hermes Kreditversicherungs AG of Germany, as well as financial institutions and, to a lesser extent, non-financial corporations. Credit risk is allocated to a guarantor in accordance with SEK’s policy and therefore, when disclosing net credit risk exposures, the majority of SEK’s guaranteed credit exposure is shown as exposure to sovereign counterparties. In general, loans under the CIRR-system are guaranteed by the EKN.

 

Total credit exposures for SEK covered by guarantees

 

 

 

Year ended December 31,

 

Skr bn

 

2018

 

2017

 

Government export credit agencies

 

143.8

 

151.3

 

of which covered corporate exposures

 

91

 

101.1

 

of which covered exposures to financial institutions

 

0.2

 

0.4

 

of which covered exposures to regional governments

 

1.7

 

0.5

 

of which covered sovereign exposures

 

50.9

 

49.3

 

 

As of December 31, 2018, government export credit agencies guaranteed 42.6 percent of SEK’s total credit exposures.

 

If a guarantee or credit default swap is entered into for risk-mitigating purposes, the instrument protects a pre-defined amount of SEK’s exposure with respect to the principal amount of the underlying loan (and in some cases interest) as long as the issuer of the guarantee or credit default swap is financially sound. The protected amount is ordinarily 75–100 percent of the principal amount. Most of the counterparties against whom SEK accepts net exposures are rated by one or more of the internationally recognized rating agencies.

 

For information regarding SEK’s gross and net credit exposures to counterparties, broken down by geography and type of counterparty (taking into account applicable guarantees but not collateral), see Note 27 to the Consolidated Financial Statements.

 

Loan Maturities

 

SEK’s historical role (and one that continues today) has been in the provision of long-term financing in order to promote the Swedish export industry. Since many of the projects the export industry engages in are long-term projects, both with regard to disbursement periods and repayment periods, SEK’s loans often have longer terms than those of loan products offered by commercial banks. However, SEK also meets its customers’ needs by providing short-term financing when required. Consequently, SEK’s loan maturities range from very short-term loans (with terms of three to six months) to loans for as long as 20–30 years. Under the CIRR-system, loan maturities generally range from one year up to 20–30 years.

 

Currency

 

SEK extends loans in different currencies, depending on the needs of its borrowers. Before the Group makes any loan commitment, it ensures that the currency in which the loan is to be funded is expected to be available for the entire loan period at an interest rate (taking into account the costs of foreign exchange derivatives) that, as of the day the commitment is made, results in a margin that the Group deems sufficient. The Group borrows, on an

 

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aggregate basis, at maturities corresponding to or exceeding those of prospective loans. Accordingly, the Group may decide not to hedge particular loan commitments due to movements in interest rate risk until sometime after they are made. Interest rate risks associated with such unhedged commitments are monitored closely and may not exceed interest rate risk limits established by the Board. SEK’s policies are described in Note 30 to the Consolidated Financial Statements.

 

The following table shows the currency breakdown of loan offers accepted for loans with maturities exceeding one year for each year in the two-year period ending December 31, 2018.

 

 

 

Percentage of loan offers accepted

 

Currency in which loan is denominated

 

2018

 

2017

 

Swedish kronor

 

33

%

34

%

Euros

 

13

%

14

%

U.S. dollars

 

50

%

50

%

Other

 

4

%

2

%

Total

 

100

%

100

%

 

Credit Support for Loans Outstanding

 

The Group’s policies with regard to counterparty exposures are described in detail in Note 30 to the Consolidated Financial Statements.

 

The following table illustrates the counterparties for the Group’s loans and guarantees outstanding as of December 31, 2018 and December 31, 2017. Although most loans fall into more than one category for any given loan, this table only reflects the counterparty (either the borrower or the guarantor) that SEK believes to be stronger in terms of creditworthiness.

 

 

 

2018

 

2017

 

Loan credit exposure to Swedish State guarantees via EKN(A)

 

40

%

35

%

Loan credit exposure to Swedish credit institutions(B)

 

4

%

4

%

Loan credit exposure to foreign bank groups or governments(C)

 

11

%

15

%

Loan credit exposure to Swedish counterparties, primarily corporations(D)

 

30

%

30

%

Loan credit exposure to municipalities

 

3

%

3

%

Loan credit exposure to other foreign counterparties, primarily corporations

 

12

%

13

%

Total

 

100

%

100

%

 


(A) EKN guarantees are in substance insurance against losses caused by the default of a foreign borrower or buyer in meeting its contractual obligations in connection with the purchase of Swedish goods or services. In the case of a foreign private borrower or buyer, coverage is for “commercial” and, in most cases, “political” risks. Coverage for “commercial” risk refers to losses caused by events such as the borrower’s or buyer’s insolvency or failure to make required payments within a certain time period (usually six months). Coverage for “political” risk refers to losses caused by events such as a moratorium, revolution or war in the importing country or the imposition of import or currency control measures in such country. Disputed claims must be resolved by a court judgment or arbitral award, unless otherwise agreed by EKN. In the table above, only the particular amount of any given total loan that is guaranteed is listed as such. The amount of any such loan that is not covered by the relevant guarantee is excluded. EKN is a State agency whose obligations are backed by the full faith and credit of Sweden.

 

(B) At December 31, 2018, loans in this category amounting to approximately 1 percent (2017: 1 percent) of total loans were obligations of the four largest commercial bank groups in Sweden, including guarantees in the form of bank guarantees or credit derivatives. The remaining 3 percent (2017: 3 percent) of total loans

 

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represented loans to various financial institutions and minor commercial banks in Sweden, including guarantees in the form of bank guarantees or credit derivatives.

 

(C) At December 31, 2018, principally obligations of other Nordic, Western European or North American bank groups, together with obligations of Western European governments, including guarantees in the form of bank guarantees or credit derivatives.

 

(D) At December 31, 2018, approximately 12 percent (2017: 12 percent) of the total loan credit exposure represented loans to the 20 largest Swedish corporations.

 

See “— Lending Operations — General” for information on the geographical distribution of borrowers, see also Note 27 to the Consolidated Financial Statements.

 

Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934

 

SEK has not entered into any new business in or with Iran since 2005.

 

Swedish Government Supervision

 

Supervisory Authorities

 

SEK operates as a credit market institution within the meaning of the Swedish Banking and Financing Business Act (2004:297). As such, it is subject to supervision and regulation by Finansinspektionen (the Swedish FSA), which licenses and monitors the activities of credit market institutions to ensure their compliance with the Swedish Banking and Financing Business Act, including the regulations linked to it, and such institutions’ corporate charters. Beginning in 2018, this supervision with respect to capital covers the Parent Company but not the Subsidiary because the Subsidiary is not classified as a credit market institution.

 

Among other things, the Swedish FSA requires SEK to submit reports on a daily, monthly, quarterly, semi-annual and annual basis and may conduct periodic inspections. The Swedish FSA may also (but currently does not) appoint an external auditor to participate with SEK’s independent auditors in examining the Group’s and the Parent Company’s financial statements and the management of the Group.

 

The Swedish National Debt Office requires information from the credit institutions based on a resolution framework that came into force on February 1, 2016, the Resolution Act (2015:1016). The Resolution Act originates from the BRRD, which provides an EU-wide framework for the recovery and resolution of credit institutions, among others. The BRRD requires all EEA member states to provide their relevant resolution authorities with a set of tools to intervene sufficiently early and quickly in an unsound or failing institution so as to ensure the continuity of the institution’s critical financial and economic functions, while minimizing the impact of an institution’s failure on the broader economy and financial system. The information is used to set the minimum requirement for own funds and eligible liabilities for the credit institution. The Swedish National Debt Office has concluded that Swedish institutions, including SEK, have business activities that are critical to the Swedish financial system and have prepared plans that outline the measures that the Swedish National Debt Office intends to take in the event of resolution. The Swedish National Debt Office has also set a minimum requirement for own funds and eligible liabilities for those institutions. Pursuant to the Swedish National Debt Office’s decision concerning the next reporting period, in 2019, the minimum requirement of total eligible liabilities and own funds for SEK is 8.3 percent (2018: 7.1 percent), as calculated in accordance with the resolution regime.

 

The Swedish National Audit Office may audit the activities that are conducted by the Swedish State in the form of limited companies if the State as owner has a controlling influence over the activities. The State has controlling influence over the activities of the Parent Company, which is a limited company. Accordingly, the Swedish National Audit Office may appoint an Authorized Public Accountant, in order to get access to the same information as the external auditors, but has not yet done so.

 

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As a credit market institution, SEK is also subject to prudential regulations relating to, among other things, its capital adequacy, its maximal exposure to any counterparty or any group of interconnected clients and its liquidity position.

 

Capital adequacy regulations

 

As of January 1, 2014, the revised capital adequacy rules of the Basel Committee, referred to as Basel III, came into force within the European Union. Basel III was introduced by a legislative package consisting of the Capital Requirements Regulation (CRR) (Regulation (EU) no. 575/2013 of the European Parliament and of the Council of June 26, 2013, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) no. 648/2012) and the Capital Requirements Directive (CRD IV) (Directive 2013/36/EU of the European Parliament and of the Council of June 26, 2013, on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing directives 2006/48/EC and 2006/49/EC).The CRR is directly applicable in Sweden and contains detailed requirements pertaining to capital adequacy, liquidity, large exposures, leverage ratio and supervisory reporting. The CRD IV was incorporated into Swedish legislation as of August 2, 2014 and covers areas such as principles for prudential supervision, internal assessments of risk and capital, corporate governance, capital buffers, sanctions and remuneration. In November 2016, the European Commission presented a proposal to revise the CRD IV and the CRR. The proposal includes, along with other changes, a binding leverage ratio as well as a binding net stable funding ratio. In December 2018, the European Parliament and the Council of the European Union announced they reached a provisional political agreement on the proposed revisions to the CRR and CRD IV (CRR II and CRD V, respectively), and a plenary vote to officially adopt the agreement is expected in early 2019.

 

The Basel Committee adopted the 2017 Revisions to the Basel III capital framework to reduce the variability of risk-weighted assets within the banking system. The 2017 Revisions include an output floor, altered standardized approaches for credit risk and operational risk, constraints on the use of internally modelled approaches and changes in leverage ratio requirements. It is planned to enter into force on January 1, 2022. From a Swedish perspective, the 2017 Revisions must first be implemented through revisions to the CRR II and CRD V, before they could impact SEK’s applicable capital requirements.

 

The current regulations introduced by the CRR and CRD IV replace regulations based on the previous revision of the Basel accord, Basel II, which had been the prevailing standard since 2007, as it was incorporated into EU and Swedish legislation. The CRR, as amended, and the CRD IV, as incorporated into national legislation, apply to credit institutions, including SEK, within Sweden and the European Union.

 

The main structure of Basel III, consists of three “Pillars”, as follows:

 

(iPillar 1 deals with minimum capital requirements for credit risks, credit valuation adjustment risks and market risks as well as for operational risks, based on explicit calculation rules. Under Pillar 1, an institution must at all times have own funds that in size and composition are sufficient to meet those minimum capital requirements. The capital requirements and the own funds are calculated in accordance with the CRR. Pillar 1 allows institutions to choose between some alternative methods based on their level of development. For credit risk, the standardized approach is the simplest approach, containing risk weights, all of which are established by national authorities. Institutions can expand upon the supervisory authorities’ risk weights by using risk assessments from recognized credit rating agencies such as Moody’s, Standard & Poor’s and Fitch. The next level of sophistication under Pillar 1 regarding credit risk is called the foundation internal rating-based (IRB) approach. Under the foundation IRB approach, the risk weights, and therefore the capital requirements, are partially based on institutions’ internal risk classifications. SEK’s permission to base its capital requirement for credit risk on the IRB approach covers most of the Company’s exposures.

 

(ii) Pillar 2 pertains to national supervisory authorities’ evaluation of risks and describes requirements for institutions’ processes for risk and capital management. It also establishes the supervisory authorities’ functions and powers. Further, under Pillar 2 each financial institution must identify risks and assess risk management from a wider perspective, to supplement the capital requirements calculated within the scope of Pillar 1. This Internal Capital Adequacy and Liquidity Assessment Process (ICAAP) also takes qualitative risks into account. SEK annually assesses the development of its future capital and liquidity requirements and available capital primarily in connection with the update of its three-year business plan . Furthermore, each quarter, the Swedish FSA publishes the result of its assessments on the capital

 

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adequacy reflecting additional requirements for risks not covered by the first pillar for the ten largest financial institutions in Sweden, including SEK. This publication covers additional estimates of concentration risk, sovereign risk, market risk and pension risk. Moreover, it reflects the ICAAP, where the additional risks are included and evaluated annually.

