Nordea Says It's `Dead Serious' on Threat to Move Swedish HQ

Updated on
  • Sweden is committed to higher fees despite Nordea criticism
  • Finance minister says Sweden might be safer without Nordea

Scandinavia’s biggest financial conglomerate, Nordea Bank AB, says a Swedish proposal to increase bank fees for a crisis fund may force it to move its headquarters away from Stockholm as efforts to find common ground with the government stall.

“This isn’t a bluff. This is dead serious,” Rodney Alfven, head of investor relations, told Bloomberg on Wednesday. “Our plan A has always been to have our administrative headquarters in Sweden,” but in talks with the government on resolution fund fees, “we are very far from each other.”

Sweden plans to raise by more than a third the annual fee banks pay into a fund to be used in the event a lender needs to be recapitalized or wound down. The government intends to base Nordea’s contribution on its entire balance sheet after the Stockholm-based bank turned its foreign subsidiaries into branches, shifting regulatory supervision to Sweden.

Alfven indicated any move would probably be within the Nordic region. “No decision has been made where to move, but we are a Nordic bank,” he said.

The comments follow signals from the very top of Nordea’s management to local media that such a drastic step might be warranted.

Safer Without Nordea?

Nordea’s threats are so far doing little to prompt the government to reconsider. Finance Minister Magdalena Andersson has told local media there might actually be some benefits should the bank opt to leave, and Financial Markets Minister Per Bolund is making clear the proposed fee is a key plank in the government’s vision for creating safeguards to protect taxpayers from bank crises.

“Sweden has a large banking system and we have experienced a bank crisis before,” Bolund told Bloomberg on Tuesday. “Everyone gains from being prepared for an unwelcome development.” Nordea is the Nordic region’s only global systemically important bank.

He told local media that the government is in dialogue with Nordea and that he doesn’t want it to move its headquarters, adding that he believes that “will be the end result.”

Global SIFI

But the question is one of staying competitive across borders, according to Nordea.

“We feel that as one of Europe’s largest banks, it is natural for us to have the same level playing field as our competitors, such as the largest German, French and U.K. based banks,” Alfven told Bloomberg on Tuesday. He says moving would cut costs by as much as 4.7 billion euros ($5 billion). It would also mean Nordea could get tax deductions for interest paid on subordinated debt, shaving another 60 million euros off costs a year, he said.

According to Karl Morris, an analyst at Keefe, Bruyette & Woods, the higher resolution fees “are material” and Nordea’s decision to move to a branch structure would make it “much easier” to relocate headquarters. What’s more, Swedish banks face a possible new tax, which would come on top of some of Europe’s highest capital requirements, based on risk-weighted assets, Morris said in an emailed response to questions. The government also recently adjusted the tax code to make it more costly for banks to issue subordinated debt.

Nuclear Option

But “moving HQ is the nuclear option,” Morris said. Nordea was expected to lobby hard against the higher resolution fees, with the threat of moving its headquarters seen as part of that based on comments made by the bank during a recent roadshow, Berenberg said in a note to clients.

Nordea has argued that Sweden’s proposal to place the fees it gets into state coffers instead of a separate fund is problematic. Ultimately, some sort of compromise is the most likely outcome, Berenberg said.

It’s not the first time Nordea has threatened to relocate. Chairman Bjorn Wahlroos, after criticizing a proposed financial tax, said in October he’d had talks with Dutch authorities on merging with ABN Amro Group NV. Those talks led nowhere at the time, he said.

Moving also comes with its own costs and risks, and Nordea is in the middle of investing more than $1 billion to revamp its technology systems. It’s also still under review for potentially helping some clients dodge taxes. Against that background, relocating to avoid fees may not play well with customers, analysts contacted by Bloomberg said.

But Nordea’s latest threat is unlikely to be “completely empty,” said Robin Rane, an analyst at Pareto Securities. “The Swedish regulator is pretty tough in a European comparison and raising the resolution fund fee is at least not improving the competitive situation,” he said.

Sweden, which experienced a banking crisis in the 1990s that cost taxpayers an estimated 2.1 percent of gross domestic product, wants to raise the fee lenders pay into the resolution fund to 0.125 percent from 0.09 percent of debts minus guaranteed deposits. It also made clear that a target of 3 percent of covered deposits would no longer represent a cap on how big industry contributions need to be. The government plans to include the proposal in its 2018 budget proposal, meaning it wouldn’t require a separate parliament vote.

“Our proposal is out on referral and we welcome the public’s opinion,” Bolund said.