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Swedish banks dominate the Baltic banking sector – good or bad things?

Monday, 31 October 2011
More than half of the banks in the Baltic banking sector are Swedish. But Minister Swedish Financial Markets, Peter Norman would want to see that a larger share of banks in Estonia, Latvia and Lithuania should be domestic.

“It would be beneficial for the Baltic states that a higher proportion of their banks are domestic banks,” said Peter Norman.

The strong credit expansion in the Baltic countries, which Swedish banks promoted by offering cheap loans to the Baltic households and companies, made their economies plummeted and almost collapsed. Debt burden grew and house prices soared.

The effect today is a situation where individual households and firms are hanging around with huge debts and property prices that have halved such that there is not more equity in them to cover any mount of borrowed money. Besides, with no money, there is no body to by thus dampening the house price growth further.

One good thing out of all this is that the cheap loan did not lead to a fiscal crisis in the region as would have expected. This is because it mainly affected households and businesses more and not really public finance.

Estonia, for example, remains with the lowest national debt in Europe till today. And the Estonian Finance Minister, Jürgen Ligi is happy that Swedish banks dominate.
“We are very pleased that we have the Swedish banks,” he says.         

The Lithuanian Finance Minister, Ingrida Simonyté, thinks that it was just the strength for the Baltics to that the Scandinavian banks dominated the banking sector by between 60 and 80 percent.

It was one of the main forces that it was the Scandinavian banks during the crisis and they had in common with other banks the same problem with lending, she said.

“The Swedish banks are very well prepared for the economic crisis,” he said.
In the shadow of the Swedish banks, with their cheap loans which contributed to an expansion of credit in the Baltics, the Swedish Minister for Financial Markets, Peter Norman, welcome the review of bank loans.
By Scancomark.se Team

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