Alecta Fires CEO as Fallout Continues From $2 Billion Banking Losses

Magnus Billing, CEO of Sweden’s largest pension fund, Alecta, said last week that the fund “needs a fresh start and new management” following revelations that it lost $2 billion to recent bank failures in the U.S.

The pension’s board agreed and this week fired him “with immediate effect.”

Deputy CEO Katarina Thorslund has been appointed acting CEO, effective immediately, as the pension fund launches a search for a permanent successor.

Last month, the pension fund revealed that it lost 19.6 billion Swedish krona ($1.9 billion) when its investments in Silicon Valley Bank, Signature Bank and First Republic Bank were decimated by banking failures. The pension fund says it has since tried to isolate the losses and work through the processes within asset management to understand what went wrong.

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Alecta says it first invested in Silicon Valley Bank in June 2019 and made its last investment in November for a total of SEK 8.9 billion. It made its first investment in Signature Bank in January 2016 and made the last investment last July for a total of SEK 3.2 billion.

“As a first step, the company’s management has, with the help of its control functions, made the assessment that the current investment decisions were within the framework and mandate established by the board,” the pension fund said in a release. “The decision on measures to strengthen capital management taken by the CEO, and which was communicated last week, has the board’s full support.”

Nevertheless, the board decided that the pension fund needed new leadership to implement the changes and let Billings go, as the losses “have seriously damaged confidence in Alecta’s asset management.” Board chair Ingrid Bonde offered to step down but was “urged by the board” to remain.

Ann Grevelius, who last week was named acting head of equity after Liselott Ledin was placed on leave, will lead a strategic review of how Alecta will conduct equity management in the future.

“We would like to thank CEO Magnus Billing for the solid work he has put in during his time at Alecta for the good of the company and the customers,” Bondesaid in a statement. “At the same time, Alecta now needs to look ahead and forcefully implement the necessary changes.”

Sweden’s Largest Pension Loses More Than $1 Billion to U.S. Banking Crisis

Two Banks’ Stumbles Underscore Larger Dilemmas for the Industry

Tags: Alecta, banking crisis, CEOs, chief executive officer, First Republic Bank, Katarina Thorslund, Magnus Billing, Pension Funds, Signature Bank, Silicon Valley Bank, Sweden

The full House Committee on Financial Services has scheduled an oversight hearing for the SEC next week, when climate disclosure will likely be a high priority.

The House Committee on Financial Services will hold an oversight hearing on the Securities and Exchange Commission next Wednesday and Chairman Gary Gensler is expected to testify. The SEC’s proposed budget and their recent proposals, especially the climate disclosure proposal will all likely be discussed.

The SEC requested $2.436 billion for 2024, an increase of $265 million from this year primarily to hire new staff. The new hires are proportionally concentrated in the Divisions of Risk Analysis and Investment Management, whose staffs would increase by more than 5% each. The largest aggregate staffing increase would be to the Division of Enforcement, from its current 1,505 positions to 1,558.

The Division of Investment Management, under William Birdthistle, is the division from which many of the more technical and controversial rule proposals of Gensler’s tenure have originated, such as those on swing pricing, the new custody proposal, and the market structure proposals.

Gensler said that this funding request is offset by transaction fees that the SEC collects.

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Chairman of the Appropriation’s Committee Subcommittee on Finance and General Government, Representative Steve Womack, R-Arkansas, said that the SEC is acting in a heavy handed way and proposing new regulations at a “blistering pace” at a hearing on March 29 in which Gensler defended the SEC budget request.

Womack also suggested that the SEC’s proposal on climate disclosure, which would require entities registered with the SEC to disclose their carbon emissions, was not within the SEC’s legal authority, a concern shared by several other Republican members of the committee.

The climate disclosure proposal has been a sensitive issue for agricultural interests. Representative Ashley Hinson, R-Iowa, emphasized the potential impact of this rule on farmers at the hearing. She said that this proposal would be bad for farmers in her state who would have to collect and disclose their emissions data to issue securities and to work with larger businesses who must collect emissions data from their value chain.

Representative Michael Cloud, R-Texas, shared this sentiment during the hearing and said that any issuer subject to Scope 3 disclosure would compel farms in their supply chain to collect this data, a tedious process, which might reduce farmer’s access to credit if they do not comply.

Gensler acknowledged that 49 farm bureaus had commented on the proposal. He responded that many stock and bond issuers already disclose this information, and the SEC is simply trying to make sure these disclosures are uniform, consistent, and not misleading, so that investors understand what they are investing in, a defense that he has been very consistent with and has given in other settings. Gensler emphasized that many commenters, especially those that are investors, support the rule proposal.

Representative Norma Torres, D-California, highlighted one instance in which climate disclosure would be material for securities issuers in her state. She said that due to increased wildfires in California, the cost of fire insurance has been going up, which due to climate change is likely to only get worse, which is a material risk for investors looking to invest in various sectors in California.

The comment period for the market structure proposals, which include order execution disclosure requirements and a required auction process for retail orders, ended on the March 31. The comment period for the SEC’s custody rule proposal expires on May 8, and the cybersecurity proposals on June 5. These issues were underemphasized compared to the climate disclosure proposal at the last hearing.

Tags: Climate Change, execution, Gary Gensler, SEC