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Nordic banks have been controversially included in tough new rules, this is not good for their investment bankers

Should you avoid European banks? (Photo credit: erjkprunczýk)

If you work in banking you can’t have failed to have seen the Liikanen report released this week, which proposes harsh new bonus rules and the ring-fencing of investment banking activities from the retail side of the business. Nordic banks are included in the rules and have every right to feel hard done by.

Danske Bank, Nordea, SEB and Swedbank have not exactly emerged unscathed from the financial crisis, but compared to their European and US counterparts they’re success stories. However, perhaps controversially, they’ve been included in the new proposals.

Implementing the ring-fencing rules – which have been described as near full segregation – would be costly for the banks, and particularly galling for the Nordic institutions whose relatively conservative, domestically-focused investment banks have been lumped into the ‘casino’ category.

Ironically, perhaps, the biggest problems for Nordic institutions have stemmed from retail and commercial banking operations. Danske has been stung by its venture into the Irish property market, while SEB and Swedbank have been pulling back from the Baltics after over-ambitious expansion in of their branch networks in the region.

The Nordic banks have so far been fiercely protective of their investment bankers, preferring instead to cut from back office and retail functions. This is another ominous sign that this stance may have to change.

AUTHORPaul Clarke

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