 

(iiiPillar 3 concerns and places requirements on openness and transparency and how institutions, in a broad sense, should report their operations to the market and the public. The disclosure of capital and risk management must follow the requirements of the CRR and some additional regulations issued in Sweden, most notably the Swedish FSA’s regulations FFFS 2014:12 regarding prudential requirements and capital buffers. The European Banking Authority (EBA) guidelines EBA/GL/2016/11 published in 2017 do not apply fully to SEK yet, since it has not yet been clarified by the Swedish FSA if and when SEK will start to be fully covered by the guidelines. SEK reported in accordance with Pillar 3 for the first time in the Annual Report for 2007. Since 2008, SEK has also published a separate report in accordance with Pillar 3: “Capital Adequacy and Risk Management Report, Pillar 3”.

 

Liquidity standards

 

As mentioned above, the CRR also introduces new liquidity standards: the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). The LCR requires that a bank holds enough high quality liquid assets to cover its projected net cash outflows over a 30-day stress scenario. The European Commission has adopted a delegated act on LCR. The detailed LCR rules came into force on October 1, 2015 with phase-in of 60 percent in 2015, 70 percent in 2016, 80 percent in 2017 and 100 percent in 2018. In addition, the Swedish FSA requires institutions to keep a LCR of at least 100 percent separately in euro and USD. The NSFR requires that a bank maintain a stable borrowing profile in relation to the composition of its assets and off-balance sheet activities under both normal and stressed conditions.

 

Measures of capital adequacy

 

The principal measure of capital adequacy, according to the current standard (Basel III as implemented by the CRR), is a capital-to-risk exposure amount ratio, which compares the own funds, as defined in the CRR, to the total of risk-weighted exposures, that is assets and off-balance sheet items measured according to the risk level.

 

According to the CRR, own funds consist of three components with different levels of quality from a loss absorption perspective:

 

·        the highest quality is the Common Equity Tier 1 capital, which includes equity capital after certain adjustments and deductions;

 

·        the next level is the Additional Tier 1 capital which, subject to detailed requirements, consists of certain types of highly subordinated, perpetual debt or hybrid capital (Tier 1 capital is the sum of Common Equity Tier 1 capital and Additional Tier 1 capital); and

 

·        Tier 2 capital constitutes the third level and consists of, subject to detailed requirements, certain types of subordinated debt that, among other things, must have an original maturity of no less than five years.

 

The minimum total capital ratio requirement under Pillar 1 is 8.0 percent, a requirement that has not changed with the CRR. However, the CRR introduced additional requirements on the higher quality components of capital, with a minimum requirement of 4.5 percent and 6.0 percent relating to Common Equity Tier 1 capital and Tier 1 capital, respectively.

 

 

 

Minimum Capital
Requirement
(1)

 

Minimum Capital
Requirement including
Buffers Requirement
(1)

 

SEK Capital
Ratios

 

Capital Ratios

 

2018

 

2017

 

2018

 

2017

 

2018

 

2017

 

Common Equity Tier 1 capital ratio

 

4.5

%

4.5

%

8.5

%

8.4

%

20.1

%

20.6

%

Tier 1 capital ratio

 

6.0

%

6.0

%

10.0

%

9.9

%

20.1

%

20.6

%

Total capital ratio

 

8.0

%

8.0

%

12.0

%

11.9

%

20.1

%

23.0

%

 


(1) Under Pillar 1.

 

In addition to these minimum ratios, SEK must meet certain capital buffers requirements. Failure to meet the additional buffers requirements triggers, among other things, restrictions on distributions. SEK is also expected

 

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to cover the supplementary capital requirements estimated under the second pillar, which in practice constitutes as an extension of the minimum capital requirement for financial institutions in Sweden. SEK’s policy is to maintain own funds well in excess of both the regulatory minimum requirements under the first pillar and the supplementary capital requirements under the second pillar.

 

The main reason for the decrease in SEK’s capital ratios as of December 31, 2018 was due to the fact that SEK called a Tier 2 eligible subordinated debt instrument early and redeemed it on November 14, 2018 in accordance with its terms. The capital adequacy ratios reflect the full impact of IFRS 9 as no transitional rules for IFRS9 are utilized. See Note 26 to the Consolidated Financial Statements for further details on the capital adequacy and capital buffers of SEK.

 

Large exposures

 

According to the CRR, a large exposure refers to an exposure to any counterparty or any group of interconnected clients, that accounts for at least 10 percent of an institution’s eligible capital, which effectively for SEK is the total of own funds.

 

As percentage of

 

2018

 

2017

 

Large exposures as percentage of the own funds

 

318.6

%

230.6

%

 

The aggregate amount of SEK’s large exposures as of December 31, 2018 consisted of exposures to 23 different counterparties, or counterparty groups, the majority of which relate to combined exposures for which more than one counterparty is responsible for the same payments.

 

In order to monitor large exposures, SEK has defined internal limits for large exposures, which are monitored daily, along with other limits.

 

C                                                                              Organizational Structure

 

In order to increase the focus on customers, SEK has made organizational changes. In October 2018, the Lending function split into two separate functions; Large Corporates and Mid Corporates. These two functions are responsible for all customer relations contacts and cooperates with a Credit function and a Treasury group. SEK also maintains a risk control unit and a compliance function as well as staff and support functions.

 

Risk Control, Compliance and Internal Audit

 

SEK maintains a risk control unit and a compliance function which operate independently of the business areas. See also Note 30 to the Consolidated Financial Statements. In November 2011, upon the recommendation of the Audit Committee, SEK’s Board decided that the independent internal audit function would be outsourced to an external company beginning in 2012. SEK’s Board appointed KPMG to be responsible for the independent internal audit function and they commenced their assignment in January 2012. Their assignment was extended for the years 2013 - 2018. As of 2019, this assignment has been transferred to another external party, Deloitte. In appointing an external party to perform the internal audit, SEK benefits from significant competence and experience in auditing SEK’s compliance with applicable regulations, particularly those regarding capital adequacy and the Company’s internal risk model. SEK’s Risk and Compliance Committee, of which the Chief Executive Officer (CEO) is the chairman, has overall responsibility to establish the internal rules for the internal control of the financial reporting and follow-up compliance with the internal control regulations.

 

D                               Property, Plant and Equipment

 

SEK’s current headquarters, which occupy approximately 4,490 square meters of office space in central Stockholm, are leased. SEK also leases office space in Gothenberg, which occupies approximately 14 square meters.

 

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Table of Contents

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

A                               Operating Results

 

A major part of SEK’s operating profit derives from net interest income, which is earned mainly on loans to customers, but also to a lesser extent on liquidity investments. Borrowing for these assets comes from equity and from securities issued in international capital markets. Accordingly, the key determinants of SEK’s operating profit are the interest rate on interest-bearing assets, the interest rate of issued securities, the outstanding volume of interest-bearing assets and the proportion of assets financed by equity.

 

SEK issues debt instruments with terms that may be fixed, floating or linked to various indices. SEK’s strategy is to economically hedge these terms at floating rates with the aim of matching the terms of its debt-financed assets. The quality of SEK’s operating profit, its relatively stable credit ratings and SEK’s public role have enabled SEK to achieve borrowing at levels that are competitive within the market. Another factor affecting net interest income is the size of the resolution fee, which SEK is required to pay to a fund to support the recovery of credit institutions.

 

In addition to net interest income, another key influence on SEK’s operating earnings has been changes in the fair value of certain assets, liabilities and derivatives. The factor that mainly impacts unrealized changes in fair value is cross-currency basis spreads. Cross-currency basis spread is the deviation in the nominal interest rate between two currencies in a currency interest rate swap caused by the difference between the base interest rate of the currencies.

 

Operating expenses, driven by personnel expense and other administrative expenses, also have an important impact on SEK’s operating profit.

 

Total other comprehensive income is mainly affected by cash-flow hedges.

 

SEK’s general business model is to hold financial instruments measured at fair value to maturity. The net fair value changes that occur, mainly relate to changes in credit spreads on SEK’s own debt, which due to IFRS 9, are reported in other comprehensive income from 2018 compared to net results of financial transactions prior to IFRS 9, and basis spreads, which are recognized in net results of financial transactions. The changes could be significant in a single reporting period, but will not affect earnings over time since the lifetime cumulative changes in the instrument’s market value will be zero if it is held to maturity and is a performing instrument. When financial instruments are not held to maturity, realized gains and losses can occur, for example when SEK repurchases its own debt, or if lending is repaid early and the related hedging instruments are terminated prematurely.

 

For Critical Accounting Policies and Estimates and Recent Accounting Pronouncements Issued and Other Accounting Related Announcements, see Note 1 to the Consolidated Financial Statements.

 

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Table of Contents

 

Assets and Business Volume

 

 

 

As of December 31,

 

Skr bn

 

2018

 

2017

 

Changes in
percent

 

Total Assets

 

302.0

 

264.4

 

14

%

Liquidity Investments

 

78.6

 

55.7

 

41

%

Loans outstanding and disbursed

 

209.2

 

195.1

 

7

%

-Percentage in the CIRR-system

 

33

%

25

%

 

 

 

The financial item total assets increased compared to the end of 2017, mainly due to disbursements of loans and the purchase of liquidity investments due to new funding.

 

New lending (offers accepted)

 

 

 

As of December 31,

 

Skr billion

 

2018

 

2017

 

2016

 

Lending to Swedish exporters(1)

 

18.0

 

21.6

 

18.1

 

of which CIRR-system

 

 

 

 

Lending to exporters’ customers(2)

 

39.0

 

67.7

 

36.7

 

of which CIRR-system

 

4.9

 

36.9

 

10.8

 

Total

 

57.0

 

89.3

 

54.8

 

 


(1) Of which Skr 0.0 billion (year-end 2017: Skr 0.7 billion) had not been disbursed at period-end.

 

(2) Of which Skr 5.1 billion (year-end 2017: Skr 35.1 billion) had not been disbursed at period-end.

 

There is high access to finance in the banking and capital markets for Swedish exporters. This impacted SEK’s new lending, which was down compared to last year. Loans covered by the CIRR-system as a percentage of new lending were significantly down compared to last year. CIRR-system loans are often part of major transactions that occur less frequently, which means that new lending in this respect varies between years.

 

Binding offers outstanding of lending

 

Offers outstanding

 

 

 

As of December 31,

 

Skr bn

 

2018

 

2017

 

Volume of binding offers outstanding

 

0.7

 

1.2

 

CIRR loans as percentage of volume of binding offers outstanding

 

83

%

52

%

 

Commitments of undisbursed loans amounted to Skr 50.8 billion in 2018 (year-end 2017: Skr 72.9 billion).

 

Counterparty Risk Exposures

 

SEK’s exposures to central and regional governments and corporates have increased as exposures to financial institutions have decreased. For more information, see the table “Total net exposures” in Note 27 to the Consolidated Financial Statements.

 

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Total counterparty exposure

 

 

 

As of December 31,

 

Counterparty Risk Exposures in Skr bn

 

2018

 

2017

 

Central governments

 

169.6

 

167.1

 

Regional governments

 

13.4

 

11.4

 

Multilateral development banks

 

0.1

 

0.0

 

Public Sector Entity

 

0.6

 

0.4

 

Financial institutions

 

34.2

 

38.6

 

Corporates

 

119.5

 

109.7

 

Total counterparty exposure

 

337.4

 

327.2

 

 

Other exposures and risks

 

SEK’s hedging transactions are expected to be effective in offsetting changes in fair value attributable to hedged risks. The determination of the gross value of certain items in the statements of financial position, particularly derivatives and issued unsubordinated securities, which effectively hedge each other, requires complex judgments regarding the most appropriate valuation technique, assumptions and estimates. If different valuation models or assumptions are used, or if assumptions change, a different result may arise. Excluding the impact on the valuation of spreads on SEK’s own debt and basis spreads (which can be significant), such changes in fair value would generally offset each other, with little impact on the value of net assets.

