NORDEA FLEES SWEDISH REGULATORY REACH

Nordic banking giant relocating HQ to Finland in bid to save US$1.3b in costs

STOCKHOLM

AEUROPEAN banking giant just snubbed one of the world’s strictest financial supervisors by moving to a more accommodating regulatory setting.

Nordea Bank AB’s decision to relocate its headquarters from Sweden to Finland puts the Nordic region’s only global systemically important bank inside the eurozone.

After months of railing against Swedish efforts to make banks pay more to protect taxpayers, Nordea estimates its decision to go to Helsinki will save it as much as US$1.3 billion (RM5.47 billion) in regulatory costs.

The move, which is due to take place in the second half of next year, promises to become a test case as Nordea blazes a trail in regulatory arbitrage.

Nordea says the move will have a “limited” effect on staffing, and expects all its Nordic operations to “remain unchanged”.

Customers would see no perceptible difference in the bank’s day-to-day operations, it said on Wednesday. But the Nordic region’s regulatory landscape will change.

Swedish authorities are already warning that their ability to deal with financial crises will be hurt by the move.

Hans Lindblad, the head of Sweden’s debt office, said he regretted Nordea’s decision. “The risks don’t move with the headquarters.”

The bank would now probably get a lower requirement for bailinable debt (known as MREL) and Sweden “is somewhat worse off when it comes to having the conditions needed to handle banking crises, and safeguard financial stability as well as Sweden’s economy”, he said.

Sweden is moving ahead with plans to force its banks to pay more towards a resolution reserve, which is intended to protect taxpayers from finance industry losses. In June, it watered down an earlier proposal following criticism from the banking industry and authorities.

While Sweden has lamented Nordea’s decision, Finland has applauded the move. Finance Minister Petteri Orpo was quick to react. “Welcome to Finland,” he tweeted.

Nordea chief executive officer Casper von Koskull had made clear that he would prefer Nordea to be inside Europe’s banking union, of which Finland is the only Nordic member.

But Sweden questioned the notion that putting the Nordic region’s biggest bank inside the European banking union, which was first created in 2012, would be a cure-all for financial risk.

“It’s also important to remember that the banking union is not yet complete,” said Swedish Financial Markets Minister Per Bolund.

“What happens if a bank ends up in financial uncertainty before the resolution reserve has been built, which won’t happen until 2024 or 2025, and what happens with the deposit guarantee, where there’s still no common system for how to handle that?”

Nordea’s decision follows a reorganisation of its legal structure. The bank converted its Nordic subsidiaries into branches this year. The change set off protests from Finnish and Danish regulators, who lost their supervisory clout over systemically important operations. Now, Sweden is left with a systemically important branch and little supervisory power.

“We will have a dialog with Nordea and other Nordic countries about how the change will be implemented,” said Swedish Financial Supervisory Authority Director General Erik Thedeen in a statement. “The most important thing is that the bank has stable and sound operations, regardless of where the headquarters are located.” Bloomberg