Norway Sees Steps to Closer Nordic Harmonization of Bank Rules

The Nordic region is getting closer to harmonizing banking rules after reaching an agreement that banks need to follow local capital standards on mortgages, Norwegian Finance Minister Siv Jensen said.

Authorities in Sweden and Denmark have agreed that banks should follow local rules to a greater extent, she said in a statement today. The neighboring countries have also responded “positively” to a plan by Norway to tighten parameters for the calculation of capital buffers on mortgages, she said.

Further details may be announced “within a few months’ time, these are ongoing negotiations between the Nordic countries,” she said in an interview after a speech today. “We all agree we need to harmonize this but I find it difficult to say an exact time frame. We’re making progress.”

Sweden’s Financial Supervisory Authority last week said that its lenders, including Nordea Bank AB, would need to apply local risk weights in Norway, which it says will rise to 22.8 percent with new legislation. Sweden sets risk weights at 15 percent and has flagged they may increase to 25 percent.

Norway at the start of the year raised the loss-given-default floor to 20 percent on home loans from 10 percent, equaling risk weights of more than 20 percent. The watchdog is now reviewing individual banks, which could lead to increases in the loss-given-default floor and “to higher capital standards than the minimum standards laid down in legislation,” Morten Baltzersen, director general of the Norwegian Financial Supervisory Authority, said in an interview in February.

Harsher Rules

Swedish Financial Markets Minister Peter Norman also said last year that all the Nordic countries want to intensify work to create common rules.

The countries have introduced harsher standards for their banks to try to protect taxpayers and their economies from future financial industry losses. The new rules differ 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, 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 already exceed that target. For systemically important banks in Norway, the target will rise to 11 percent in 2015 and 12 percent a year later. A counter cyclical buffer of 1 percent will be applied as of July 2015.

The European Central Bank is setting an 8 percent capital requirement for the region’s biggest banks.

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

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