Although an EU member, Sweden has always declined membership in the eurozone, instead keeping its own currency, running its own monetary policy and its own banking system — which have all been humming along smoothly.
But Nordea's decision to relocate its headquarters to neighbouring Finland, which is in the eurozone, is suddenly raising the pressure on Sweden to join the European banking union which provides a big cushion to member states' banks in case of failures.
Such a move would have many advantages and one big downside: Control of Sweden's big banks would shift from Stockholm to the European Central Bank (ECB), a move Swedes have so far rejected because they fear a loss of national sovereignty.
'On a par' with the competition
Nordea is fleeing Stockholm after the government raised by almost 40 percent a special bank tax designed to shield the country from a future financial crisis.
The bank wants to put itself “on a par with its European peers”, Nordea's chairman of the board, Bjorn Wahlroos, argued in announcing the move. Since the 2008 financial crisis, Swedish banks have been required to contribute to a specially-created fund to be used to bail out a bank or financial institution in the event of a collapse.
Meanwhile, the European banking union was created in the wake of the 2010 eurozone crisis. The top banks of its member states are placed under the supervision of the European Central Bank, and the banks pay into a joint fund to cover the cost of a potential bailout.
In July, two months after Nordea announced that it would be moving, Sweden's Financial Markets Minister Per Bolund raised the question of Swedish membership in the banking union, which is open to all European Union members — including those not in the eurozone, like Sweden.
“If the study we are carrying out clearly indicates that becoming a member would bring great advantages to a country like Sweden, then it would not be excluded” for the country to sign up, he told news agency TT.
Johan Javeus, chief strategist at Swedish bank SEB, said he believed Nordea's move “has increased the likelihood of Sweden eventually deciding to join the banking union”.
“Nordea is also big in Denmark and the Danish government may also decide to join the banking union as a result of Nordea. If so the Swedish branch of Danske Bank will also come under EU supervision, increasing the pressure on Sweden to join the banking union even more,” he told AFP.
Denmark is currently evaluating possible membership in the banking union and is expected to announce its decision in the next two years.
At a seminar in Stockholm in September, the European Commissioner for Economic and Financial Affairs Pierre Moscovici encouraged Sweden to join the union, which has been operational since 2013.
“You will find greater security, but also greater market access,” he said. “The banking union is a debate you have to have, but no one should force you to join the eurozone institutions,” he said.
But, he added, “you should ask yourself why this happened,” he said, referring to Nordea's decision.
For Per Bolund, one of the advantages of joining the banking union would be sharing the risk of managing “big banks if they run into financial difficulty”. Sweden is expected to study the issue for the next few years.
First step towards the euro ?
When an EU country joins the banking union, supervision of that country's big banks passes from its national authorities to the Frankfurt-based European Central Bank.
“If the Swedish national supervisory authority, or the Swedish government for that matter, has any concerns, it will not be able to take direct action without consulting the European authorities,” explained Aneta Spendzharova, assistant professor at the University of Maastricht.
This loss of independence over its banking institutions is what has so far halted Sweden from joining, as non-eurozone countries have no voice and no vote at the ECB.
“You can't ignore the fact that the decision-making can be a little problematic for countries not in the eurozone,” Swedish Finance Minister Madgalena Andersson noted during the seminar with Moscovici.
Spendzharova said meanwhile that if Sweden joins the banking union, “this will create pressure to consider once again joining the eurozone, so that Sweden can have a full seat in the ECB”.
Sweden, which has enjoyed a stable economy and growth for a number of years, has long refused to join the eurozone, primarily because of the heavy influence Germany and other heavyweights have on the ECB.
“The eurozone is an inclusive area, this is an open door,” Moscovici insisted.
By Helene Dauschy