FI sanctions SBB for deficiencies in its consolidated financial statements

Finansinspektionen (FI) is issuing Samhällsbyggnadsbolaget i Norden AB (SBB) a caution and an administrative fine of SEK 80 million for violations of current financial reporting rules regarding how consolidated financial statements are to be prepared.

The rules regarding periodic financial information are central to ensuring good investor protection and that investors on the stock market and the bond market are able to make well-informed investment decisions. On the bond market, terms and conditions are often linked to loan-to-value ratios and the value of the issuer’s assets, which means that matters related to valuations can play a direct role in lenders’ risk assessments.

“In Europe, the Swedish capital market is viewed as a model. This is something to be proud of and safeguard. It is fundamental that consolidated financial statements provide a fair and accurate view; otherwise, there is a risk that this will undermine confidence in both the stock market and the bond market,” says Johan Almenberg, Director General of FI.

For firms whose assets consist largely of commercial real estate, the valuation principles are also significant for credit assessments more generally. Such properties are widely used as collateral for loan-based financing, and incorrect valuations could lead to an incorrect distribution of loan financing among market participants.

SBB’s consolidated financial statements deficient in multiple aspects

FI investigated whether SBB prepared its consolidated financial statements for 2021 in accordance with applicable regulations. The background to the investigation is a review conducted by the Swedish Board for Financial Reporting Supervision, an expert body under the Association for Generally Accepted Principles in the Securities Market.

The investigation shows that SBB, in its consolidated financial statements for 2021, did not report some properties at their fair value and incorrectly reported two acquisitions as asset acquisitions instead of business combinations. These deficiencies entailed, in part, that the reported consolidated profit before tax for 2021 was SEK 3.6 billion too high and the consolidated statement of financial position at the end of the year was incorrect.

“The errors we identified resulted in the presentation of a stronger financial position than what was actually the case. This could have affected the decisions made by investors, including small savers. FI views this seriously,” says Jimmy Kvarnström, Executive Director of Markets at FI.

In addition, the consolidated financial statements did not contain disclosures about the character of the acquisitions in question and their subsequent financial impact.

FI has therefore decided to issue SBB a caution and an administrative fine of SEK 80 million.

FI’s intervention following deficiencies in financial reporting

FI intervenes when firms subject to the Securities Market Act do not prepare their financial statements in accordance with the rules. First, we issue the firm a caution following the violation of the rules. If FI has issued a caution, the caution can be combined with an administrative fine. FI may also order the firm to make a correction.