Sweden Wants Tougher European Rules to Curb Banker Bonuses

Sweden will push the European Union to enforce stricter banker pay rules amid signs the financial industry is stepping up bonuses even as the economic crisis continues, Financial Markets Minister Peter Norman said.

“I assume that the banks carefully check that things are handled in the right way according to the existing regulatory framework,” Norman said to reporters in Stockholm today. “We’re pushing hard in the EU area for a tougher decision on the bonus issue and we’ll continue to do that.”

Norman last month told Sweden’s banks they’re free to increase dividends to shareholders after Nordea Bank AB, Swedbank AB, Svenska Handelsbanken AB and SEB AB built up capital that exceeded regulatory rules. Sweden has set a 10 percent core Tier 1 requirement of risk-weighted assets for this year, with the minimum rising to 12 percent in 2015. The Basel Committee on Banking Supervision targets 7 percent by 2019.

Handelsbanken, Sweden’s second-largest bank, said today it would raise dividends by 10 percent, while Swedbank earlier announced it will raise its payouts by 87 percent, SEB by 57 percent and Nordea by 31 percent. Handelsbanken, Swedbank and SEB are the best capitalized major lenders in the EU, giving them scope to pay more to shareholders at a time when other banks in Europe are trying to preserve cash.

“It’s important that banks continue to build capital” because the debt crisis in Europe is “far from over” Norman said. “It’s good if they have a big buffer in relation to the existing regulatory framework.”

Though Sweden’s banks now are in “very good shape,” the industry should do more to reduce its use of foreign currency borrowing, Norman said. Reliance on international funding markets poses a “big risk” to Sweden’s banks, he said.

Before it's here, it's on the Bloomberg Terminal.