[BRUSSELS] The European Union (EU) wants to unleash trillions of euros in household savings by encouraging people to invest in capital markets – and it sees Sweden as a template of how to do so.
Europe is expected to detail its plan this quarter to mobilise citizens’ funds sat in bank deposits as part of its Savings and Investments Union. By making it easier for people to invest, it aims to lift household wealth and boost firms’ access to funding. Analysts say that it might promote wider adoption of Swedish-style bank accounts that enable people to easily invest savings in stocks.
That is as Poland earlier this month proposed an investment savings account modelled on Sweden’s InvesteringsSparKonto, or ISK system, to create an “equity culture” attracting US$27 billion in its first three years.
Sweden’s retail-trading base is “among the best in the world” due to the ease by which people been able to invest in listed companies, Philip Scholtze, savings economist at Avanza Bank Holding, said.
The Nordic nation is regarded as a “best practice” model, said a spokesperson for the financial services department at the European Commission, the EU’s executive arm. The spokesperson added that the bloc aims to provide citizens with “a wider range of tools and knowledge to invest their savings in ways that can directly benefit their personal economy, while simultaneously turbocharging the investment landscape in the EU”.
Decades of policymaking in the country of about 10 million people has helped make equity investing more akin to a national sport. Swedish households invest over half of their savings in stocks, more than twice the average in the euro area, according to a report by European Savings Institute this year.
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Anyone with a bank account can trade, while the ISK account – in place since 2012 – is not subject to capital gains tax. Securities can be easily bought and sold directly from mobile banking applications.
“Swedes have good reason to be thankful for the ISK account,” said Mohammed Salih, a 32-year-old communications manager who lives in Listerby in southern Sweden. He has invested with the system for more than 10 years. “I have always saved money and tried to build an economically stable future, but I didn’t know how to make the money grow.”
He started an Instagram account to document his journey toward his goal of growing assets to US$105,000. He said that he achieved it a few years ago, but still posts stock market tips that attract interest. “The youngest person who has written to me was 13 years old. His parents had helped him set up an ISK account,” Salih added.
The ISK simplified the tax structure around capital investments, removing bureaucratic barriers that had previously discouraged participation. “It’s just a much simpler way to buy stocks,” Frida Bratt, savings economist at Nordnet Bank, noted. “This has been especially important for young people.”
Almost a quarter of Swedes directly own shares in publicly listed companies, with stakes totalling around US$56,552 on average, according to data from Euroclear Sweden. The most recent available data from the Swedish Investment Fund Association show that about 70 per cent of all Swedes directly invest money in mutual funds.
In the UK, only 8 per cent of personal wealth is saved in equities and mutual funds, data from a January review by Aberdeen Group showed.
It remains to be seen what effect the introduction of a EU-wide savings and investment account could have on the wider European market.
According to Jonas Strom, CEO of the Nordic investment bank ABG Sundal Collier Holding, it is “definitely possible” to export the Swedish success with the ISK accounts to a wider European audience.
The European Commission would only offer a blueprint of how a EU-wide savings and investment account could be constructed, leaving member states to implement it. The success of the proposal ultimately depends on the “political will” of the member states, Strom noted. BLOOMBERG