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Banking group Nordea snubs Sweden with HQ move to Finland

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Banking group Nordea snubs Sweden with HQ move to Finland

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By Simon Johnson and Johan Ahlander STOCKHOLM (Reuters) – Nordea <NDA.ST>, the Nordic region’s biggest bank, said on Wednesday it would move its headquarters to Finland, a move aimed at cutting costs of complying with Swedish regulations and dealing a blow to Stockholm’s bid to be build a financial hub. The move is the first time since the 2008 financial crisis that a major bank has shifted its headquarters to avoid tougher rules. Nordea said the move to Finland, where it would be supervised by the European Central Bank, would save about 1 billion euros in the longer term despite extra short-term costs. It said the bank wanted a level playing field with rivals supervised by the ECB, which has since 2014 sought to establish common standards across the euro zone. “The Single Supervisory Mechanism is an appropriate regulator for a bank of our size and complexity,” Nordea CEO Caspar Von Koskull told reporters on a conference call. The bank, the ninth biggest by market value in Europe, said in March it could move HQ if the government hiked fees to cover the cost of winding up banks that fail, prompting the centre-left coalition to soften some terms. Swedish Finance Minister Magdalena Andersson said she was disappointed but said tax revenues would not be affected. She said Sweden was looking at joining the European banking union, but a decision could take years. “They want the security that the banking union provides, and that leaves Finland as the alternative that can provide that,” Exane BNP Paribas analyst Andreas Hakansson said. Nordea shares closed broadly unchanged.

MIXED BLESSING Analysts have been divided about how moving the HQ would affect Nordea, once owned by the Swedish state, and Sweden. Some analysts had expected lower capital requirements within the banking union would allow Nordea to lift dividend payouts. But Nordea said it would keep capital and dividend policy unchanged, although it said it would make long-term savings. Sweden’s demand for big capital buffers has acted as stamp of quality for buyers of bank debt, lowering borrowing costs for Swedish banks, which partly explains why they are twice as profitable in terms of capital employed (ROCE) as European rivals. But the move could reduce regulatory uncertainty for Nordea ahead of next year’s election. Sweden’s centre-left government has been considering ways to tax banks more heavily. “Welcome to Finland Nordea HQ. Finland’s membership in the Banking Union provides a stable business environment,” Finland’s Finance Minister Petteri Orpo wrote on Twitter. Some Swedish customers, already frustrated at what they see as inflated bank profits, opposed the moved as unpatriotic and cynical. Some unions had said they could withdraw funds and business from Nordea if its HQ went abroad. Losing Nordea will be a blow to Swedish prestige as it seeks to attract financial firms when Britain leaves the European Union. It will also fuel criticism from those who say the government is hostile to business. The Swedish finance minister said the move could reduce risks to the economy from the outsized banking sector. “Having a banking headquarters also comes with increased risks for tax payers,” she said. “That is exactly why we in the Swedish parliament have found it important to have tough rules to safeguard financial stability.” But regardless of where a bank is based in the region, problems at one institution could quickly hit other banks in other centres and could still leave Swedish taxpayers a bill for any clean up, experts say. Sweden avoided the worst of the fallout from the 2008 financial crisis, but a banking crash in the early 1990s plunged the country into a recession and held back growth for years. (Additional reporting by Niklas Pollard in Stockholm and Jussi Rosendahl in Helsinki; Editing by Niklas Pollard and Edmund Blair)
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