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Nordic Nations to Intensify Efforts on Common Bank Rules

Oct. 31 (Bloomberg) -- All the Nordic countries want to intensify work to create common rules for Nordic and European banks, Swedish Financial Markets Minister Peter Norman said.

“We have four very big banks in Sweden, of which each and every one is system critical” and “we have DNB in Norway and Danske Bank in Denmark,” Norman said at a press conference in Oslo today, following talks between Nordic governments. “These operate across national borders so there’s big interest in finding common solutions and my interpretation of today’s meeting is that we agree on intensifying the work.”

The Nordic countries have introduced harsher rules for their banks to try to protect taxpayers and their economies from future financial industry losses in the wake of the global financial crisis. Still, the new regulation differs between countries, with Sweden having imposed higher capital requirements than some neighbors while Norway has raised risk-weights on mortgages to a higher level than Sweden.

Stockholm-based Nordea Bank AB, Svenska Handelsbanken AB, Swedbank AB and SEB AB are required to have core Tier 1 ratios of at least 12 percent of their risk-weighted assets by 2015 and all already exceed that target. In Norway, banks must hold 12 percent of core capital by 2016. The European Central Bank is setting an 8 percent capital requirement for the region’s biggest banks, including a common equity Tier 1 ratio of 4.5 percent and a 2.5 percent capital conservation buffer.

Shares of Nordea, the Nordic region’s largest lender, fell 1.1 percent to 83 kronor in Stockholm trading. Danske Bank A/S rose 2.1 percent in Copenhagen trading and DNB ASA declined 1.2 percent in Oslo.

Tripled Risks

Sweden this year tripled the capital banks must set aside to guard against losses on their mortgage assets to 15 percent, from levels as low as 5 percent, Norway has proposed raising the loss-given-default floor on mortgage loans to 20 percent from 10 percent, equaling a risk-weight of about 20 percent or higher, according to Finance Ministry calculations.

That the same rules apply for all banks that operate in each country is also important, said Norwegian Finance Minister Siv Jensen in a statement.

“It especially important that all banks that operate in a country use the risk weights that are used in that country,” she said. “The same goes for counter-cyclical buffers.”

Stockholm-based Nordea is the second-biggest bank in both Norway and Denmark and one of the top 2 banks in Finland. Sweden’s SEB, Swedbank and Handelsbanken also have operations in neighboring Nordic countries while Oslo-based DNB is also active in Sweden. Danske Bank is the fifth-largest lender in Sweden and one of the biggest banks in Finland.

To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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