 

SEK maintains a conservative policy with regard to market risk exposures, primarily consisting of interest rate risks, currency risks and operational risks. For risks and exposures, see Note 27 Risk Information as well as Note 30 Risk and capital management.

 

Results of Operations

 

Net interest income

 

Skr bn, average

 

2018

 

2017

 

%

 

2016

 

%

 

Total loans

 

202.2

 

201.9

 

0

%

206.9

 

-2

%

Liquidity investments

 

67.2

 

64.0

 

5

%

65.5

 

-2

%

Interest-bearing assets

 

269.3

 

265.9

 

1

%

272.4

 

-2

%

Interest-bearing liabilities

 

242.4

 

241.0

 

1

%

245.4

 

-2

%

 

2018 compared to 2017

 

Net interest income amounted to Skr 1,442 million (2017: Skr 1,683 million), a decrease of 14 percent compared to the previous year. Net interest income was affected negatively by Skr 73 million due to a higher resolution fee of Skr 266 million (2017: Skr 193 million), which SEK is required to pay to a fund to support the recovery of credit institutions. In 2018, the resolution fee amounted to 0.125 percent of the calculation basis (2017: 0.09 percent), which essentially corresponds to SEK’s debt-financed assets less the CIRR loans. In 2019, the resolution fee will go back to 0.09 percent and beginning in 2020, it will be 0.05 percent. Net interest income was also affected negatively by higher average borrowing costs.

 

2017 compared to 2016

 

Net interest income amounted to Skr 1,683 million (2016: Skr 1,747 million), a decrease of 4 percent compared to the previous year. Net interest income was affected negatively by a higher resolution fee of Skr 193 million (2016: Skr 102 million), which SEK is required to pay to a fund to support the recovery of credit institutions. The higher fee was partially offset by higher market interest rates and lower borrowing costs.

 

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Table of Contents

 

Commission earned and commission incurred

 

2018 compared to 2017

 

Commission earned and commission incurred amounted to Skr -32 million (2017: Skr -28 million). Commission earned amounted to Skr 5 million (2017: Skr 3 million). Commission incurred amounted to Skr -37 million (2017: Skr –31 million).

 

2017 compared to 2016

 

Commission earned and commission incurred amounted to Skr -28 million (2016: Skr -29 million). Commission earned amounted to Skr 3 million (2016: Skr 3 million). Commission incurred amounted to Skr -31 million (2016: Skr –32 million).

 

Net results of financial transactions

 

2018 compared to 2017

 

Net results of financial transactions amounted to Skr 19 million (2017: Skr -102 million). The result was mainly due to realized gains related to the repurchase of SEK’s own debt and early redemption of loans. This was offset by unrealized losses in the fair value of assets in the liquidity portfolio and on derivatives.

 

2017 compared to 2016Net results of financial transactions amounted to Skr -102 million (2016: Skr -110 million), mainly due to unrealized losses related to changes in the fair value of the credit spreads on SEK’s own debt, where increased credit spreads have had a negative effect on net profit. This was partially offset by unrealized gains related to the fair value of currency swaps.

 

Operating expenses

 

Skr mn

 

2018

 

2017

 

%

 

2016

 

%

 

Personnel expenses

 

-311

 

-320

 

-3

%

-308

 

4

%

of which provision to the EIS

 

 

7

 

 

 

4

 

 

 

Other administrative expenses

 

-231

 

-232

 

0

%

-236

 

-2

%

Depreciation and impairment of non-financial assets

 

-40

 

-45

 

-11

%

-46

 

-2

%

Total Operating expenses

 

-582

 

-597

 

-3

%

-590

 

1

%

 

2018 compared to 2017

 

Operating expenses decreased 3 percent compared to the previous year, due to decreased personnel expenses and depreciation and impairment of non-financial assets. The impairment related to intangible assets. Beginning in 2017, SEK introduced a system for individual variable remuneration (“IVR”)  for permanent employees with customer or business responsibility, with the exception of members of the executive management team. No provision was made in 2018 for the individual variable remuneration (2017: Skr 7 million).

 

2017 compared to 2016

 

Operating expenses increased somewhat compared to the previous year, mainly due to increased personnel expenses, which were partially offset by a decrease in other administrative expenses. In 2017, a provision of Skr 7 million was made for the IVR, compared to a reversal of Skr 4 million in 2016 for the previous employee incentive scheme (“EIS”). Beginning in 2017, SEK introduced a system in which SEK could offer permanent employees with customer or business responsibility, with the exception of members of the executive management, the possibility of IVR. The outcome at Company level is capped at a maximum of two months’ salary, calculated on the basis of all Company employees entitled to IVR.

 

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Depreciation and impairment of non-financial assets

 

2018 compared to 2017

 

Depreciation and impairment of non-financial assets amounted to Skr -40 million, which was a decrease of 11 percent compare to the previous year. The impairment related to intangible assets.

 

2017 compared to 2016

 

Depreciation and impairment of non-financial assets amounted to Skr -45 million, which was in line with the previous year.

 

Net credit losses

 

2018 compared to 2017

 

Net credit losses amounted to Skr 7 million (2017: Skr 51 million). The positive result was attributable to changes in the macroeconomic forecasting scenario and risk factors in accordance with IFRS 9 procedures. Further impairment of stage 3 credits offset much of these changes. See Note 9 to the Consolidated Financial Statements.

 

Loss allowances as of December 31, 2018 amounted to Skr -139 million compared to Skr -137 million as of January 1, 2018 of which exposures in stage 3 amounted to Skr -84 million (January 1, 2018: Skr -66 million). The reserve was affected negatively by unfavorable exchange rate effects.

 

2017 compared to 2016

 

Net credit losses amounted to Skr 51 million (2016: Skr -16 million). In 2017, a provision of Skr -59 million was made for anticipated credit losses relative to individually-assessed counterparties. During 2017, a previous reserved loss of Skr 47 million was realized. The collectively-assessed credits reserve decreased by Skr 80 million during the year. The decrease was due to improvements in the assessment basis in preparation for the introduction of the new process under IFRS 9, which began in 2018 (see Notes 1 and 9 to the Consolidated Financial Statements). The collectively-assessed credits reserve amounted to Skr 90 million at December 31, 2017 (year-end 2016: Skr 170 million).

 

Taxes

 

2018 compared to 2017

 

Tax costs amounted to Skr -204 million (2017: Skr -235 million), of which Skr -448 million (2017: Skr -262 million) consisted of current tax and Skr 245 million (2017: Skr 27 million) consisted of deferred tax (see Note 10 to the Consolidated Financial Statements). The effective tax rate was 24.0 percent (2017: 23.3 percent), while the nominal tax rate for 2018 was 22.0 percent (2017: 22.0 percent). The difference between the nominal tax rate and the effective tax rate is primarily due to the fact that the interest expense for subordinated loans from 2017 is no longer deductible due to a change in the Swedish tax rules that became effective as of January 1, 2017.

 

2017 compared to 2016

 

Tax costs amounted to Skr -235 million (2016: Skr –222 million), of which Skr -262 million (2016: Skr -382 million) consisted of current tax and Skr 27 million (2016: Skr 156 million) consisted of deferred tax (see Note 10 to the Consolidated Financial Statements). The effective tax rate was 23.3 percent (2016: 22.2 percent), while the nominal tax rate for 2017 was 22.0 percent (2016: 22.0 percent). The difference between the nominal tax rate and the effective tax rate is primarily due to the fact that the interest expense for subordinated loans beginning in 2017 is no longer deductible due to a change in the Swedish tax rules that became effective as of January 1, 2017.

 

Operating and net profit

 

2018 compared to 2017

 

Operating profit amounted to Skr 852 million (2017: Skr 1,007 million). Net profit amounted to Skr 648 million (2017: Skr 772 million). Operating profit decreased mainly due to a decrease in net interest income. This was offset by an increase in net results of financial transactions and a decrease in operating expenses.

 

2017 compared to 2016

 

Operating profit amounted to Skr 1,007 million (2016: Skr 1,002 million). Operating profit increased due to an improvement in net credit losses, which was largely offset by a decrease in net interest income.  Net profit amounted to Skr 772 million (2016: Skr 780 million).

 

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Other comprehensive income

 

Skr mn

 

2018

 

2017

 

2016

 

Items to be reclassified to operating profit

 

-25

 

-124

 

-123

 

of which available-for-sale securities

 

 

-33

 

46

 

of which other comprehensive income effects related to cash-flow hedges

 

-25

 

-91

 

-169

 

Items not to be reclassified to operating profit

 

326

 

-4

 

-26

 

of which own credit risk

 

374

 

 

 

of which revaluation of defined benefit plans

 

-48

 

-4

 

-26

 

Other comprehensive income before tax

 

301

 

-128

 

-149

 

 

2018 compared to 2017

 

The line item Other comprehensive income before tax amounted to Skr 301 million (2017: Skr -128 million), mainly due to a reversal of a previous reserve for parameter uncertainty related to credit spreads on SEK’s own debt. Items to be reclassified to operating profit related to cash flow hedges. The effect was related to reclassification from other comprehensive income to net interest income due to the fact that hedging instruments previously were included in cash flow hedges. A major part of items not to be reclassified to operating profit were due to changes in own credit risk, but also due to revaluation of defined benefit pension plans due to a changed discount rate.

 

2017 compared to 2016

 

A major part of the items to be reclassified to operating profit related to cash flow hedges. The effect was related to reclassification from other comprehensive income to net interest income due to the fact that hedging instruments previously were included in cash flow hedges. Items not to be reclassified to operating profit were related to revaluation of defined benefit pensions.

 

B                                                                              Liquidity, Capital Resources and Borrowing

 

SEK’s policy for liquidity and borrowing risk requires that for all credit commitments outstanding as well as agreed but undisbursed credits, there must be borrowing available through maturity. For CIRR loans, which SEK manages on behalf of the Swedish State, the Company counts its credit facility of Skr 125 billion with the Swedish National Debt Office, which in December 2018 was extended for 2019, as available borrowing, despite the fact that no funds have been drawn under this facility. As a consequence, SEK continues to have a high level of liquid assets and a low borrowing risk. The aggregate volume of funds and equity exceeded the aggregate volume of loans outstanding and loans committed during each future time period. Accordingly, SEK considers all loan commitments to be funded through maturity. As of December 31, 2018, SEK had 5 months of available funds to meet potential disbursements under new lending agreements, as compared to 15 months as of December 31, 2017. See the section titled “Liquidity risk and refinancing risk” in Note 27 to the Consolidated Financial Statements and the liquidity risk discussion in Note 30 to the Consolidated Financial Statements.

 

Borrowing

 

Skr bn

 

2018

 

2017

 

New borrowing

 

60.4

 

82.4

 

Repurchase of own debt

 

3.0

 

2.7

 

Early redemption of borrowing

 

6.9

 

36.0

 

 

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New borrowing in 2018 was lower than in 2017, particularly with regards to structured debt. As a consequence of efforts to adapt to the new MiFID II regulations, SEK did not issue any structured debt in the Japanese market in the first five months of the year.

 

During 2018, SEK issued four benchmark bonds, totaling USD 4.3 billion. In November 2018, SEK’s USD 250 million subordinated debt due November 14, 2023 was redeemed early.

 

SEK’s borrowing over the course of the year took place in a total of nine different currencies across a number of different geographic markets. Europe (other than the Nordic countries) and North America were the largest borrowing markets in 2018.

 

SEK continues to have high liquidity for new lending and is well prepared to meet the future financing needs of the Swedish export industry.

 

Debt Maturities

 

The following table illustrates SEK’s debt maturity profile for different types of senior and subordinated debt. Repayments are assumed to occur on the maturity date and reflect nominal amounts.

