Sweden's Riksbank published a consultation response to the interim report “A stronger fund market”, largely endorsing proposals to strengthen liquidity risk management in the fund sector and to give fund managers greater scope to align redemption terms with underlying asset liquidity. It also sets conditions for mortgage-lending alternative investment funds (mortgage funds) to be allowed to operate in Sweden under incoming EU rules. The response supports introducing legal requirements for fund management companies and alternative investment fund (AIF) managers to pre-select and be able to apply at least two liquidity management tools in mutual funds and open-ended AIFs, citing tools such as redemption gates, swing pricing and anti-dilution levies, and urges calibration to withstand extreme conditions. It backs reducing the minimum redemption frequency for mutual funds to at least two days per month (with scope for monthly redemption subject to Finansinspektionen authorisation) and allowing notice periods, but rejects a five-banking-day cap and proposes a maximum of ten banking days at least for corporate bond funds. To make the new flexibility usable in practice, it calls for the premium pension fund platform and occupational pension selection centres to adjust their terms and, where necessary, IT systems so funds meeting the new statutory redemption and notice-period rules can be offered. On mortgage funds, the Riksbank argues that permission to operate should depend on sufficient tools to limit risks to mortgage borrowers and financial stability, highlighting concerns around open-ended structures, permitted leverage and maturity mismatches. It proposes that Finansinspektionen use its powers under the Alternative Investment Fund Managers Directive (AIFM Directive) to impose stricter leverage limits than the EU framework’s caps of 175 per cent of net asset value for open-ended funds and 300 per cent for closed-ended funds, and states mortgage funds should not use leverage. The submission also asks the Government to seek additional macroprudential powers and reciprocity in future EU negotiations to manage liquidity and other risks, noting that relevant European Securities and Markets Authority technical standards are still pending.

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