Cash Management in the Nordic and Baltic Regions 2015

Sweden update

Published: Aug 2015

Sweden is a country of 9.7m people, 85% of whom live in cities. The country takes environmental and welfare issues very seriously and yet still ranks sixth in the World Bank’s global competitive index for the ease of doing business within a country. It also has among the EU’s lowest levels of national debt, low and stable inflation and a healthy banking system.

Key facts

Official country name:
Kingdom of Sweden
Swedish krona (SEK)
Official language:
Capital city and financial centre:
Time zone:
9,723,809 (July 2014 est)
Population growth rate:
0.79% (2014 est)
GDP per capita (USD equivalent):
$44,700 (2014 est)
GDP real growth rate:
2.1% (2014 est)
Government type:
constitutional monarchy
Head of state:
King Carl XVI Gustaf
Political leader:
Prime Minister Stefan Löfven
Top export partners:
Norway, Germany, UK, Finland, Denmark, Netherlands, US, Belgium, France
Top import partners:
Germany, Denmark, Norway, UK, Netherlands, Russia, Finland, China, France

Economic overview

Whilst Sweden may seem like a model economy, the country has had to work through some difficult patches to get to where it is today. The currency, Swedish krona (SEK), was repeatedly devalued throughout the 20th century before successive governments implemented – and stuck to – a series of reforms starting with a ceiling for government expenditures in 1996 and continuing in 2007 with the establishment of the Swedish Fiscal Policy Council.

Despite joining the EU in 1995, Swedish voters rejected entry into the euro system in 2003. Perhaps this decision has played a part in Sweden maintaining a Fitch rating of AAA with a long-term outlook of ‘stable’.

In terms of industrial output, privately owned firms account for the vast majority of activity. It has established a diverse export-orientated market economy that is heavily reliant on the sale of machinery (16% of all goods exported) and vehicles (16%), pharmaceuticals and chemicals (13%), wood products (11%) and electronics (11%).

Although economic weakness continued in other parts of the EU, GDP in 2014 had risen to $557.94bn from $405.78bn in 2010. Sweden’s export sector is nonetheless at the mercy of weaker economies in the EU, which is its main export market. Sweden’s central bank, the Riksbank, has a long-term inflation target of 2%, which is now the main focus of its monetary policy, but the country’s National Institute of Economic Research predicts it will only reach this in 2018. As at May 2015 it was 0.1%.

SEK is free-floating and there are not generally any currency controls although some restrictions are applied to inward investment.

The banking sector

At the top of the tree is the Riksbank, Sweden’s central bank. It operates under the supervision of the Swedish Financial Supervisory Authority, or Finansinspektionen. Riksbank states that it is “responsible for monetary policy with the objective to maintain price stability.” The bank has also been given the task to “promote a safe and efficient payment system.” Riksbank is a member of the European System of Central Banks, composed of the central banks of all Member States of the EU.

Commercially, the top four Swedish banks control around 75% of the sector’s total assets. Those banks are as follows (largest first, ordered by total assets in USD, as at 31st December 2013): Nordea ($866, 403m); Svenska Handelsbanken ($386,713m); SEB ($385,941m); and Swedbank ($282,805m).

In total, Sweden’s banking sector is formed of 38 commercial banks, 49 savings banks, two co-operative banks and 29 foreign bank branches. The largest foreign bank in the country is Danske Bank.

Both foreign exchange and domestic currency accounts can be held by resident companies in Sweden and abroad. Non-resident bank accounts can be held in foreign and domestic currency and SEK accounts can be held overseas and are convertible into foreign currency.

Payments and clearing

At the heart of all payments in Sweden is RIX, the Riksbank’s system for large value and urgent inter-bank payments. The participant banks’ accounts in RIX are used for both direct payments between the banks and for the final settlement of payment orders from bank customers.

There are 25 banks currently on-board alongside two clearing organisations (Euroclear Sweden and EuroCCP), the Nasdaq OMX trading venue and the Swedish National Debt Office. Payments (including retail payments and those arising from transactions in financial instruments) may be transferred electronically between the accounts held at the Riksbank by participants. Settlement is immediate on a real-time gross settlement (RTGS) basis although this assumes sufficient liquid funds are in place; if not, Riksbank is able to provide intraday credit to settle payments in RIX as long as adequate collateral is provided. By choice, RIX is not connected to the ECB’s Target 2 interbank cross-border payment system.

In addition to RIX, the bank-owned Bankgirot system (21 direct participants) is an online automated clearing and settlement platform for retail payments (using RIX clearing). A post office-based version, Plusgirot, is also offered and used by almost all Swedish companies for euro and SEK payments. Bankgirot also runs the Data Clearing system for retail payments for 27 direct participants. Securities custody and settlement is handled by Euroclear Sweden.

  • Credit transfers. These are used for high-value corporate and low-value retail payments. They may be paper or electronic, the latter is the predominant method (24.81% of all transactions in 2013 versus 8.66% for direct debits). RIX is used for all high-value and/or urgent credit transfers; low-value/non-urgent/bulk payments are cleared via the same-day Bankgirot system. SEPA can be used for euro-denominated credit transfers.
  • Cheques. Transactions by cheque are losing their appeal. They attract high bank fees (SEK 15 per cheque) and have a low (SEK 2,000) guarantee limit.
  • Cash. According to the Bank for International Settlements, in Sweden only 3% of all transactions involve cash.
  • Payment cards. These accounted for 66.54% of all transactions in 2013. Debit card payments have particularly increased in popularity over recent years – in 2014, a survey by Riksbank showed that 98% of respondents have access to a card.
  • Direct debits. Both the Plusgirot and the Bankgirot systems provide direct debit services. Although launched in November 2009, it took until November 2014 before banks were obliged to accept customer SEPA direct debits.

Investment options

  • Interest can be earned on current accounts. Rates are bank-specific but will be based on the Stockholm Interbank Offered Rate (STIBOR).
  • Time deposits. Maturities range from three months to a maximum of two years, with 12 months being the most common maximum maturity period.
  • Certificates of deposit (CDs). Banks that issue CDs establish their own minimum investment amounts (usually ranging from SEK 1,000 to SEK 50,000).
  • Treasury bills. These government securities are a popular method of short-term investment as they are low risk and highly flexible with maturities ranging from three months to a year. The minimum investment amount is SEK 5,000.
  • Commercial paper. Offered by companies and public authorities and many investors in CP also issue it.
  • Money market funds. Offered by some banks, not all.
  • Repurchase agreements. Widely used and interest rates vary depending on demand.

Tax considerations

  • Corporation tax is levied at 22% (2015).
  • Sweden levies no withholding tax on interest or royalties. Withholding tax of 30% applies to dividends paid by a Swedish company to a foreign/non-resident body.
  • No formal thin capitalisation rules are in place for tax purposes.
  • Transfer pricing is based on OECD ‘arms-length’ principles. Production of transfer pricing documentation is required of all resident companies in economic relationships with non-residents.

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