 

Debt Maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skr million

 

2019

 

2020

 

2021

 

2022

 

2023

 

Thereafter

 

Total

 

Senior debt

 

75,448

 

53,657

 

42,090

 

32,769

 

20,397

 

33,486

 

257,847

 

of which fixed-rate

 

39,345

 

43,280

 

29,222

 

24,698

 

15,464

 

10,307

 

162,316

 

of which variable-rate

 

7,163

 

0

 

6,289

 

0

 

0

 

0

 

13,452

 

of which formula-based

 

28,940

 

10,377

 

6,579

 

8,071

 

4,933

 

23,179

 

82,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt

 

 

 

 

 

 

 

 

of which fixed rate

 

 

 

 

 

 

 

 

of which variable rate

 

 

 

 

 

 

 

 

Total debt

 

75,448

 

53,657

 

42,090

 

32,769

 

20,397

 

33,486

 

257,847

 

 

Senior Debt by Category:

 

 

 

As of December 31,

 

Skr million

 

2018

 

2017

 

Fixed-rate(1)

 

162,316

 

141,523

 

Variable-rate (1)

 

13,452

 

10,292

 

Formula-based (1)

 

82,079

 

73,018

 

of which interest rate-linked

 

79,103

 

69,928

 

of which currency-linked

 

2,097

 

2,198

 

of which equity-linked

 

783

 

779

 

of which commodity-linked

 

96

 

113

 

of which credit-linked

 

 

 

 

Total senior debt(2)

 

257,847

 

224,833

 

 


(1) As of December 31, 2018, the interest rate ranges for fixed-rate senior debt and variable-rate senior debt were 0 percent to 10 percent per annum, respectively (2017: 0 percent to 10 percent). The wide range of interest rates reflects the fact that the debt is issued in many different currencies and with different maturities. Due to the exceptionally low general interest levels in 2018, SEK has also experienced negative variable interest rates on its funding, especially debt denominated in Swiss Francs and Japanese Yen.

 

(2) Of which Skr 17 billion is linked to LIBOR

 

SEK’s economic hedges are expected to be effective in offsetting changes in fair value attributable to hedged risks. Certain assets and liabilities in such hedges require complex judgments regarding the most appropriate valuation models and assumptions. The gross values of certain assets and liabilities (primarily derivative and senior securities issued by SEK), which effectively hedge each other, are affected by this complexity. If different valuation models or assumptions are employed instead of those used in the valuations in this report, or if

 

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assumptions were change, this could produce different results regarding the gross value of such securities issued and hedging derivatives. Changes in the fair value of derivatives will usually be offset by changes in fair value of securities issued, and the connected change in the fair value will thus not have a material effect on either results or equity except the impact on valuation of credit spreads on SEK’s own debt and basis spreads.

 

The outstanding volume of debt with remaining maturities of one year or less decreased during 2018. On December 31, 2018, outstanding debt with remaining maturities of one year or less amounted to Skr 75 billion, compared with Skr 49 billion on December 31, 2017.

 

Contractual Commitments

 

For maturity analysis of SEK’s financial assets and liabilities as of December 31, 2017, see the table entitled “Contractual Flows” in Note 27 to the Consolidated Financial Statements.

 

C                             Trend Information

 

SEK’s future development is based on a number of factors, some of which are difficult to predict and generally beyond the Company’s control. Some significant factors for 2018 are presented below:

 

·            Despite favorable access to other financing solutions, demand for SEK’s financing offerings is healthy.

·            During the year, SEK continued its efforts to reach new clients and to broaden its business with existing clients. Solicitation of new clients has been successful and SEK has concluded deals with new clients including large companies and medium-sized companies, the latter being a new customer group since 2015.

·            During 2018, SEK worked together with other export promotion agencies on the Swedish government’s Team Sweden initiative. SEK also works with other government export promotion agencies to improve the communication with companies, especially in providing information on the Swedish export credit system.

·            In 2017, SEK adopted the Equator Principles, a globally recognized framework for assessing and managing environmental and societal risks in conjunction with financing projects. This work has continued throughout the year of 2018.

·            During the year, credits were granted to six larger international projects where SEK conducted separate sustainability reviews in line with international guidelines for export credits. In 2018, new lending that qualified for classification as green loans, as per SEK’s definition, amounted to Skr 2.0 billion, which was below the target of Skr 3.0 billion. In 2019, we will instead measure by the number of loans and not by the total volume.

·            In collaboration with clients and business partners, SEK has continued to clarify its commitment to human rights in conjunction with export credits.

 

For additional information on the trends affecting SEK and the risks it faces, see the discussions under “Business Volume” above and the “Risk Factors” in Item 3.

 

D                             Certain Off-Balance Sheet Arrangements

 

In 2018, SEK had a credit facility in place with the Swedish National Debt Office of up to Skr 125 billion. To date, SEK has not utilized the credit facility. The credit facility can only be utilized for loans covered by the CIRR-system. In December 2018, the Swedish Parliament confirmed that the credit facility will continue to be available in 2019 in an amount up to Skr 125 billion.

 

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ITEM 6. DIRECTORS, SENIOR MANGEMENT AND EMPLOYEES

 

The Board is responsible for the management of the Parent Company.

 

The Parent Company’s Articles of Association currently provide that the Board shall consist of six to eight directors. The State, as holder of all the shares, elects the directors. The Chairman of the Board is appointed at each Annual General Meeting. The Board may appoint a Vice Chairman of the Board.

 

The Board meets at least six times a year.

 

The members of the Board are elected at each Annual General Meeting to serve for a term of one year, which expires at the next Annual General Meeting. An Annual General Meeting is required to be held not later than June 30 of each year.

 

Certain information with respect to the Parent Company’s directors and executive officers is set forth below. Unless otherwise indicated, such information is given as of the date of this report.

 

A                                                                              Director and senior management

 

Board of Directors and Executive Officers

 

Name

 

Age(1)

 

Position(1)

Lars Linder-Aronson

 

65

 

Chairman of the Board and Director

Cecilia Ardström

 

53

 

Director

Anna Brandt

 

57

 

Director

Reinhold Geijer

 

65

 

Director

Hans Larsson

 

57

 

Director

Susanne Lithander(2)

 

57

 

Director

Lotta Mellström(2)

 

48

 

Director

Eva Nilsagård(3)

 

54

 

Director

Ulla Nilsson

 

71

 

Director

Hélène Westholm(3)

 

47

 

Director

Catrin Fransson

 

56

 

Chief Executive Officer

Per Åkerlind

 

56

 

Executive Vice President and Head of Treasury and Capital management

Karl Johan Bernerfalk

 

46

 

General Counsel

Andreas Ericson(4)

 

42

 

Head of Mid Corporates

Stefan Friberg

 

50

 

Chief Risk Officer

Theresa Hamilton Burman

 

56

 

Chief Credit Officer

Jens Hedar(4)

 

44

 

Head of Large Corporates

Johan Henningsson

 

53

 

Head of Sustainability

Petra Könberg

 

49

 

Head of Marketing and Business development

Jane Lundgren Ericsson(5)

 

53

 

Head of Lending

Ingela Nachtweij(6)

 

52

 

Acting Head of IT

Sirpa Rusanen

 

54

 

Head of HR

Susanna Rystedt

 

54

 

Chief Administrative Officer

Madeleine Widaeus(7)

 

48

 

Chief Information Officer

 


(1) As of December 31, 2018

(2) Resigned April 24, 2018

(3) From April 24, 2018

(4) From October 15, 2018

(5) Resigned October 12, 2018

(6) Resigned January 31, 2018

(7) From February 1, 2018

 

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Changes after December 31, 2018

 

Hélène Westholm chose to leave the Board after approximately one year of service, effective January 31, 2019. On January 31, 2019, the Board determined that Hanna Lagercrantz will be a Board observer (Sw: adjungerad ledamot) until her election to the Board, which is expected to occur at the next Annual General Meeting on March 28, 2019.

 

Three new roles were created within management: Executive Vice President, Strategic Partnerships and Relationships; CFO; and Head of Business Development, Business Support and Transformation. Per Åkerlind, previously Executive Vice President and Head of Treasury and Capital Management at SEK, has been appointed as Executive Vice President, Strategic Partnerships and Relationships. Stefan Friberg, formerly Chief Risk Officer at SEK, has been appointed CFO and Susanna Rystedt, who previously held the role of Chief Administrative Officer at SEK, has been appointed as Head of Business Development, Business Support and Transformation. In conjunction with the introduction of these roles, the roles of Head of Treasury and Capital Management and Chief Administrative Officer have been removed and the accounting and treasury units have been reorganized under the same manager, the CFO. The change also means that the Head of Sustainability will report to the Executive Vice President, Strategic Partnerships and Relationships instead of the CEO. Irina Slinko has been appointed as acting Chief Risk Officer.

 

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A1.                                                                    The Board

 

Mr. Linder-Aronson was appointed director in May 2011. He is currently Chairman of the Board at Nordisk Renting AB. He serves as a director of Facility Labs AB and Bright Group Oy. He has previously served as Managing Director at Enskilda Securities AB and Deputy Managing Director at Skandinaviska Enskilda Banken AB.

 

Ms. Ardström was appointed director in May 2011. She is currently a Member of the Board at Guldsillen AB, Stockholms Stads Brandförsäkringskontor AB and AMF Fonder AB. She has previously served as Chief Financial Officer and Head of Asset Management at Länsförsäkringar AB, Head of Treasury at Tele2 Group and Head of Asset Management and Chief Information Officer of Folksam Group.

 

Ms. Brandt was appointed director in November 2017. She is currently Ambassador and permanent representative of Sweden to the OECD and the United Nations Educational, Scientific and Cultural Organization (also known as UNESCO) in Paris. She has previously served as Executive Director and Member of the Board at the World Bank, European Bank for Reconstruction and Development (EBRD), and European Investment Bank (EIB), Ambassador for Agenda 2030 at the Ministry for Foreign Affairs and Ambassador to Nairobi, Kenya and Ambassador to Dublin, Ireland.

 

Mr. Geijer was appointed director in March 2017. He is currently Chairman of the Board at BTS Group AB and a Board Member of Edsbyn Senab AB, Eterna Invest AB, Zacco A/S and Livförsäkringsaktiebolaget Skandia. He has previously served as Chief Executive Officer at The Royal Bank of Scotland, Nordic Branch, Chief Executive Officer at Nordisk Renting AB, Executive Vice President at Telia AB and Chief Executive Officer at Swedbank. He has also previously worked in Ericsson Radio Systems AB, SSAB Swedish Steel and Weyerhaeuser Integrated Forest Company, USA.

 

Mr. Larsson was appointed director in March 2017. He is currently Chief Executive Officer at Linderyd Advisory AB and Lunda Advisory AB. He serves as Chairman of the Board of Nordnet AB and Linderyd Advisory AB and as Board Member at Intrum Justitia AB. He has previously served as Head of Group Strategy & Business Development at SEB, Executive Vice President and Chief of Staff at Lindorff Group and Board Member at Nordax AB and Nordax Bank AB.

 

Ms. Nilsson was appointed director in July 2011. She is currently Honorary Vice President to the Swedish Chamber of Commerce to the United Kingdom. She has served as Managing Director to the Swedish Chamber of Commerce to the United Kingdom, Skandinaviska Enskilda Banken AB, Global Head of SEB Futures in London, Chairman of Enskilda Futures Limited in London, Head of Trading & Capital Markets in Singapore, Head of Treasury in Luxemburg and Skånska Banken.

 

Ms. Nilsagård was appointed director in April 2018. She is currently CEO at Nilsagård consulting. She serves as Board member and Chairman of the audit committe of AddLife AB and in Irras AB and as Board member and member of the audit committee of Bufab AB. She has previously served as CFO at Plastal Industri AB, SVP Strategy & Business development Volvo Trucks (EMEA), Vitrolife, VP Finance & IT Volvo Penta and other senior positions within finance and business development in Volvo, AstraZeneca Group and SKF.

 

Ms Westholm was appointed director in April 2018. She is currently Investment director at Division for State-Owned Enterprises at the Ministry of Enterprise and Innovation. She serves as Board member at AB Svensk Bilprovning and AB Svenska Spel. Ms. Westholm chose to leave the Board effective January 31, 2019.

 

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A.2                                                                    Management — Executive Officers

 

Ms. Fransson has been CEO since April 2014. Prior to that she held several positions within Swedbank between 2000 and 2013; member of group executive committee (2004-2013), Head of Group Products (2013), Head of Retail Banking Sweden (2010-2012), Head of Customer Offerings & Products (2007-2010), Region Manager — Northern Region (2004-2007), CRM Manager (2000-2002), and several positions at Föreningssparbanken; Area Manager Stockholm (2003-2004) and various management positions (1997-2000).

