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Sweden won't fight for more power over Nordea's mega bank branch
[COPENHAGEN] Sweden's financial regulator says giving national supervisors additional powers over bank branches - even systemically important ones like Nordea Bank - is bad policy.
According to Martin Noreus, deputy director general of the Financial Supervisory Authority in Stockholm, national regulators risk missing the big picture.
"It is sub-optimal and risky when different supervisors act too much in silos," Mr Noreus said in an interview. "Generally speaking, supervisors tend to focus too much on the legal entities and our narrow responsibility rather than on the whole group, while the really serious problems, they will usually be at the group level."
The Swedish FSA's thinking is instructive because it offers a look at how to handle bank branches that, if they fail, are big enough to disrupt local economies. How to supervise them is of growing concern as Europe marches toward its goal of a single market, with growth in cross-border banking an inevitable offshoot.
For Sweden, the whole question relates directly to how it will treat Nordea, the Nordic region's only global systemically important bank. It this year converted its Nordic subsidiaries into branches, meaning the regulator in the country in which Nordea is based has full control of the whole bank. Nordea is now headquartered in Stockholm, but plans to move to Helsinki next year to be inside the banking union.
Giving more power to regulators to oversee giant bank branches "sounds fine in a narrow perspective if you're a big host market," Mr Noreus said. "But it will also mean that the supervisor of the group as a whole will be weakened, because the home supervisor's control of the group will be weakened."
To aid national regulators, the European Banking Authority this year created a new set of guidelines for so-called significant-plus branches. Some countries, including Finland, have lobbied for more direct powers.
Sweden would rather have so-called colleges, in which regulators from various countries coordinate supervision, with the home country taking the lead. The approach works better in a scenario in which some countries are outside the banking union and, thus, outside the jurisdiction of the ECB, Mr Noreus said.
"If Europe wants to be able to have large European cross-border banks, we need to find a way to cooperate effectively between supervisors," Mr Noreus said. "It's better than to give very strong powers to each involved authority. That will usually create a silo-based and less cooperation-based approach, to the detriment of a more consolidated approach."