Nordea Wins Concessions From Swedish Government After HQ Threats

Updated on
  • Nordea says it can’t provide update on HQ plans at this stage
  • Swedish government says it expects broad backing for new plan

Sweden unveiled a softer plan for filling the country’s bank resolution reserve following threats from Nordea Bank AB that it may shift its headquarters from Stockholm to a more accommodating regulatory environment.

Sweden will keep a cap on the size of the resolution reserve, instead of allowing it to grow indefinitely, the Finance Ministry said on Thursday. The government stuck to a plan of raising bank contributions by an estimated 3 billion kronor ($345 million) next year, but will then cut the fee in 2019 and 2020, with the fund expected to be filled by 2025, it said.

“We have looked carefully at the hearing responses that we’ve received,” Financial Markets Minister Per Bolund said in a statement. “It’s our assessment that our new proposal is well balanced,” he said.

Nordea, the Nordic region’s only global systemically important bank, had criticized an earlier proposal that sought to raise fees indefinitely, with no cap on how large the resolution reserve would grow. The government’s decision to keep the cap is likely to be viewed as a compromise by the bank. But the administration didn’t withdraw its proposal to keep the resolution reserve in the state budget, instead of earmarking a separate fund, which Nordea had also criticized.

Given the new proposals, “the maximum regulatory fees for Nordea, all else equal, will be flat at 360 million euros ($405 million), a figure arguably already baked into consensus, assuming Nordea remains in Stockholm,” Adam Barrass, an analyst at Berenberg Bank, said in an emailed note. That said, “today’s move by the Swedish government still represents a relatively unpredictable fiscal environment,” he said.

Bolund told reporters he was “convinced that Nordea will see that there are good possibilities to conduct banking business in Sweden and that the Swedish banking system is stable and safe.” The minister said he expects the new proposal to receive broad backing in parliament.

But analysts expressed doubts that the revised plan would make a big difference.

“Nordea has said it wants a level playing field and improved predictability, and this doesn’t provide that,” Matti Ahokas, head of equity research at Danske Bank in Helsinki, said by phone. “The proposal has changed but at the end of the day, they still say they will raise 10 billion kronor from the Swedish banking sector.”

The Swedish government also reiterated that it’s exploring a new bank tax, after being forced to scrap a previous proposal that was criticized for affecting too many companies and for distorting competition.

Rodney Alfven, Nordea’s head of investor relations, said by phone that management won’t be providing an update on its future location “at this stage,” shortly after the government published its new proposal. But Nordea does “take note that today’s reality is different from yesterday’s,” he said.

Nordea Chief Executive Officer Casper von Koskull had previously said management was targeting a decision before the summer, but has since indicated the bank may need more time. He has singled out Helsinki and Copenhagen as potential alternatives to Stockholm.

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