 

Mr. Åkerlind has been Executive Vice President, Strategic Partnerships and Relationships since January 2019. He has previously worked as Executive Vice President and Head of Treasury & Capital Management since 2015. Prior to that he served as Executive Director, Chief Operating Officer since January 2011. Prior to that he was Executive Director, CFO and Head of Capital Markets since June 2002. Prior to that he served as Executive Director, Treasurer and Head of Debt Capital Markets beginning in 1997. Prior to that he served in various capacities within the Debt Capital Markets group, beginning in 1990.

 

Mr. Bernerfalk has been Executive Director, General Counsel since 2015. Previously he was Head of Legal Lending since 2007. Prior to that he served as legal counsel of SBAB and served as legal counsel with leading Swedish law firms.

 

Mr. Ericson has been Director, Head of Mid Corporates since 2015 and Executive Director, member of the executive management team since October 2018. Prior to that he held a position as Director within Debt Capital Markets. Prior to that he served as Senior Underwriter at EKN (Swedish Export Credit Guarantee Board). Prior to that he held various positions within Export Finance, Securities etc. at SEB.

 

Mr. Friberg has been CFO since January 2019. He had previously worked as Executive Director, Chief Risk Officer since May 2015. Previously he held the position as Head of Group Risk Control at Skandinaviska Enskilda Banken (“SEB”) from 2008. Prior to that he served as Head of Credit Portfolio Management at SEB from 2006. Prior to that he held various positions in Trading within SEB and Nordea, primarily in Derivatives Trading, since 1996.

 

Ms. Hamilton Burman has been Executive Director, Chief Credit Officer since August 2015. Previously she held several positions within Swedbank e.g. Regional Credit Manager, Head of Corporate Banking, Head of Credit analysis. In addition she has been a director representing Swedbank in several of its subsidiaries such as Swedbank Financial Services AB, Swedbank Card Services AB and some partly owned saving banks and the credit bureau UC AB.

 

Mr. Hedar has been Executive Vice President and Head of Large Corporates since 2018. Previously he held several positions within SEK since 2007, such as. Senior Director and Head of Large Corporates, Director, Senior Client Executive and Senior Manager of the Financial Advisory business. Prior to that he served in various capacities in Boliden Mineral AB, Outokumpu Oyj and AvestaPolarit AB.

 

Mr. Henningsson has been Executive Director, Head of Sustainability since January 2015 and has served as Head of Sustainability since 2010. Previously he was a Director at SEK Financial Advisors (2006-2009). Prior to that, he served, among other positions, as Head of Corporate Sales at ABN Amro Bank Stockholm Branch and Head of Treasury Management at N&G Financial Management.

 

Ms. Könberg has been Executive Director, Head of Marketing & Business Development since April 2017. Prior to that she served as Head of Internal communications (2016-2017) and Head of consumer communications (2014-2016) at Telia. Before that she served as Head of communications, Group Products at Swedbank (2013-2014) and prior to that she served in other capacities at Swedbank.

 

Ms. Rusanen has been Executive Director, Chief Human Resources Officer since 2005. Prior to that, she served as Human Resource Manager at Ericsson, beginning in 1997.

 

Ms. Rystedt has been Head of Business Development, Business Support and Transformation since January 2019.  She had previously worked as Executive Director, Chief Administrative Officer since March 2009. Prior to that, she served as Head of Business Development & IT at SEB Life beginning in 2005. From 2002 to 2005, she served as Head of IT at SEB Trygg Liv, and before that she served in other capacities at SEB Trygg Liv and Enskilda Securities and as a member of the Group Staff within the SEB Group, beginning in 1990.

 

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Ms. Widaeus has been Chief Information Officer, Head of IT, since February 2018. Prior to her employment at SEK, she served as Chief Information Officer at Bankgirot for three years. Prior to that, she worked for fourteen years at Swedbank in different roles.

 

B                                                                              Compensation of Directors and Officers

 

Remuneration, Skr mn

 

2018

 

2017

 

2016

 

Aggregate remuneration of all directors and executive officers as a group(1)

 

27.9

 

27.1

 

24.3

 

Chairman of the Board

 

0.6

 

0.7

 

0.7

 

Each director(2)

 

0.0-0.4

 

0.0-0.3

 

0.0-0.2

 

CEO Catrin Fransson(3)

 

4.8

 

4.7

 

4.6

 

Other executive officers of the Parent Company(4)

 

21.0

 

20.2

 

17.9

 

Pension plan with an insurance company on behalf of all executive officers

 

7.7

 

7.1

 

6.3

 

 


(1) In the form of salaries, fees and other benefits in the case of executive officers. In the form of fees and other benefits in the case of directors.

(2) Since April 29, 2010, remuneration is not paid from the Company to the representatives on the Board who are employed by the owner, the Swedish State.

(3) Remuneration and other benefits. The CEO did not receive any variable compensation.

(4) Remuneration and other benefits.

 

For information on amounts set aside or accrued by SEK to provide employee pension benefits, see also Note 5 to the Consolidated Financial Statements.

 

C                             Board Practices

 

Activities and Division of Responsibility within the Board

 

The Board is responsible for the organization and the administration of SEK’s affairs in which sustainability forms an integral part. The Board is also tasked with ensuring that the Company’s financial statements, including sustainability reporting, are prepared in accordance with legislation, applicable accounting standards and other requirements. The Board must continually assess SEK’s financial position and ensure that SEK is structured in such a way that its accounting, management of funds and SEK’s other financial circumstances are governed by satisfactory controls. The Board adopts the operating targets and strategies for the operations, and issues general internal regulations in policies and instructions. The Board ensures that an efficient system is in place to monitor and control SEK’s operations. In addition, the Board is tasked with appointing, and dismissing if necessary, the CEO and the Chief Risk Officer, and deciding on the remuneration of these individuals and other members of executive management.

 

The Board’s work follows the rules of procedure and the Board’s annual plan, which are adopted each year at the statutory Board meeting. The Board met on 14 occasions in 2018. The CEO attends all Board meetings except those addressing matters in which there is a conflict of interest, such as when evaluating the CEO’s work or determining the CEO’s compensation.

 

The rules of procedure govern such matters as reporting to the Board, the frequency and form of the meetings of the Board, and delegation and assessment of the work of the Board and the CEO. In addition to this, the Board monitors financial developments and has ultimate responsibility for internal control, compliance and risk management.

 

The Board is responsible for a well thought-out and firmly established policy and strategy for dealing with respect for the environment, social responsibility, human rights, corruption as well as equal opportunities and diversity.

 

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The Chairman of the Board leads the work of the Board and is responsible for ensuring that the other members of the Board are provided with the necessary information.

 

When required, the Chairman of the Board participates in important meetings and represents the Company in ownership matters. The tasks of the Chairman of the Board conform to applicable legislation and the rules of procedure of the Board. Auditors are invited to participate at meetings of the Board at least once a year. The auditors appointed by the Annual General Meeting have attended one of the meetings of the Board. The General Counsel acts as secretary to the Board.

 

The Board has established a credit committee (the body that deals with credit-related matters), a finance and risk committee (the body that deals with other financial matters besides those relating to credits as well as risk issues), an audit committee (the body that deals with the Company’s financial reporting, internal control, etc.) and a remuneration committee (the body that deals with certain remuneration matters). Besides the Board committees and the work for which the Chairman is responsible, work is not divided within the Board.

 

Appointing the Board and Auditors

 

The nomination procedure for Board members complies with the state’s ownership policy and is conducted and coordinated by the Division for State-owned enterprises at the Swedish Ministry of Enterprise and Innovation. A working group analyzes the skills requirements based on the composition of the Board as well as the Company’s operations, status, future challenges and completed Board training. Any recruitment needs are then established and the recruitment process initiated. The state’s ownership policy sets out that the government seeks to achieve an even gender balance and the target is a minimum of 40 percent board representation for both women and men. Boards with six to eight directors elected by the general meeting of shareholders must include at least three persons of each gender. Directors are to be selected from a broad recruitment base with the aim of utilizing the expertise of women and men, as well as of individuals with various backgrounds and experience. Discrimination based on gender, transgender identity or expression, ethnic affiliation, religion or other belief, disability, sexual preference or age is prohibited.

 

SEK carries out a suitability assessment of Board members and senior executives pursuant to the regulatory framework issued by the EBA. SEK’s assessment of potential new Board members is based on the owner having identified the candidate in question according to a job specification. The owner is informed of the outcome following SEK’s assessment. When the procedure is complete, the nominations are disclosed publicly in accordance with the provisions of the Code, which is part of the Swedish government’s framework for corporate governance.

 

At the Annual General Meeting in April 2018, Öhrlings PricewaterhouseCoopers AB (“PwC”) was appointed as external auditors, with Peter Nyllinge as principally responsible auditor for a period of one year. The Board has decided to propose PwC as SEK’s auditors for 2019 at the next Annual General Meeting.

 

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Policy documents

 

In 2018, SEK’s Board and committees adopted the following policies and instructions:

 

Document

 

Issued by

The Board’s rules of procedure

 

The Board

Code of Conduct

 

The Board

Sustainable Business Policy

 

The Board

Risk Policy

 

The Board

Credit Policy

 

The Board

Instruction for the CEO

 

The Board

Instruction for the Chief Risk Officer, CRO

 

The Board

Instruction for the Internal Audit function

 

The Board

Instruction for the Compliance function

 

The Board

Limits for market risk

 

The Board and CEO

Limits for liquidity risk

 

The Board and CEO

HR policy

 

The Board

Financing and liquidity strategy

 

Finance and Risk Committee

Credit Instruction

 

Credit Committee

Audit instruction

 

Audit Committee

 

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Board’s work during the year

 

During 2018, the Board spent time in monitoring the Company’s work in adapting its operations to various regulations. Accordingly, issues relating to MiFID II and the General Data Protection Regulation were reported to the Board. The resolution framework and its consequences for SEK’s operations, were also up for discussion. It was possible to devote a large proportion of the meeting time to forward-looking strategy issues.

 

The Board held its annual strategy meeting in early summer 2018. The focus was on how SEK can create even greater value for exporters by working with structured client processing and digitalization. A few of SEK’s clients participated and described their need for SEK’s support and expectations of SEK. One foreign bank was represented by its digitalization expert, who shared his thoughts on trends and new business models in the industry.

 

In November 2018, the annual Board trip was made to visit clients and business partners. In 2018 the Board visited India. Over a very busy day, the Board met clients and bank business partners. The Board also gained good insight into how India functions as a market and which needs for various sustainability solutions, such as in the form of smart cities, SEK could provide by offering adapted financing solutions.

 

In addition to the scheduled meetings in 2018, the Board participated in targeted training activities on four occasions. The training was comprised of a review of SEK’s risk framework, including its Internal capital adequacy assessment process (ICAAP), a review of the internal rules on operational risk, a review of sanction regulations and smart sustainable cities.

 

Quality assurance of financial reporting

 

To ensure correct and reliable financial reporting, SEK has developed a management system for financial reporting based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework for internal control (2013 version). This internal control framework is divided into five components: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities.

 

Evaluation of the work of the Board and the CEO

 

A separate assessment of the work of the Board and CEO is carried out once a year under the leadership of the Chairman. The results of this assessment were reported to the Board and, by the Board’s Chairman, to the owner. An evaluation is also performed by the owner in conjunction with the nomination of Directors. The evaluation for 2018 was conducted with particular focus on the assessment that is to be made of the Board’s suitability as a group in accordance with the regulations issued by the EBA.

 

The Board Committees

 

The Board has established the following committees. Credit Committee, Finance and Risk Committee, Remuneration Committee and Audit Committee. The Board’s rules of procedure include establishing annual instructions for all of its committees. The minutes from each committee are reported at meetings of the Board by the respective committee’s chairman.

 

Credit Committee

 

Ulla Nilsson (Chairman), Anna Brandt, Reinhold Geijer and Lars Linder-Aronson

 

·                  Ensure the Board’s involvement in decision-making regarding credit risks.

·                  Prepare matters relating to credits and credit decisions that are of fundamental or otherwise significant importance to the Company, and also to make decisions regarding credits in accordance with the delegation rules determined by the Board, where sustainability aspects are implicated.

 

Finance and Risk Committee

 

Cecilia Ardström (Chairman), Lars Linder-Aronson, Hans Larsson and Ulla Nilsson

 

·                  Ensure that the Company can identify, measure, manage, report internally and control the risks to which it is or can be expected to be exposed.

·                  Prepare matters pertaining to general policies, strategies and risk appetite in all risk and capital-related

 

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issues where sustainability risk is a component, as well as regarding overall issues concerning the Company’s financial operations.

