Funding Strategy

Swedbank’s large deposit base forms the basis for the Group’s funding and in addition to the deposits the Group shall strategically use issuance of debt instruments to cover other funding needs. Swedbank’s main issuance of debt instruments is through covered bonds. Swedbank has a limited need of senior funding in its business operations but issues Senior Preferred and Senior Non-Preferred debt to ensure that the bank maintains sufficient eligible instruments according to regulations. Swedbank issues capital instruments to meet capital requirements. Swedbank also issues Certificates of Deposits and Commercial Papers to attain funding in the short-term markets, purely for liquidity management purposes.

The Group’s funding strategy is based on three qualitative objectives: diversification, commitment, and proactivity. In order to build a sound structure, the funding shall be diversified based on long-term and short-term debt, the ESG labelled bonds and Private Placements, the maturity profile, geographies and the currency distribution, while ensuring the cost-effectiveness of funding. The funding shall take into account the asset side of the balance sheet and the different products offered by the bank.

The funding strategy is operationalised through Swedbank’s funding plan. The funding plan is based on balance sheet development, the maturity profile of issued debt, and relevant regulatory requirements e.g., Net Stable Funding Ratio, and MREL. Due to this the funding plan is closely monitored and can change during the year depending on e.g., in- or outflows of deposits and lending growth.

The Group’s funding shall also support and demonstrate commitment to Swedbank’s overall sustainability strategy by being an active issuer of green, social, and sustainable bonds.

Liquidity Risk Management

The basis for liquidity risk management lies in Swedbank’s Risk Appetite set by the Board of Directors. The Risk Appetite comes through three liquidity risk metrics: The Survival Horizon, the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR).

Swedbank's internal metric to limit and manage liquidity risk is the Survival Horizon, a stress test measuring how long the bank can meet its contractual cash flows with limited or no access to capital market financing and other risk factors stressed, including deposit withdrawals. The measurement assumes that the bank can pledge or sell high-quality assets with central banks and/or utilise its liquidity held at accounts in central banks. Securities with low credit rating or own issued bonds are not included. Swedbank's Board of Directors has established its Risk Appetite based on a minimum survival horizon limit for the Group.

In addition, the regulatory liquidity risk metrics LCR and the NSFR are also part of Swedbank’s Risk Appetite and hence important for steering and management of funding and liquidity and is part of forming the funding plan. The LCR is a short-term liquidity ratio that aims to ensure liquidity in a bank for 30 days in severe stress. The NSFR is more of a structural ratio balancing stable funding and illiquid assets to ensure a long-term viability of the business model.