Nordic Banks ‘Punished’ as EBA Tests Penalize Mortgage Debt

Nordic banks are being penalized by European rules that assign tougher risk weights to mortgage assets than local regulators, forcing lenders to scrap payouts for shareholders to fulfill capital rules.

Scandinavia is home to Copenhagen-based Nykredit A/S, Europe’s biggest mortgage-backed covered bond issuer. Other lenders in the region, including Swedbank AB and Svenska Handelsbanken AB, also rely on mortgage credit for much of their business. That means the European Banking Authority’s decision to assign risk weightings up to eight times higher than those enforced by local regulators is hitting Nordic banks harder than lenders elsewhere.