·                  Set limits for such risk and capital-related matters that the Board delegates to the Committee to determine, and to establish measurement methods and limits concerning market and liquidity risk, in addition to models for valuing financial instruments.

 

Remuneration Committee

 

Lars Linder-Aronson (Chairman), Reinhold Geijer and Hélène Westholm. (Ms. Westholm left the Remuneration Committee effective upon her departure from the Board on January 31, 2019.) On January 31, 2019, the Board determined that Hanna Lagercrantz will be a Board observer (Sw: adjungerad ledamot) until her election to the Board, which is expected to occur at the next Annual General Meeting on March 28, 2019.

 

·                  Prepare matters relating to employment terms and conditions, salaries, pensions and other benefits for the CEO and the executive management, and general issues relating to salaries, pensions and other benefits.

·                  Prepare proposals regarding the remuneration policy for decision by the Board.

·                  Prepare proposals on salaries for other individuals in management positions for whom the Board determines the terms of remuneration.

·                  Evaluate compliance with the Annual General Meeting’s resolutions on remuneration.

 

Audit Committee

 

Cecilia Ardström (Chairman), Lars Linder-Aronson, Eva Nilsagård and Hélène Westholm. (Ms. Westholm left the Audit Committee effective upon her departure from the Board on January 31, 2019.) On January 31, 2019, the Board determined that Hanna Lagercrantz will be a Board observer (Sw: adjungerad ledamot) until her election to the Board, which is expected to occur at the next Annual General Meeting on March 28, 2019.

 

·                  Monitor the Company’s financial reporting and submit recommendations and proposals aimed at assuring the reliability of the Company’s reporting.

·                  Monitor the efficiency of the Company’s internal control, internal audit and risk management in terms of the financial reporting.

·                  Evaluate the audit process and inform the Board of the results and, through the Chairman of the Board, inform the Company’s owner about the results of the evaluation.

·                  Keep informed about the audit of the annual accounts and the consolidated financial statements, as well as the conclusions of the Supervisory Board of Public Accountants’ quality control.

·                  Assist in the preparation of proposals regarding the selection of auditors for resolution by the Annual General Meeting.

 

Attendance at Board and committee meetings in 2018

 

 

 

Total

 

Board of
Directors

 

Remuneration
Committee

 

Finance
and Risk
Committee

 

Credit
Committee

 

Audit
Committee

 

Number of meetings

 

51

 

14

 

7

 

8

 

14

 

8

 

Lars Linder-Aronson

 

51

 

14

 

7

 

8

 

14

 

8

 

Cecilia Ardström (1)

 

30

 

14

 

0

 

8

 

0

 

8

 

Anna Brandt

 

28

 

14

 

0

 

0

 

14

 

0

 

Reinhold Geijer

 

32

 

14

 

4

 

0

 

14

 

0

 

Hans Larsson

 

22

 

14

 

0

 

8

 

0

 

0

 

Eva Nilsagård (2)

 

13

 

8

 

0

 

0

 

0

 

5

 

Susanne Lithander (3)

 

10

 

4

 

3

 

0

 

0

 

3

 

Lotta Mellström (4)

 

10

 

4

 

3

 

0

 

0

 

3

 

Ulla Nilsson

 

36

 

14

 

0

 

8

 

14

 

0

 

Hélène Westholm (5)

 

18

 

9

 

4

 

0

 

0

 

5

 

 


(1) Cecilia Ardström was elected as Chair of the Audit Committee on April 24, 2018.

(2) Eva Nilsagård was elected as a member of the Board and the Audit Committee on April 24, 2018.

(3) Susanne Lithander stepped down from the Board, Remuneration Committee and Audit Committee on April 24, 2018.

(4) Lotta Mellström stepped down from the Board, Remuneration Committee and Audit Committee on April 24, 2018.

(5) Hélène Westholm was elected as a member of the Board, Remuneration Committee and Audit Committee on April 24, 2018.

 

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D                             Employee Relations

 

 

 

2018

 

2017

 

2016

 

Average employees

 

243

 

252

 

260

 

of which female

 

117

 

121

 

122

 

of which male

 

126

 

131

 

138

 

Employees at year-end

 

238

 

250

 

256

 

 

The total number of employees is small in relation to the volume of lending because the number of lending transactions is relatively small and the administration and documentation of loans are in many cases handled by the banks participating in the transactions. The Group has not experienced any strikes or labor disputes and considers its employee relations to be strong.

 

For more information, see “Personnel Expenses” in Note 5 to the Consolidated Financial Statements.

 

Members of the Board, the CEO, and other executive officers have no share ownership in the Parent Company or Subsidiary and no options have been granted to them with respect to the Parent Company’s shares. There are no arrangements for involving the employees in the capital of the Parent Company, including any arrangement that involves the issue or grant of options, shares or securities of the Parent Company.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A                             Major Shareholders

 

As of December 31, 2018, the total number of shares outstanding was 3,990,000. Since June 30, 2003, the Swedish State has been the sole (100 percent) owner of SEK. The State owns all of the Company’s shares.

 

The following table sets forth the share ownership of the Parent Company:

 

Shareholder

 

 

 

Ownership %

 

Number of shares

 

Kingdom of Sweden

 

Appr.

 

100.00

 

3,990,000

 

 

Ownership and governance

 

SEK is owned by the Swedish State. The State exerts its influence at the Parent Company’s general meetings and through representation on the Board.

 

The governance of SEK is divided between the shareholder, the Board and the CEO, in accordance with the Swedish Companies Act, the Articles of Association, and the Board’s procedural rules. The Board appoints the CEO, who conducts ongoing management in accordance with the Board’s guidelines and instructions.

 

The State as shareholder has decided that State-owned companies should observe the Swedish Corporate Governance Code.

 

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B                             Transactions with related parties

 

SEK defines related parties for the Consolidated Group as:

 

· the shareholder, i.e. the Swedish State

· companies and organizations that are controlled through a common owner, the Swedish State

· key management personnel

· other related parties

 

The Swedish State owns 100 percent of the Parent Company’s share capital. By means of direct guarantees extended by the Swedish National Debt Office and the EKN, 40 percent of the Group’s outstanding loans as of December 31, 2018, were guaranteed by the State (year-end 2017: 35 percent). SEK administers for compensation the CIRR-system. See Note 1(d) and Note 25 to the Consolidated Financial Statements.

 

In order to further enhance the ability of SEK to promote the Swedish export industry, on February 5, 2009, the State decided to provide SEK with access to a credit facility via the Swedish National Debt Office, an action that was approved by the Swedish Parliament and has been renewed for subsequent terms since then. In December 2014, the credit facility was extended for 2015. It amounted to Skr 80 billion and was only available for loans covered by the CIRR-system. The Swedish Parliament also decided not to extend the government’s previous authority to enable SEK to purchase state guarantees on commercial terms for new borrowing of up to Skr 250 billion. In December 2015, the credit facility was extended for 2016, though the facility amount was changed to Skr 125 billion. The same amount was further extended in December 2016 for 2017, in December 2017 for 2018 and in December 2018 for 2019. SEK has never utilized the credit facility or its previous ability to purchase state guarantees.

 

SEK enters into transactions in the ordinary course of business with entities that are partially or wholly-owned or controlled by the State. SEK also extends export credits (in the form of direct or pass-through loans) to entities related to the State. Transactions with such parties are conducted on the same terms (including as to interest rates and repayment schedules) as transactions with unrelated parties.

 

Key management personnel include the following persons:

 

· Members of the Board

· The President and CEO

· Other members of the Executive Management

 

For information about remuneration and other benefits to key management personnel, see Note 5 to the Consolidated Financial Statements. Other related parties include close family members of key management personnel as well as companies which are controlled by key management personnel or controlled by close family members to key management personnel.

 

See also Note 28 to the Consolidated Financial Statements for further details on related-party transactions.

 

ITEM 8. FINANCIAL INFORMATION

 

A                             Consolidated Financial Statements and Other Financial Statements

 

See Item 18, “Financial Statements.”

 

Legal Proceedings

 

There are no material pending or, to the Group’s knowledge, threatened, legal or governmental proceedings to which the Group is or would be a party or to which any of its property is or would be subject.

 

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Dividend Policy

 

The Board resolved for each year, as listed in the table below, that the corresponding amount was to be paid to the sole shareholder, the Swedish State, in relation to the fiscal year of each such year.

 

 

 

In relation to the respective years

 

 

 

2018

 

2017

 

2016

 

Dividend

 

Skr

194 mn

 

Skr

232 mn

 

Skr

234 mn

 

-of which per share

 

Skr

48.70

 

Skr

58.05

 

Skr

58.65

 

 

For additional details regarding equity, see the Consolidated Statement of Equity.

 

B                             Significant Changes

 

Except as otherwise disclosed in this report, there has been no significant change in SEK’s financial position since December 31, 2018.

 

ITEM 9. THE OFFER AND LISTING

 

A                             Nature of Trading Market

 

The Parent Company’s shares, all of which are owned by the State, are not listed on any exchange in Sweden or outside Sweden.

 

All issues of SEK’s U.S. medium term notes listed on securities exchanges in the United States are set forth on the cover of this Report. Certain global issues of such notes are listed on European exchanges.

 

 

 

As of December 31,

 

 

2018

Notes listed on European exchanges of which:

 

 

-Listed on the Irish Stock Exchange

 

Floating Rate Global Notes due January 14, 2019,

 

 

1.25% Global Notes due April 12, 2019,

 

 

1.875% Global Notes due June 17, 2019,

 

 

1.125% Global Notes due August 28, 2019,

 

 

1.50% Global Notes due May 15, 2020

 

 

1.875% Global Notes due June 23, 2020,

 

 

1.750% Global Notes due August 28, 2020

 

 

2.750% Global Notes due October 7, 2020

 

 

1.750% Global Notes due March 10, 2021

 

 

2.875% Global Notes due May 22, 2021

 

 

3.125% Global Notes due November 8, 2021

 

 

1.875% Global Notes due February 28, 2022

 

 

1.875% Global Notes due July 31, 2022 and

 

 

2.875% Global Notes due March 14, 2023

 

Other issuances of SEK’s Medium Term Notes are traded in the over-the-counter market.

 

ITEM 10. ADDITIONAL INFORMATION

 

A                             The Share Capital

 

The share capital of the Parent Company shall be not less than Skr 1,500 million and not more than Skr 6,000 million. No shareholder is obliged to make additional capital contributions to the Parent Company solely as a result of being a shareholder.

 

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Shareholders’ rights may only be changed by a majority (and in certain cases a qualified majority) of the shares represented at a general meeting of the shareholders. However, all resolutions passed at a general meeting of the shareholders are subject to mandatory provisions under Swedish law (for practical purposes, primarily the Swedish Companies Act). In particular, there are rules protecting minority shareholders and there is a general principle that all shares and shareholders shall be treated equally.

 

Annual General Meeting

 

The Annual General Meeting is held once a year not later than six months following the end of the preceding fiscal year. Notices convening an Annual General Meeting or any other general meeting called to resolve upon any amendment of the Articles of Association, shall be issued not earlier than six weeks and not later than four weeks prior to the meeting. Notices convening a general meeting, in cases other than those set forth in the preceding sentence, shall be issued not earlier than six weeks and not later than three weeks prior to the meeting. Each person entitled to vote at an Annual General Meeting shall have the right to vote all the shares owned and represented by that person. There are no restrictions on the rights of non-Swedish nationals to own shares or vote their shares at the Annual General Meeting.

 

Swedish law provides that, in matters other than elections, resolutions are passed by a simple majority of the votes cast, except that (among other exceptions):

 

·                                          a resolution to amend the Articles of Association (except as described in the following paragraphs) requires a majority of at least two-thirds of the votes cast as well as at least two-thirds of the shares represented at the meeting;

 

·                                          a resolution to amend the Articles of Association that reduces any existing shareholder’s rights to profits or other assets, restricts the transferability of issued shares or alters the legal relationship between issued shares, normally requires the unanimous approval of the shareholders present or represented at the meeting and representing at least nine-tenths of all shares issued; and

 

·                                          a resolution to amend the Articles of Association for the purpose of limiting the number of shares which a shareholder may vote at an annual general meeting normally requires the approval of shareholders representing at least two-thirds of the votes cast and at least nine-tenths of the shares represented at the meeting.

