Swedish finance Minister Borg Uses political power to blow Wahlroos on Nordea threat


Friday, 15 April 2011
Swedish Finance Minister Anders Borg will push for joint Nordic rules for banks' capital adequacy. This is a blow to the new chairman of Nordea who had threatened to move the head quarters of Nordea to Finland where there is currently no demand for increase bank capital requirement.

Sweden is the biggest economic power among the Nordics and most of its banks and financial institution are more exposed there. Therefore, for the sake of economic stability, it makes sense that all the banks of the region should follow the Swedish plan and beef up bank’s capital need.

Anders Borg wants Sweden to join the rest of Europe and impose tougher capital adequacy rules for banks than what will be required by the new Basel III. The aim is to reduce the vulnerability of the financial system which might be triggered by banks going under. For banks, it would mean more expensive financing. This is why the proposal met stiff resistance in the financial industry in Sweden and is creating jitters in neighbouring countries.

In an interview on Thursday with the Swedish business daily, Dagens Industri, Nordea’s newly-appointed chairman Wahlroos said that for him "is apparent that the European financial system to function normally requires a game plan with the same terms to all".

He continues: "It means that if a country of one reason or another want to stand out will automatically impose a competitive disadvantage in their companies. It is important to understand that. "

The statements are difficult to read than that Nordea could move its headquarters from Sweden if tougher rules are introduced. Wahlroos statement has made Anders Borg to react. The finance minister now wants to see joint Nordic rules for capital adequacy of banks.
"It is good and natural for the Nordic countries to move forward together, "said Anders Borg, through his press secretary Markus Sj�qvist.

Lobbying is waiting to be launched for the Nordic colleagues to join his plan. "He will try to make contact and take the initiative for this to be the case," said Markus Sj�qvis

Example of how the banks’ lack of sufficient capital is raking havoc is in Denmark. Some banks there have already gone bust and big ones such as Danske bank had to increase their capital adequacy a few months ago. The behaviour of banks in Denmark also reflects the nature of the Danish economy which is struggling to catch with the type of growth momentum seen in Sweden.
By Team

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