* Debt Office says banks should not need to raise debt levels
* Shares relatively unchanged (Updates with details, analyst quote)
By Johan Ahlander
STOCKHOLM, Feb 23 (Reuters) - Sweden's top four banks will be required to issue subordinated bonds worth a total 500 billion crowns ($56 bln) over the next five years, the Debt Office said on Thursday, to meet new rules designed to protect taxpayers in the event a bank fails.
Subordinated bonds are a debt that rank below other debts if a company falls into liquidation or bankruptcy. The requirement comes under EU-wide regulation known as the Minimum Requirement for Own Funds and Eligible Liabilities (MREL), which aims to shift the cost of a failing bank to shareholders and away from taxpayers - a so-called 'bail-in'.
The Debt Office said the requirement would not compel the banks to increase their overall level of debt.
"Banks that are important for stability in the financial system now need to replace a portion of their existing bond holdings with subordinated bonds," the Debt Office said in a statement.
The new rules will be phased in from January next year. Shares in top lenders Handelsbanken, SEB, Nordea and Swedbank were largely unchanged on the Stockholm bourse.
Swedish banks came through the financial crisis relatively unscathed and are among the most well capitalized in Europe.
"It is an implementation period of five years so I feel it will be very manageable for the banks," said Andreas Hakansson, banking analyst at Exane BNP Paribas. "They will not have to increase their indebtedness so it feels like it will not have any major impact."
Sweden's Debt Office is responsible for overseeing the resolution process in the event a bank or credit institution fails. ($1 = 8.9728 Swedish crowns) (Editing by Simon Johnson and Richard Lough)