 

In elections, the person receiving the most votes is deemed to have been elected.

 

B                             Memorandum and Articles of Association

 

Set forth below is a brief summary of certain significant provisions of the Parent Company’s Articles of Association and Swedish law. This description does not purport to be complete and is qualified by reference to the Articles of Association, which are incorporated by reference, as an exhibit to this annual report.

 

Registration

 

The Parent Company’s registry number with the Swedish Company Registry (Sw. Bolagsregistret) of the Swedish Companies Registration Office (Sw. Bolagsverket) is 556084-0315.

 

Purpose

 

Under Article 3 of the Articles of Association, the Parent Company’s objective is to engage, on commercial grounds, in Swedish and international financing activities in accordance with the Swedish Banking and Financing Business Act (2004:297) in order to promote activities of Swedish interest, directly or indirectly related to the Swedish export industry, including Swedish infrastructure, and further to otherwise strengthen the internationalization and competitiveness of Swedish industry. The Parent Company’s financing activities include, but are not limited to: (i) borrowing funds, for example by accepting deposits from the general public or issuing bonds or other comparable debt instruments; (ii) granting and intermediating loans, for example in the form of loans secured by charges over real property or claims; (iii) issuing guarantees and assuming similar

 

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obligations; (iv) the holding of securities and the conduct of trading in securities; and (v)  engaging in securities operations in accordance with the Swedish Securities Market Act (2007:528).

 

Certain Powers of Directors

 

Under the Swedish Companies Act (2005:551), the Board is ultimately responsible for the Parent Company’s organization and the management of its affairs.

 

All members of the Board shall, if possible, be given the opportunity to participate in the deliberations relating to a matter and be given sufficient information to do so. A resolution of the Board requires the participation of a majority of the members of the Board and the approval of the higher of (i) a majority of the participating members of the Board and (ii) more than a third of the total number of Board members. However, the Board may delegate the authority to borrow and lend funds on behalf of the Parent Company to the CEO or another employee, acting singly or jointly, provided that such financing transaction does not contravene any fundamental policy of the Parent Company and is not otherwise of great significance to the Parent Company. There are no legal requirements applicable to any member of the Board requiring the ownership of shares in the Parent Company, or requiring retirement at a certain age.

 

Although the Articles of Association do not address voting by directors on matters in which they are interested, under the Swedish Companies Act, a director may not take part in the Board’ deliberations with respect to any of the following:

 

1.           agreements between such director and the Parent Company;

 

2.           agreements between the Parent Company and third parties, where such director has a material interest in the matter that may conflict with the interests of the Parent Company; or

 

3.           agreements between the Parent Company and a legal entity that such director himself, or together with someone else, may represent.

 

Under the Swedish Companies Act, the Parent Company may not lend funds to shareholders or directors.

 

Under Swedish law, the CEO and at least half of the Board must be resident in a European Economic Area country unless exempted by the Swedish Companies Registration Office. Under Swedish law, a director’s term of office may not be more than four years, but the Parent Company’s Articles of Association require one-year terms. A director may, however, serve any number of consecutive terms. Directors elected at a general meeting of the shareholders may be removed from office at another general meeting of the shareholders, and vacancies on the Board, except when filled by a deputy director, may only be filled by a resolution of shareholders. Each year, if not otherwise stipulated in the Parent Company’s Articles of Association, one director is elected Chairman of the Board by resolution of the Board (unless elected by the shareholders) at the statutory meeting following the Board’s appointment.

 

C                                       Material Contracts

 

The Parent Company is a party to certain material contracts, as defined in the Instructions to Item 10.C of Form 20-F. Such contracts are either filed with this annual report or incorporated by reference herein. Please see Item 19 herein.

 

D                                       Exchange Controls and Other Limitations Affecting Security Holders

 

There are currently no Swedish exchange control laws or laws restricting the import or export of capital. No approvals are necessary under Swedish law to enable the Group, at the times and in the manner provided in the Group’s debt securities and the indentures or other instruments pursuant to which such securities have been issued, to acquire and transfer out of Sweden all the amounts necessary to pay in full the principal of and/or interest on such securities, and any additional amounts payable with respect thereto, and no external approval is required for any prepayment of such securities.

 

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Under Swedish law and the Parent Company’s Articles of Association, there are no limitations on the right of non-resident or foreign owners to hold debt securities issued by the Parent Company.

 

E                             Swedish Taxation

 

The following summary outlines certain Swedish tax consequences relating to holders of SEK’s debt securities. The summary is based on the laws of Sweden as currently in effect and is intended to provide general information only. The summary does not address, among other things, situations where debt securities are held in an investment savings account (Sw. investeringssparkonto), the tax consequences in connection with a relevant authority’s exercise of bail-in tools and/or any other powers under the Resolution Act, the tax consequences in connection with any impairment of the debt securities, or the rules regarding reporting obligations for, among others, payers of interest. Investors should consult their professional tax advisors regarding Swedish and other tax consequences (including the applicability and effect of tax treaties for the avoidance of double taxation) of acquiring, owning and disposing of debt securities in their particular circumstances.

 

Holders not tax resident in Sweden

 

Payments of any principal amount or any amount that is considered to be interest for Swedish tax purposes to the holder of any debt security should not be subject to Swedish income tax, provided that such holder (i) is not resident in Sweden for Swedish tax purposes and (ii) does not have a permanent establishment in Sweden to which the debt securities are effectively connected.

 

However, if the value of or the return on the debt securities is deemed equity-related for Swedish tax purposes, private individuals who have been residents of Sweden for tax purposes due to a habitual abode in Sweden or a stay in Sweden for six consecutive months at any time during the calendar year of disposal or redemption or the ten calendar years preceding the year of disposal or redemption are liable for capital gains taxation in Sweden upon disposal or redemption of such debt securities. In a number of cases though, the applicability of this rule is limited by the applicable tax treaty for the avoidance of double taxation.

 

Swedish withholding tax, or Swedish tax deduction, is not imposed on payments of any principal amount or any amount that is considered to be interest for Swedish tax purposes, except for certain payments of interest (and other returns on debt securities) to a private individual (or an estate of a deceased individual) who is resident in Sweden for Swedish tax purposes (see “Holders tax resident in Sweden” below).

 

Holders tax resident in Sweden

 

In general, for Swedish corporations and private individuals (and estates of deceased individuals) with residence in Sweden for Swedish tax purposes, all capital income (for example income that is considered to be interest for Swedish tax purposes and capital gains on debt securities) will be taxable. Specific tax consequences may be applicable to certain categories of corporations, for example life insurance companies. Moreover, specific tax consequences may be applicable if, and to the extent that, a holder of debt securities realizes a capital loss on the debt securities and any currency exchange gains or losses.

 

If amounts that are deemed as interest for Swedish tax purposes are paid by Euroclear Sweden AB or by another legal entity domiciled in Sweden - including a Swedish branch of a non-Swedish corporation - or, in certain

 

cases, a clearing institution within the EEA, to a private individual (or an estate of a deceased individual) with residence in Sweden for Swedish tax purposes, Swedish preliminary taxes are normally withheld by Euroclear Sweden AB /the legal entity/the clearing institution on such payments. Swedish preliminary taxes should normally also be withheld on other returns on debt securities (but not capital gains), if the return is paid out together with such a payment of interest referred to above.

 

F                                        Documents on Display

 

The Parent Company files reports and other information electronically with the SEC. For a fee, members of the public may request copies of these documents by writing to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

 

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

All information about Quantitative and Qualitative Disclosures about Market Risks are included in Note 27 and Note 30 to the Consolidated Financial Statements.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Not applicable.

 

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PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

None.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

None.

 

ITEM 15. CONTROLS AND PROCEDURES

 

A                             Disclosure Controls and Procedures

 

Management, including the CEO and the CFO have evaluated the effectiveness of SEK’s disclosure controls and procedures (as defined in Rule 13a—15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2018. The Group’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Parent Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is compiled with and communicated to the Parent Company’s management, including the CEO and the CFO as appropriate to allow timely decisions regarding required disclosure.

 

Based upon that evaluation, management, including the CEO and the CFO concluded that the Group’s internal control over financial reporting described in the Management’s Report on Internal Control over Financial Reporting below, and the Group’s disclosure controls and procedures were effective as of December 31, 2018.

 

B                             Management’s Report on Internal Control over Financial Reporting

 

Management, including the CEO and the CFO is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of SEK’s financial statements for external purposes in accordance with IFRS.

 

Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Group; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with IFRS; (iii) provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of management and directors of the Group; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Group’s assets that could have a material effect on the financial statements.

 

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

 

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Management, including the CEO and the CFO assessed the effectiveness of SEK’s internal control over financial reporting as of December 31, 2018, based on criteria set forth in “Internal Control — Integrated Framework” issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission, and using the information contained in the Interpretive Release No.33—8810, “Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,” issued by the U.S. Securities and Exchange Commission. Management concluded that, as of December 31, 2018, SEK’s internal control over financial reporting was effective based on these criteria.

 

C                             Attestation Report of the Registered Public Accounting Firm

 

Because SEK is a “non-accelerated filer”, this annual report is not required to include an attestation report of the SEK’s registered public accounting firm regarding internal control over financial reporting.

 

D                             Changes in Internal Control over Financial Reporting

 

There have been no changes in the Group’s internal control over financial reporting that occurred during the year ended December 31, 2018, that have materially affected, or are reasonably likely to materially affect, SEK’s internal control over financial reporting.

 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

 

The Audit Committee of the Parent Company’s Board was established in January 2008. This committee, whose members are Cecilia Ardström (Chairman), Lars Linder-Aronson, Eva Nilsagård and, until her departure effective January 31, 2019,  Hélène Westholm, has a mandate to, among other things, supervise the Group’s financial reporting and review the work of its independent auditors. While the members of the Audit Committee have varying degrees of financial and accounting experience, the committee has not concluded that any of its members is an “audit committee financial expert” within the meaning of the regulations adopted under the Sarbanes-Oxley Act of 2002.

 

The Parent Company has not found it necessary to designate an audit committee financial expert because the Group is under the supervision of the Swedish FSA. Accordingly, SEK believes that there is the opportunity for meaningful independent review of its financial statements by qualified experts (at the Swedish FSA), in addition to the independent review performed by the Parent Company’s external auditor.

 

ITEM 16B. CODE OF ETHICS

 

The Group has ethical guidelines in place that apply to all employees including all executive officers. The guidelines are consistent with, and also in some respects more restrictive than, applicable Swedish regulations. The ethical guidelines are designed to deter wrongdoing and promote:

 

·                  honest and ethical conduct, including the ethical handling of actual and apparent conflicts of interest between personal and professional relationships; and

·                  compliance with applicable governmental laws, rules and regulations.

 

Although these ethical guidelines do not meet the definition of “code of ethics” in the regulations adopted pursuant to the Sarbanes-Oxley Act of 2002, primarily because they do not specifically address matters relating to the Parent Company’s disclosure in reports and documents filed with the SEC and in other public communications, the Parent Company believes that its ethical guidelines are sufficient to regulate the conduct of SEK’s executive officers, including its principal executive officer, its principal financial officer and its principal accounting officer. The guidelines have also been specifically designed to comply with relevant Swedish regulations and guidelines (including the Swedish Governance Code), which is why SEK has not attempted to alter them to comply with the Sarbanes-Oxley Act of 2002.

 

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The Code of Conduct is available on SEK’s website, www.sek.se./en/code-of-conduct-2. Information available on or accessible through SEK’s website is not incorporated herein by reference.

 

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table sets forth, for the years ending December 31, 2018 and 2017, the fees billed from the Parent Company’s independent auditors, Öhrlings PricewaterhouseCoopers AB.

 

Skr mn

 

2018

 

2017

 

Öhrlings PricewaterhouseCoopers AB

 

 

 

 

 

 

 

 

 

 

 

Audit fees(1)

 

8

 

8

 

Audit related fees(2)

 

0

 

0

 

Tax related fees(3)

 

 

0

 

Other fees(4)

 

2

 

1

 

Total

 

10

 

9

 

 


(1) Fees related to audit of annual financial statements and reviews of interim financial statements.

(2) Fees charged for assurance and related services that are related to the performance of audit or review of the financial statements and are not reported under “Audit fee”.

