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Sweden approves $200 billion bailout plan

/ Source: The Associated Press

Sweden’s Parliament on Wednesday approved a 1.5 trillion kronor ($200 billion) rescue package for the nation’s financial sector.

The measure allows the government to give 1.5 trillion kronor ($200 billion) in credit guarantees to banks and mortgage lenders to improve liquidity amid the global financial turmoil. It also creates a 15 billion kronor ($2 billion) “stability fund” to bail out any Swedish banks that run into solvency problems.

The bill, proposed last week, was part of a coordinated European bailout effort to calm markets and restore lending between banks and to customers.

Financial Markets Minister Mats Odell told Parliament that Swedish banks were relatively stable “but we cannot during the current turbulence exclude that the crisis deepens.”

It became clear this week that the credit crunch has hit the Scandinavian country as troubled investment bank Carnegie AB requested a 5 billion kronor ($630 million) credit line from the central bank, and Swedbank, one of Sweden’s largest banks, announced a new share issue to raise more capital.

The main points of the nine-point bill were approved without a vote in the 349-seat legislature. The left-wing opposition demanded votes on two points, both of which were approved by a majority of lawmakers present.

The credit guarantee covers medium-term loans between 90 days and five years. It is set to expire on April 30 but can be extended through the rest of the year.

Banks and mortgage lenders that want to join the program must pay a fee and agree to certain restrictions on compensation for their top executives.

Earlier Wednesday, Sweden’s central bank said it would help large nonfinancial companies with corporate funding since the financial crisis has resulted in the country’s loan supply drying up. The Riksbank said it will provide a new, temporary credit facility so that the country’s companies can receive loans more easily. It will also increase the banks’ possibilities to provide them with liquidity.

The move will allow banks to be able to use commercial paper with maturities up to one year as collateral to a greater extent.

“We aim to improve the opportunities for companies to borrow funds,” Riksbank Governor Stefan Ingves said in a statement.