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FINANCIAL CRISIS

Banks must pay extra for loans from Swedish state

Sweden's recently approved financial sector support package calls for institutions which borrow money to pay a fee of 0.5 percent of the loans or more, according to details published on Wednesday.

Published: 30 October 2008 06:49 CET

Earlier this month Sweden said it would guarantee new borrowing by financial institutions of up to 1.5 trillion kronor ($194 billion) and set up a bail-out fund that would be used to deal with a solvency crisis at a bank should one arise in future.

None of the main Swedish banks have said they will utilize the facility, although Carnegie, a small investment bank, has been forced to take an emergency loan of up to 5 billion kronor from the Riksbank.

Nordea, the Nordic region’s biggest bank declined to comment on whether it would take up the government offer as did Handelsbanken.

SEB and Swedbank could not immediately be reached for a comment.

Details of the package published on Wednesday showed banks that want the government to back new loans will have to pay 0.5 percent for loans of up to one year. For longer-duration borrowing, the amount will be risk-weighted, based on historical prices in the credit default swap market.

Credit default swaps are a kind of insurance against the chance a company will default on debts.

The government said the guarantee will only be available for banks with core capital of more than 6 percent and a capital ratio of more than 9 percent will be able to get government guarantees for borrowing.

There will also be a limit on how much each financial institution can borrow and a cap on salaries for the top management of any firm receiving the state-sponsored support.

“The government is now taking measures to ease banks’ mid-term funding,” Financial Markets Minister Mats Odell said in a statement.

“This lays the groundwork for lowering banks’ borrowing costs, reducing interest rates and giving broader access to credit for companies and households.”

Under the new law, which comes into force on October 30th, the central bank will also assume broad powers to intervene in the operations of financial institutions should the necessity arise.

The government said it expected formal approval of the plan from the European Commission on Wednesday.

Twint app can be installed on a mobile phone.

“Twinting” money with a smartphone is easy and convenient. Photo by Andrea Piacquadio from Pexels

In Switzerland, the word “Twint” is used both as a noun and a verb.

As a noun, it describes the mobile application which allows you to pay for various goods and services practically everywhere in the country.

As a verb, (“to twint”), it means to send someone money, or receive it, via the same app.

So what exactly is Twint?

Simply put, it is digital cash (not to be confused with bitcoin, which is digital currency) that was first introduced in Switzerland in 2014 and has become very popular since then.

Twint logo. Image by Twint.ch

People like it because it is an easy and quick way to make instantaneous payments, especially in situations when credit cards or physical cash can’t be used.

A big part of its convenience is that it can be used at cash registers, vending machines and parking meters, as well as in online shops — pretty much everywhere in Switzerland, even in places that don’t accept credit cards.

The only similar mode of payment would be your maestro debit card issued by your bank.

This video explains exactly how the process works.

Another advantage of Twint is that you can use it to send money to someone else’s mobile phone — as long as they also have Twint. And you can receive money the same way.

And there are no fees or charges for this service.

How does Twint work?

Anyone can use Twint, but you need a Swiss bank account or a credit card and, of course, a smartphone.

According to Twint website, you need a smartphone with either an iOS (from version 12.2 and upwards) or Android (from version 7 and upwards) operating system and Bluetooth capability (from version 4.0 and upwards).

“It is generally not possible for Twint to be used on Apple devices with an operating system older than “iOS 12.2” or on Android devices with an operating system older than “Android 7”. On Android devices without access to the Google Play Store (e.g. on certain HUAWEI models), the use of Twint app is also not possible”.

But If you have a compatible phone, installing Twint is easy.

Swiss banks offer their own version of the app, and you can download it directly from your bank’s website.

Then, when you use Twint to make a payment, the amount is debited directly from your bank account or credit card.

By the same token, if you receive payment from another Twint user, the money is automatically deposited in your account.

And you are not limited to just one Twint app.

If you have accounts is several banks, or have more than one credit card, you can install and use all of them.

READ MORE: How to open a bank account in Switzerland

Can Twint be used to make payments and receive money from abroad?

For the moment, Twint can be used solely in Switzerland and payments can be made only in Swiss francs – although this may change in future.

“We are, however, working closely with providers in other countries to develop an international and multi-currency solution”, according to Twint website.

You can find more information about Twint here.

READ MORE: Which bank is best for Americans in Switzerland?

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