Bloomberg News

Sweden Will Need to Follow EU on Capital Rules, Nordea CEO Says

March 27, 2012

Sweden will need to comply with any potential European Union decisions when setting capital requirements, the head of Nordea Bank AB (NDA) said.

Sweden in November told its four biggest banks to target higher capital buffers than those set by the Basel Committee on Banking Supervision and to reach the goals six years earlier than Basel’s 2019 deadline. The government has said tighter standards are needed to ensure taxpayers are protected from the risk of losses.

“If the EU takes a decision everyone will have to comply, also the ones with lower ratios will have to come up,” Chief Executive Officer Christian Clausen said today in an interview in Oslo. “Of course everyone will have to comply.”

Sweden has proposed its banks bring their core Tier 1 capital ratios -- a measure of financial strength -- to at least 10 percent of their risk-weighted assets by next year. That ratio needs to rise by 2 percentage points by 2015. Basel sets a minimum target of 7 percent by 2019, while the EU has a 9 percent target for this year.

The 12 percent ratio will be an “excessive burden on the economy,” Clausen said. The Stockholm-based bank, in a new forecast issued today, predicted the largest Nordic economy will contract 0.3 percent this year amid an export slump.

Talking 10%

“The rest of Europe is talking about 10 percent right now,” he said. “The discussion among finance ministers is to put a maximum of 10 percent right now and if that goes through, most countries in Europe will agree on that.”

Sweden will be able to impose stricter capital standards on its own, according to Jonatan Holst, a spokesman at the country’s Financial Supervisory Authority. Regardless of what the EU decides, the country can use powers under so-called pillar 2 to force banks to set aside more capital to reflect risk, he said by phone.

Pillar 2 allows regulators to assess risk based on possible future losses.

To contact the editor responsible for this story: Josiane Kremer at jkremer4@bloomberg.net


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