How we became the largest lender to the Swedish local government sector
Following the austere years of the 1970s and 1980s, there was considerable need for secure access to credit in the Swedish local government sector. At the same time, the capital and money markets were undergoing substantial change. It was difficult to borrow money on favourable terms in relation to creditworthiness, which caused some local government authorities to ask: would it not be better to work together?
This was the start of what is now Kommuninvest. Nine municipalities in the County of Örebro resolved, together with the County Council, to cooperate in the credit market by starting a joint company. When borrowing could instead be managed by Kommuninvest, loans could be obtained less expensively and access was gained to a secure source of capital during periods of financial market stress.
News of the successful cooperation spread through the country and soon local government authorities outside the County of Örebro made contact, seeking to join up. Although broadening the membership base and thus growing even stronger was viewed as positive, a new form of ownership was necessary. The growing membership also entailed new requirements for democracy between the members to function well.
Consequently, in 1992, the Kommuninvest Cooperative Society was established, and, at the same time, the company changed name to Kommuninvest i Sverige AB. Thanks to the formation of the Society, the members could pay their contributions as contribution capital, which facilitated further expansion of the membership.
Today, more than 25 years since its inception, 90 percent of Sweden’s municipalities and county councils/regions are members of Kommuninvest, which is now the largest lender to the local government sector. Much has happened since Kommuninvest began, and we have learned a great deal along the way. Today, we are also an important centre of knowledge for the local government sector on matters of local government financing. We maintain a daily dialogue with our members and support research on challenges facing the local government sector. This is all in accordance with our vision of being the world’s best organisation for local government financial administration – today and in the future.
Nine municipalities, together with the county council in the County of Örebro took the initiative to found what is now Kommuninvest.
To be able to expand the operations, the Kommuninvest Cooperative Society was set up as the joint owner organisation. At the same time, the company changed name to Kommuninvest i Sverige AB.
Kommuninvest gained the highest credit rating, Aaa, from ratings agency Moody’s, and we have maintained that rating ever since.
50 percent of all Swedish municipalities were members of Kommuninvest
The other major rating agency, Standard & Poor’s, gave Kommuninvest its highest rating, AAA.
Kommuninvest was approved as a monetary policy counterparty to the Swedish Riksbank and was included in the Riksbank’s RIX payment system.
Kommuninvest amended its Articles of Association to facilitate the supply of capital required under the Basel III regulations.