STOCKHOLM (Reuters) - Fees that Swedish banks pay into a bailout fund will rise next year but then taper off, the government said on Thursday, after top lender Nordea threatened to move its headquarters abroad in the face of higher costs.
Swedish regulators have imposed some of the toughest capital requirements in Europe, citing the risk posed to financial stability by the size of the country’s banks. Sweden’s banks hold assets worth around four times the Swedish gross domestic product.
“When it comes to the banking sector specifically we have a responsibility to ensure financial stability and protect tax payers,” Finance Minister Magdalena Andersson told reporters. “It is up to Nordea to decide where they are going to have their HQ.”
The so-called resolution fee that banks pay to the bailout fund will rise next year to 0.125 of debt minus guaranteed deposits from the current 0.09 percent. But it will drop back in 2019 and will be eliminated in 2025, when the fund is expected to reach its target level.
The government had originally planned to raise the fee to 0.125 percent indefinitely.
Nordea said that would have raised its fee to around 6 billion crowns ($690 million) in 2019 from 500 million in 2016. Analysts expected Nordea to move its headquarters to either Finland or Denmark to avoid the cost.
Andersson said the government still aimed to introduce a new bank tax before 2019. It would apply to all banks doing business in Sweden, even if their headquarters were located elsewhere.
Nordea spokesman Petter Brunnberg said the bank would study the new plans. “It is a question for the board to determine where our headquarters will be and they will make a decision when they feel comfortable with it,” he said.
Andreas Hakansson, an analyst at Exane BNP Paribas, said the new fees alone were unlikely to prompt Nordea to move its HQ.
“But it is one thing after another,” he said. “There is uncertainty and that creates an unstable platform ... and that could be reason enough for Nordea to move.”
The government has said banks are undertaxed, pointing to net profits of more than 80 billion crowns last year and exemptions from VAT on banking services.
But banks say their return on equity - at around 12 percent - is lower than the average Swedish company’s and that they are subject to tough capital requirements.
Banks in Sweden are around twice as profitable as the average in Europe.
The government had planned a payroll tax on financial services firms but dropped that after widespread criticism. Instead, it decided on the plan to raise resolution fees, which are paid to a reserve to be used for recapitalising or winding up troubled banks.
Banks currently pay around 7 billion a year to the resolution fund.
($1 = 8.6852 Swedish crowns)
Reporting by Simon Johnson and Niklas Pollard; additional reporting by Johan Sennero; Editing by Larry King