Sweden’s financial watchdog has taken swift action to get a handle on the impact of multiple US bank collapses on the Nordic country’s pension investors, after it came to light that the largest – Alecta – was highly exposed to the sector.
The sudden heavy losses in Alecta’s portfolio have come at a time when its chief investment officer is absent on long-term sick leave, it has emerged.
The Swedish financial services authority (Finansinspektionen, FI) held a digital meeting with Alecta and a number of other pension firms yesterday, Alecta and the watchdog confirmed to IPE today.
In a statement yesterday, FI had announced its intention to meet Alecta and other businesses “to talk about the investments they have in US banks and other exposures to the sector that the US banks have targeted”.
Yesterday, Alecta admitted it had suffered enormous investment losses from its holdings in three US banks after Silicon Valley Bank (SVB) collapsed on Friday, followed by Signature Bank on Sunday.
Alecta, which has a relatively concentrated equities portfolio, was the fourth-largest shareholder in SVB.
The Stockholm-based agency said: “FI will investigate how large the holdings are that the companies have in the US banks, hear what analysis the companies are doing regarding the situation and how the companies will handle the situation going forward.”
Regarding the Swedish banking sector, FI said its assessment was that no domestic banks had their own large direct exposures to the US banks that had now run into problems.
Susanna Grufman, acting director general of the FI, said: “We see a certain amount of drama and turbulence in the US banking market.
“However, our assessment is that the stability of the Swedish financial system is not affected by this, as it has significant resilience,” she said.
“On the other hand,” Grufman said, “it is important that we closely monitor how the rapid changes in the interest-rate situation are affecting financial companies in general, which we are already focusing on.”
Alecta’s statement on Monday painted a picture of overall losses on SVB, Signature Bank, and the beleaguered First Republic Bank up to Friday of SEK14.5bn (€1.27bn) in all.
However, from today’s stockmarket data, it appears that Alecta’s holding in First Republic Bank shares may have lost a further SEK3.65bn of its value, on paper, with the bank’s share price having halved in Monday’s trading.
Asked about this, a spokesman for Alecta told IPE: “Regarding First Republic we don’t have any more comments today.”
However, he confirmed that Alecta’s CIO Henrik Gade Jepsen – who only took on the new role on 1 December 2022 – has been on sick-leave since the beginning of this year.
“We don’t know when he will be back,” the spokesman said, adding that Magnus Billing, Alecta’s chief executive officer, had been acting CIO since January 2023.
Sweden’s main AP national pension funds were also exposed to SVB, according to end-2022 data, but to a much lesser extent than was Alecta.
The big-four buffer funds AP1, AP2, AP3 and AP4 had holdings worth SEK27.8m, SEK35.0m, SEK28.6m and SEK33m, respectively, according to data on their websites, collectively amounting to less than 0.01% of the funds’ total assets of SEK1.76trn.
AP7, which is larger than the buffer funds with total assets of SEK905.2bn, held SEK242.1m of SVB shares at the end of last year – a slightly larger exposure of 0.027% but still far below the failed bank’s weighting in Alecta’s portfolio. AP7 runs the default option in the Sweden’s defined contribution premium pension system.
In neighbouring Norway, as of last Wednesday’s market close, the country’s giant sovereign wealth fund had equity and bond investments worth a total of NOK3.2bn (€281m) in SVB, Signature and Silvergate – which went into voluntary liquidation earlier last week – a spokeswoman for Norges Bank Investment Management (NBIM) told IPE today.
“This is the biggest US bank collapse since the financial crisis, and we are closely monitoring the situation in the market,” she said.
The Government Pension Fund Global (GPFG) also had NOK2.2bn of equities in First Republic Bank, she said.
According to its website, the now-NOK13.8trn GPFG also had large holdings at the end of last year in other US banks whose share prices have plunged in recent days, such as Zions Bancorp and Comerica.
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