Sweden’s largest bank is under pressure today after Svenska Dagbladet reported an internal document from Sweden’s Financial Supervisory Authority indicates that Nordea bank had a capital shortfall of $9.7 billion at the end of last year.
Newspaper Svenska Dagbladet published an article that alleges an analyst at Sweden’s FSA had discovered that internal bank models used to assess risk of loss on its loan portfolio had understated risk by as much as half at the end of last year. As a result of the finding, the document said that as much as $9.7 billion in new capital would have to be raised in order to fulfill capital requirements. The document stated that based on the situation at the end of last year, Nordea would have needed to boost its capital by between 50 billion and 80 billion crowns to be in line with regulatory requirements, the paper reported.
“We are very confident in our ability to fulfil the capital requirements without additional capital. I view the article in today’s Svenska Dagbladet as highly speculative and with no real substance” said Casper von Koskull, Nordea Group CEO and President.
Nordea has released a statement on the matter, saying that as of the end of the first quarter, Nordea’s Common Equity Tier 1 ratio was 16.7%, which was above the SFSA published requirement of 15.6% for Nordea.
We have enough capital to fulfil all capital requirements and we do not expect any material effects on the requirements in the coming reviews.
- We are very confident in our reported numbers and the ongoing review process. Nordea’s models are reviewed as part of the annual validation process. Nordea’s current assessment is an increase of approx. 40bps as a result of the outcome from the ‘Capital requirements for maturity assumptions under pillar 2’ and ‘SFSA’s supervision of banks’ calculations of risk weights for exposures to corporates’. We have prepared for this. However, Nordea is awaiting the outcome from the review process.
- Our ability to generate capital is towards the best of any bank in the world and we have demonstrated that capability over the last ten years. We are very confident in our ability to fulfil the capital requirements without additional capital. I view the article in today’s Svenska Dagbladet as highly speculative and with no real substance, says Casper von Koskull, Group CEO and President of Nordea.
FACTS
- We have one of the strongest balance sheets in Europe which is reflected through one of the highest ratings (AA-).
- On 26 May 2016 SFSA published their requirements for Nordea which was 15.6 percent Common Equity Tier 1 ratio at the end of the first quarter, and at that time Nordea’s Common Equity Tier 1 ratio was 16.7 percent.
- On 17 May 2016 the SFSA approved the merger plans between Nordea and the subsidiary banks and in that review they evaluated if the debt holders have appropriate safety margins and that the public interest is not negatively affected, i.e. if the risk for Swedish tax payers will increase as a result. The SFSA judgement was that these risks do not increase and therefore they approved the merger.
- On 24 May 2016 the Swedish FSA published a new methodology for banks’ internal risk models which indicated that the risk weights for banks in Sweden would increase by approximately 2 percentage points on average, a not material number for Nordea.
- We already have the highest corporate risk weights among the Swedish banks at 41 percent at the end of the first quarter 2016. Svenska Dagbladet’s article implies that the risk weights would go to 61-73 per cent – compared to around 20-35 percent for the other Swedish banks. This is not realistic.
- During the annual validation process a number of credit perimeters have been reviewed and we are now in the final stages of this review and we are not expecting any material effects as a result of this process.
via http://ift.tt/28L1c5Y Tyler Durden