(3) Fees for professional services rendered by the principal independent auditors for tax compliance and tax advice.

(4) Fees for products and services rendered by the principal independent auditors, other than the services reported in “Audit fee”, “Audit related fee” and “Other fees” above.

 

In the financial statements remuneration to auditors is mainly included in Other administrative expenses. No additional fees have been billed by the principal auditors.

 

See also Item 16G herein for information about corporate governance as it relates to the external auditors of the Parent Company.

 

ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Prior to 2008, the Board as a whole comprised the Parent Company’s audit committee for the purposes of Rule 10A-3 under the Exchange Act. In January 2008, the Board established a separate Audit Committee; which currently has four directors as members. See Item 6 “Directors, Senior Management and Employees — Board Practices — Committees — Audit Committee.” Each of the members of the Board, and thus the Audit Committee, is a representative or designee of the Swedish State. As its sole owner, the Swedish State is an affiliate of the Parent Company. However, no member of the Board is an Executive Officer of the Parent Company. Thus, although no member of the Board or the Audit Committee satisfies the non-affiliate requirement of the independence standard for audit committee members described in Rule 10A-3(b)(1)(ii)(B) under the Exchange Act, the Parent Company relies, as to each member of the Board and the Audit Committee, on the exemption from this requirement for foreign governmental representatives described in Rule 10A-3(b)(1)(iv)(E). The Parent Company does not believe that its reliance on the above exemption materially adversely affects the ability of the Audit Committee to act independently and to satisfy its duties.

 

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ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

 

None.

 

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

 

ITEM 16G. CORPORATE GOVERNANCE

 

As a result of the listing of certain of its debt securities on NYSE ARCA, SEK is subject to Rule 10A-3 under the Exchange Act. Rule 10A-3, with which SEK complies fully, sets out certain requirements with respect to the independence of audit committee members and with respect to audit committees’ duties, powers and responsibilities. Rule 10A-3 contains certain exemptions for foreign issuers, however, and SEK avails itself of certain of these exemptions. In particular: (i) as noted in Item 16D above, it relies on Section (b)(1)(iv)(E) of the Rule (applicable to audit committee members that are representatives or designees of a foreign government, which all of SEK’s audit committee members are) to satisfy the independence requirement set forth in Section (b)(1)(ii)(B) of the Rule; and (ii) it relies on the “Instructions” accompanying the Rule, which provide that, to the extent that a foreign issuer’s home-country legal requirements conflict with the prescriptions of the Rule concerning the duties, powers or responsibilities of audit committees (i.e., due to the assignment of such duties, powers or responsibilities to another corporate body under local law), it is sufficient to allocate to the audit committee advisory powers, or powers and/or responsibilities concerning the making of proposals to the relevant decision-making body. Regarding the foregoing, Section (b) (2) of the Rule states that an issuer’s audit committee should be directly responsible for the appointment, compensation, retention and oversight of external auditors. Under Swedish law, these powers are reserved to the Parent Company’s shareholder. Thus, the charter for SEK’s audit committee gives the committee an advisory role (to the shareholder) with respect to the aforesaid (but does not make the committee directly responsible).

 

PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

Not applicable.

 

ITEM 18. FINANCIAL STATEMENTS

 

The Group’s Consolidated Financial Statements prepared in accordance with Item 18 of Form 20-F begin on page F-1 of this annual report.

 

Consolidated Financial Statements

 

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Statement of Comprehensive Income

F-2

Consolidated Statement of Financial Position

F-3

Consolidated Statement of Changes in Equity

F-4

Consolidated Statement of Cash Flows

F-5

Notes to the Consolidated Financial Statements

F-6

 

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Table of Contents

 

ITEM 19. EXHIBITS

 

1.1             Articles of Association of the Registrant in effect as of the date of this annual report (filed as Exhibit 1.1 to the Company’s Annual Report on 20-F (No. 001-08382) for the year ended December 31, 2014 and incorporated herein by reference).

 

2.1             Indenture, dated as of August 15, 1991, between the Company and J.P. Morgan Trust Company, National Association (as successor in interest to the First National Bank of Chicago) as Trustee, providing for the issuance of debt securities, in one or more series, by the Company (filed as Exhibit 4(a) to the Company’s Report of Foreign Issuer on Form 6-K (No. 001-08382) dated September 30, 1991 and incorporated herein by reference).

 

2.2             First Supplemental Indenture dated as of June 2, 2004 between the Company and J.P. Morgan Trust Company, National Association (filed as Exhibit 4(b) to the Company’s Registration Statement on Form F-3 (No. 333-131369) dated January 30, 2006 and incorporated herein by reference).

 

2.3             Second Supplemental Indenture, dated as of January 30, 2006, between the Company and J.P. Morgan Trust Company, National Association (filed as Exhibit 4(c) to the Company’s Registration Statement on Form F-3 (No. 333-131369) dated January 30, 2006 and incorporated herein by reference).

 

2.4             Third Supplemental Indenture, dated as of October 23, 2008, relating to the Debt Securities (filed as Exhibit 4 to the Company’s Report of Foreign Issuer on Form 6-K dated October 23, 2008 (No. 001-08382) and incorporated herein by reference).

 

2.5             Fourth Supplemental Indenture, dated as of March 8, 2010, relating to the Debt Securities (filed as Exhibit 4(f) to the Company’s Post-Effective Amendment (No. 333-156118) to the Company’s Registration Statement on Form F-3, filed by the Company on March 10, 2010 and filed as Exhibit 2.8 to the Company’s Annual Report on Form 20-F (No. 001-08382) for the year ended December 31, 2009, filed by the Company on March 31, 2010 and incorporated herein by reference).

 

2.6             Fiscal Agency Agreement dated March 28, 2018 relating to an unlimited aggregate principal amount of debt securities authorized to be issued under the Company’s Program for the Continuous Issuance of Debt Instruments (filed herewith).

 

2.7             Deed of Covenant dated April 4, 2014 relating to an unlimited aggregate principal amount of securities of SEK authorized to be issued under the Company’s Program for the Continuous Issuance of Debt Instruments (filed as Exhibit 2.6 to the Company’s Annual Report on 20-F (No. 001-08382) for the year ended December 31, 2014, and incorporated herein by reference).

 

2.8             ASX Austraclear Registry and IPA Services Agreement dated February 29, 2016 relating to an unlimited principal amount of debt securities authorized to be issued under the Company’s Australian Dollar Debt Issue Programme (filed as Exhibit 2.10 to the Company’s Annual Report on Form 20-F (No. 001-08382) for the year ended December 31, 2017, filed by the Company on February 26, 2018 and incorporated herein by reference).

 

2.9             Third Note Deed Poll dated 29 February, 2016 relating to an unlimited principal amount of debt securities authorized to be issued under the Company’s Australian Dollar Debt Issue Program (filed as Exhibit 2.11 to the Company’s Annual Report on Form 20-F (No. 001-08382) for the year ended December 31, 2017, filed by the Company on February 26, 2018 and incorporated herein by reference).

 

12.1   Certifications pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act (filed herewith).

 

13.1      Certifications pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

 

14.1      Consent of Independent Registered Public Accounting Firm (filed herewith).

 

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Pursuant to Instruction 2(b) (i) in the “Instructions as to Exhibits” in Form 20-F, various instruments defining the rights of holders of long-term debt securities issued by the Company are not being filed herewith because such debt securities are not registered with the Commission and the total amount of debt securities authorized under each such instrument does not exceed 10 percent of the total assets of the Company. The Company hereby agrees to furnish a copy of any such instrument to the Commission upon request.

 

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Table of Contents

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and shareholder of

Aktiebolaget Svensk Exportkredit (Swedish Export Credit Corporation)

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated statement of financial position of Aktiebolaget Svensk Exportkredit (Swedish Export Credit Corporation) and its subsidiaries as of December 31, 2018 and December 31, 2017, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and December 31, 2017, and the results of their operations and their cash flows for the two years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

The consolidated financial statements of the Company as of December 31, 2016 and for the year then ended were audited by other auditors whose report dated February 24, 2017 expressed an unqualified opinion on those consolidated financial statements.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that our audits provides a reasonable basis for our opinion.

 

/s/ Öhrlings PricewaterhouseCoopers AB

 

 

Stockholm, Sweden

February 25, 2019

 

We have served as the Company’s auditor since 2017.

 

F-1


Table of Contents

 

Consolidated Statement of Comprehensive Income

 

Skr mn

 

Note

 

2018

 

2017

 

2016

 

Interest income calculated using effective interest method

 

 

 

4,390

 

3,276

 

2,610

 

Other interest income

 

 

 

763

 

620

 

578

 

Interest expenses

 

 

 

-3,711

 

-2,213

 

-1,441

 

Net interest income

 

2

 

1,442

 

1,683

 

1,747

 

Net fee and commission expense

 

3

 

-32

 

-28

 

-29

 

Net results of financial transactions

 

4

 

19

 

-102

 

-110

 

Other operating income

 

 

 

-2

 

 

 

 

Total operating income

 

 

 

1,427

 

1,553

 

1,608

 

Personnel expenses

 

5

 

-311

 

-320

 

-308

 

Other administrative expenses

 

6

 

-231

 

-232

 

-236

 

Depreciation and impairment of non-financial assets

 

7

 

-40

 

-45

 

-46

 

Total operating expenses

 

 

 

-582

 

-597

 

-590

 

Operating profit before credit losses

 

 

 

845

 

956

 

1,018

 

Net credit losses

 

9

 

7

 

51

 

-16

 

Operating profit

 

 

 

852

 

1,007

 

1,002

 

Tax expenses

 

10

 

-204

 

-235

 

-222

 

Net profit(1)

 

 

 

648

 

772

 

780

 

Other comprehensive income related to:

 

 

 

 

 

 

 

 

 

Items to be reclassified to profit or loss

 

 

 

 

 

 

 

 

 

Available-for-sale securities(2)

 

 

 

 

-33

 

46

 

Derivatives in cash-flow hedges(2)

 

 

 

-25

 

-91

 

-169

 

Tax on items to be reclassified to profit or loss

 

10

 

6

 

27

 

27

 

Net items to be reclassified to profit or loss

 

 

 

-19

 

-97

 

-96

 

Items not to be reclassified to profit or loss

 

 

 

 

 

 

 

 

 

Own credit risk

 

 

 

374

 

 

 

Revaluation of defined benefit plans

 

 

 

-48

 

-4

 

-26

 

Tax on items not to be reclassified to profit or loss

 

10

 

-72

 

1

 

6

 

Net items not to be reclassified to profit or loss

 

 

 

254

 

-3

 

-20

 

Total other comprehensive income

 

 

 

235

 

-100

 

-116

 

Total comprehensive income(1)

 

 

 

883

 

672

 

664

 

 

Skr

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share(3)

 

 

 

162

 

193

 

195

 

 


(1) The entire profit is attributable to the shareholder of the Parent Company.

(2) See the Consolidated Statement of Changes in Equity

(3) The average number of shares in 2018 amounts to 3,990,000 (2017: 3,990,000; 2016: 3,990,000)

 

F-2


Table of Contents

 

Consolidated Statement of Financial Position

 

Skr mn

 

Note

 

December 31, 2018

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

11, 12

 

2,416

 

1,231

 

Treasuries/government bonds

 

11, 12

 

11,117

 

4,382

 

Other interest-bearing securities except loans

 

11, 12

 

48,665

 

39,807

 

Loans in the form of interest-bearing securities

 

11, 12

 

36,781

 

41,125

 

Loans to credit institutions

 

9, 11, 12

 

27,725

 

23,198

 

Loans to the public

 

8, 9, 11, 12

 

161,094

 

141,111

 

Derivatives

 

12, 14

 

6,529

 

7,803

 

Tangible and intangible assets

 

7

 

69

 

88

 

Other assets

 

16

 

4,980

 

3,556

 

Prepaid expenses and accrued revenues

 

17

 

2,657

 

2,091

 

Total assets

 

 

 

302,033

 

264,392

 

Liabilities and equity

 

 

 

 

 

 

 

Borrowing from credit institutions

 

12, 18

 

2,247

 

2,317

 

Debt securities issued

 

12, 18

 

255,600

 

222,516

 

Derivatives

 

12, 14

 

21,934

 

16,480

 

Other liabilities

 

19

 

1,069

 

826

 

Accrued expenses and prepaid revenues

 

20

 

2,583