The Financial Supervisory Authority (FSA) intends to ensure that Nordea’s capital requirement remains as high as it is currently, even after the bank moves its headquarters to Finland.
In an interview with Dagens Industri (DI), the head of the FSA, Erik Thedéen, says that the Finland is move is “completely unique”. “It is also the first time a large bank, with exposure to the whole of the Nordic region comes under the jurisdiction of the European Central Bank (ECB),” he adds.
He does not believe Nordea’s move is a sign that Swedish regulation has gone too far. “When you say that our requirements are too demanding, then you are forgetting that these requirements are made in an environment typical to Sweden, which is concentrated and interlinked.”
When the move is made, the FSA no longer has responsibility for supervising Nordea and it could mean a lower capital requirement for Nordea. The FSA has already started talks with the ECB and Erik Thedéen wants to push for the ECB to ensure the current capital levels are maintained.
Nordea’s CEO Casper von Koskull held a secret meeting on Tuesday with a number of minority shareholders, including AMF, Swedbank Robur and the AP pension funds, in an attempt to convince them that a move of the bank’s head office to Helsinki is in their best interest.
A move will require the approval of at least two-thirds of shareholders at next year’s AGM, but some of the larger minority shareholders are said to be sceptical to the plan. “As a shareholder in Nordea, you have to ask yourself if the value of your investment may decrease with the Finnish tradition of running a company,” says one shareholder who wishes to remain anonymous.
On Thursday Nordea held a press conference at its Helsinki, which will next year host key employees who will be moved from Stockholm.
When asked why it was not enough that the Swedish government backed down over the resolution reserve fee, CEO Casper von Koskull said, “Nordea is a bank with four domestic markets. We are also a very large bank. It is therefore difficult to exist under one regulation that is based on one country.” For him it is a natural step to become part of the European banking union and be regulated by the Single Supervisory Mechanism, SSM.
He also comments that there never was any negotiation. “We have not been shopping around.” Instead the bank has carried out a thorough analysis.
Meanwhile Swedbank is in a good position to take over dissatisfied customers who leave Nordea, says Swedbank’s head of press Josefine Uppling.
Prime Minister Stefan Löfven understands that many Swedes are upset. “Here we have a bank that has twice received significant help. The whole reason the bank exists is because of Swedish taxpayers and the thanks for that is: we are moving the head office,” he says.
Social Democratic Finance Minister Magdalena Andersson said she was disappointed to hear the news of Nordea’s move to Finland but saw no reason to review government policy. The government has a responsibility to ensure financial stability and provide a sound environment for companies, she commented, pointing out that Nordea had posted a profit of SEK 40 billion in 2016.
Green Financial Markets Minister Per Bolund said there was broad political unity in Sweden not to join the banking union for the time being. However, the government had now decided to analyse the advantages and disadvantages of Swedish membership.
Ulf Kristersson, the Moderate economic policy spokesman, commented that the government, with its plans for extra regulation and a bank tax, had “undermined confidence that Sweden is a country with stable long-term regulation”.
The total net interest for Sweden’s big four banks amounted to around SEK 30 billion for the second quarter – an increase of over one billion kronor since last year. The profits come mainly from mortgages.
“This is a completely unreasonable figure,” says Håkan Larsson, housing economist at the Swedish Homeowners Association. Håkan Larsson says that the development is due to the low repo rate, which has meant there is a huge difference between the interest banks themselves pay and what they offer mortgage customers.
During the same period mortgages have grown in importance for banks. For Swedbank and Handelsbanken, the mortgage share of the group rocketed from 25% in 2010 to 49% and 42% respectively in 2015.
Håkan Larsson points out that the four big banks have very similar interest rates for mortgage customers, calling it a price-fixing cartel. He believes politicians ought to act and the state SBAB bank ought to lead the way by bringing down interest rates.
The government is backing down on the proposal to raise the resolution reserve fund fee. This is the second time in a short period that the government reverses on taxation of banks. In February, it withdrew a proposal for a new bank tax, replacing it instead with this rise in the resolution fee.
The purpose of the resolution fee is to create a buffer for any future financial crises. In its final form, presented yesterday, the original changes were either gone or had been toned down significantly.
Nordea has discussed plans to move its head office to Copenhagen or Helsinki because of the fee. However, the bank had no comment to make on Thursday.
Finance Minister Magdalena Andersson had previously commented that there are benefits for taxpayers if Nordea leaves the country. However yesterday her tone was milder, “Nordea is of course welcome to stay in Sweden and we see a significant point with having a head office in Sweden.”
Representatives of the alliance were pleased with the government’s U-turn.
The issue of whether Nordea will move its head office to either Helsinki or Copenhagen has been a hot topic since the government presented its proposal to raise the resolution reserve fee. In March Nordea chair Björn Wahlroos said the higher fee could cost Nordea an extra SKr 5 billion, motivating a move.
Svenska Dagbladet reported on Saturday that sources have now confirmed that the decision has been made and all that remains is a formal decision by the bank’s board on 30 May. However Nordea’s head of investment Rodney Alfvén would neither confirm nor deny the reports.
Dagens Industri, DI, reports today that Finance Minister Magdalena Andersson denies that the Swedish state would lose any tax income if Nordea moves its head office. Nordea pays corporate tax in Sweden for its Swedish operations regardless of where its head office is situated.
Finance Minister Magdalena Andersson has criticised the Danish government’s attempts to persuade Nordea to place its head office in Copenhagen. “It sounds as though the Danish government is prepared to compete by easing the rules on the finance market. That is a path that the Swedish government will not tread,” she said.
She has also berated CEO Casper von Koskull, saying “many taxpayers, who saved the bank in the 90s, are tired of Nordea’s games”.
Both parties could end up losing in the dispute over Nordea’s head office, according to several commentators. Nordea has threatened to move its headquarters out of Sweden as a result of the political decision to raise the fees for the resolution reserve (to aid banks in the case of a financial crisis – ed.).
However, although the government has so far focused on the positive elements of a Nordea move for taxpayers, an anonymous source to SvD points out, “It would make big international news. It could lead to a discussion about the business climate in Sweden, something the government does not want.” On the other hand Nordea risks disappointing customers, as the move could be perceived as a rejection of the bank’s largest market.
Meanwhile, writing in Dagens Industri today, MEP Gunnar Hökmark accuses the government of undermining Sweden’s competitiveness with the new bank tax and says that it is incomprehensible that Finance Minister Magdalena Andersson want to bring in this tax, which is making Nordea, the Nordic countries’ largest bank consider moving.
After Nordea’s threat to move its head office out of Sweden the Moderates have attacked the government. Ulf Kristersson, the party’s economic spokesperson, says, “We are driving companies out of the country with the policy the government is threatening to bring in.” He says Sweden needs more head offices, not fewer.
Nevertheless Finance Minister Magdalena Andersson is not fazed by Nordea’s threat. “If they place their head office in another country then it lowers the risk for Swedish taxpayers in the case of a crash,” she says. She points out that the banking sector is healthy, has high profits and the fees have not created any problems. She also emphasises that Nordea made billions of kronor in profits last year.
The proposal is now out for consultation.