“Going public does not mean giving up family ownership”
Sweden has built one of Europe’s most vibrant capital markets. During FinanceMalta’sforthcoming annual conference on the 11 and 12 of November, JIMMY KVARNSTRÖM Executive Director of Markets at Sweden’s Financial Supervisory Authority and a member of the Board of Supervisors of the European Securities and Markets Authority will be delivering a keynote speech on the Swedish experience and the elements that may be relevant to Malta as it seeks to deepen its own market.
The Swedish experience is particularly relevant at a time when Europe is trying to mobilise more of its substantial household savings towards productive investment. Much of that wealth remains in bank deposits, while European businesses continue to rely heavily on bank financing.
However, Mr Kvarnström sees no single explanation for the gap.
“It is a combination. Europe has substantial savings, but the channels connecting them with productive investment remain underdeveloped. Fragmentation, taxation and market structures all play a role, but so does the supply of companies capable and willing to raise capital through public equity markets. A successful capital market requires investors, investible companies and an ecosystem that connects them.”
For Europe’s Savings and Investments Union, he argues that the priorities should address both sides of that equation.
“First, strengthen long-term household investment through funded pensions and simple, cost-effective investment products. Second, remove the barriers that make it difficult for European companies to grow, raise equity and reach investors across borders.”
That does not necessarily mean deregulation. Mr Kvarnström regards rules covering material disclosure, market abuse, conflicts of interest, governance and the safeguarding of client assets as fundamental to market confidence. The problem, he suggests, is more often cumulative complexity: overlapping reporting requirements, frequent changes and inconsistent implementation.
“I would start by asking what information investors and supervisors actually use and remove duplication without weakening the protections that support confidence in markets.”
That principle of proportionality is particularly important for smaller jurisdictions. European supervision, he argues, should pursue common outcomes and consistent standards without demanding identical approaches everywhere.
“Supervision should remain risk-based and reflect the scale, complexity and cross-border footprint of the activity. European cooperation can provide consistency, while national authorities contribute the market knowledge and proximity needed to supervise effectively.”
For smaller markets, greater European integration may also require accepting that they cannot, and need not, replicate the infrastructure of the largest financial centers.
“Smaller markets do not need to maintain every element of the market infrastructure domestically,” Mr Kvarnström pointed out.
“Instead, they can specialise in areas where local expertise and proximity provide an advantage, while connecting those capabilities to European markets and pools of capital.”
For Malta, he points to its experience in fund and investment services and its work on digital finance as possible foundations for such specialisation.
“The opportunity is to develop selected areas with genuine expertise and market demand. Attempting to reproduce the full infrastructure of a much larger financial centre is unlikely to be necessary or efficient,” he cautions.
Sweden’s own equity culture also offers lessons, although Mr Kvarnström stresses that not everything can simply be transplanted. Funded pension arrangements, simple investment accounts and markets capable of serving companies at different stages of development were deliberate policy choices.
Other features are more deeply rooted in Swedish institutional history, including the role of employers and trade unions, its entrepreneurial culture and longstanding public confidence in markets.
For Malta, he identifies stable and simple incentives for long-term investment and a proportionate route to public markets for smaller companies as potentially transferable ideas.
For Malta’s closely held businesses, the Swedish example demonstrates that access to public capital need not come at the expense of family or founder control.
“The Swedish experience shows that accessing public markets does not necessarily mean abandoning long-term or family ownership. The balance is between effective long-term ownership and the responsibilities that accompany outside capital, supported by disclosure, accountability and minority-shareholder protection.”
For companies to view listing as a natural stage of growth rather than a last resort, however, the wider ecosystem matters. Investors, advisers and trading venues need to help companies prepare for life as public businesses, while markets must offer tangible benefits: growth capital, liquidity, visibility and access to a broader investor base.
“Listing should be a natural option for a well-prepared company at the right stage, without requiring founders to give up their long-term commitment to the business.”
Technology can reinforce that ecosystem, particularly in a small market, by lowering fixed costs, enabling cross-border distribution and improving reporting, compliance and supervision.
However, Mr Kvarnström is clear about its limits, noting that “technology cannot compensate for weak governance, a limited pipeline of investable companies or insufficient investor demand, and it does not create liquidity by itself.”
The challenge, he states, is to encourage participation without confusing investor protection with protection from investment risk.
“We need to distinguish clearly between protection from misconduct and protection from risk. Regulators can address fraud, misleading information, conflicts and unsuitable products, but ordinary market losses cannot be eliminated. Participation should instead be encouraged through understandable products, diversification and a long-term perspective.”
Five years from now, Kvarnström says, the test of Europe’s reforms should be visible in practical outcomes: less fragmentation, lower cross-border friction, deeper markets, more companies raising equity and scaling across Europe, greater cross-border investment and broader household participation.
For Malta, success would be similarly tangible.
“A broader range of companies using its capital-market ecosystem to raise growth capital, including through public equity, and connecting more effectively with investors across Europe,” he concluded.
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