Bank-Union Skepticism Abounds as Denmark Examines Pros and ConsBy
Review comes as Nordea makes bank union key to HQ decision
Denmark and Sweden have given themselves 2 years to decide
As Denmark reconsiders joining Europe’s bank union, the two biggest parties in the country’s parliament are already voicing considerable skepticism.
The divisions suggest it’s far from obvious that Denmark will become part of a union that so far only counts euro-zone nations. The minority coalition of Prime Minister Lars Lokke Rasmussen has given itself about two years to decide. (The latest review follows a 2015 study of the pros and cons of membership).
The EU-skeptic Danish People’s Party, on which the center-right government relies to stay in power, is firmly against joining. The opposition Social Democrat party, the biggest in the legislature, says Denmark should only join if concessions are made to protect its $450 billion mortgage-bond market.
“If that can’t be done in a satisfactory way, membership will not be relevant,” Peter Hummelgaard Thomsen, the European Union spokesman for the Social Democrats, said in a telephone interview.
Under Europe’s banking union, which was first created in 2012, national regulators hand over powers and lenders become subject to the Single Supervisory Mechanism of the European Central Bank. If a bank gets into trouble, it’s wound down under a set of unified resolution guidelines. The one-size-fits all model is unlikely to fit a country that’s regularly locked in battle with global regulators to protect its mortgage market from international rules.
“We don’t feel there’s a need for a banking union,” Rene Christensen, finance spokesman for the Danish People’s Party, said by phone. “We feel the same way about the banking union as we did back in the day about the euro, and it worked out quite nicely” just having a euro peg instead of full currency union membership, he said.
Nordea Bank AB said last month that bank union membership is key in shaping its decision on where the Nordic region’s only global systemically important lender will place its headquarters. The bank’s management says it will reach a decision on its domicile in September.
For now, Nordea is based in the Swedish capital, but it has threatened to move in response to what it characterizes as an unreasonable regulatory environment there. The bank is looking at Copenhagen and Helsinki as alternatives. Finland, a euro member, is already in the bank union. Sweden has given itself two years to explore membership.
Thomsen of the Social Democrats says the government seems “split on the subject,” and “at odds with its closest ally,” the Danish People’s Party.
— With assistance by Frances Schwartzkopff