Baltics doing the right thing

RIGA - By now it has become obvious that the Baltic countries have been doing the right thing to overcome the crisis, and other European countries should follow suit, Nordea Group President Christian Clausen said on Oct. 19, reports Nozare.lv. Strong discipline and stringent decisions have helped the Baltic countries to recover from the crisis, and European leaders should also act decisively.

In Clausen’s opinion, the individual eurozone countries will have no choice but do what the Baltic countries did; at the same time, a joint action package for all of Europe should be adopted to ease markets and avoid further escalation of the debt crisis. He believes that the introduction of the euro in Latvia is a political decision first of all, but accession to the eurozone must happen at the right time when the country will be competitive enough and able to ensure its fiscal stability.
The banking group president expects that eurozone regulations will be tightened in the near future already, and not only regarding the Maastricht criteria. He also believes that penalties for not observing these criteria will be increased. He believes, however, that no new recession wave should be expected, as politicians, who are well aware of what consequences one might have, will do everything possible to stabilize the situation.

In preparation for potentially volatile times ahead, Nordea Bank, the largest Nordic lender, says it won’t tap the capital markets for more capital as European lenders ready themselves for a round of recapitalization, added Clausen, reports Bloomberg. “Certainly, in Nordea we don’t need more capital,” Clausen said in an interview in Stockholm after delivering third-quarter results that missed analysts’ estimates by 25 percent.

The bank, which is shedding 2,000 jobs to adjust to a deteriorating economic outlook in Europe, said profit last quarter suffered because of “market turmoil.” While Nordea doesn’t hold any bonds of the euro area’s peripheral nations, the spread of the region’s debt crisis shows efforts to boost capital buffers need to be coordinated across borders and continents, Clausen said.
Nordea on Oct. 19 reported capital by that measure of 9.2 percent in the third quarter. The European Union may require banks in the region to increase core capital ratios to nine percent of their risk-weighted assets, according to a person with knowledge of the plans.

The deadline for meeting the increased capital levels may be the middle of next year, German Finance Minister Wolfgang Schaeuble told a closed parliamentary committee, reported two lawmakers who attended the meeting. That’s almost seven years ahead of the target set by the Basel Committee on Banking Supervision.
Sweden is home to four of the Nordic region’s six largest banks, and the country’s lenders have combined balance sheets four times the size of the nation’s economy. Nordea is 13.5 percent owned by the Swedish state, which has earmarked the bank for divestment over the coming years.

The Latvian branch of Nordea Bank concluded the first three quarters of 2011 with 7 million lats (10 million euros) in net profit. The profit of Nordea Estonia in the first nine months of this year totaled 29 million euros, a growth of 35 percent in comparison with the corresponding period of the last year.