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ECONOMY

Should Sweden join the European banking union?

A planned move by the Nordic region's biggest bank from Sweden to Finland has sparked much soul-searching among Swedes about the wisdom of trying to protect its banks from future crises without eurozone help.

Published: 8 November 2017 07:45 CET
Should Sweden join the European banking union?
The European Central Bank in Frankfurt. Photo: AP Photo/Michael Probst/TT

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.

READ MORE: Nordea moves headquarters from Sweden to Finland

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.

READ ALSO: Swedes don't want to join the euro – now or ever

“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.

Risk sharing

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.

READ ALSO: Sweden's economic growth is 'crazy strong': analysts

“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

For members

MONEY

Readers’ tips: How to find the best bank for foreigners in Sweden

The Local asked its readers to share their tips about which bank offers the best account for foreigners living in Sweden. Here's what they had to say.

Published: 31 January 2024 11:59 CET
Readers' tips: How to find the best bank for foreigners in Sweden

Which bank offers the best option for foreigners in Sweden?

More than 180 readers responded to The Local’s non-scientific survey, and we got a wide range of replies.

No bank received a majority of votes, but Handelsbanken generally seemed to be the most popular (it was the preferred option by just over a fifth of readers), followed by Nordea, SEB and Swedbank – in other words some of Sweden’s main banks.

However, these banks got a relatively equal number of votes, and they were also frequently mentioned when readers were asked which banks they would recommend against using, so all in all, the survey didn’t produce a conclusive result.

We got the strong impression from reading all the responses that it may matter more which branch you use than the bank itself, as people’s experiences varied greatly even with the same company.

What makes a bank good for foreigners in Sweden?

It depends on what stage of the “moving to Sweden” process you’re at. If you’ve just arrived, you may be looking for a bank that’s happy to set up an account for you without a personnummer, the Swedish personal identity number which gives you access to a range of services.

If you’re buying an apartment, a bank that’s willing to give a mortgage to people without permanent residency or who don’t require a long Swedish credit history may be the best option for you.

If you’ve lived in Sweden for many years, those things may not matter as much any more and things like customer service, ease of online banking and interest rates may be more important.

Features that generally made readers like their bank included good customer service, convenient international money transfers, online services fully available in English and staff being willing to speak English to customers, cheap rates and, more than anything, being able to set up a bank account without having a Swedish personal identity number.

Conversely, many readers were put off by things such as invasive questions, perceived rudeness or discrimination due to not speaking Swedish, difficulties getting an account despite being eligible, long waiting times for an appointment, and a lack of any of the above services.

What are the need-to-know tips about banking in Sweden?

Although in theory you have the right to set up at least a debit account without a personnummer, it still tends to be the main stumbling block for newcomers. To spare yourself the hassle of negotiating with bank staff who may not be used to dealing with foreigners, several readers suggested waiting until you have one, if you can.

“Be prepared for a world of complications if you don’t have a personnummer yet. If you moved for work, ask your work HR person to help get you a coordination number, which can be used to open a bank account (even though sometimes the banks themselves are unfamiliar with this concept if they don’t work with many foreigners),” said Abigail, an American PhD student in Stockholm.

READ ALSO:

Lowering your expectations and starting with a basic account without requesting a credit card or a mortgage right away, may help you get a foot through the door.

“All banks in Sweden are in for business. Contact the bank’s helpline and fix an appointment and walk in. There’s a misconception about banks in Sweden that you cannot get a bank account if you don’t have a job. Banks are very cooperative with opening accounts. There could be arguments when getting credit cards or loans, but for daily transactions they’re very cooperative,” said an Indian reader, now a permanent resident, who set up his SEB account without a personnummer.

Many readers also said knowing your rights and being prepared before walking in helps – and if possible, try to get an appointment to meet someone face to face rather than calling or emailing.

“Have every possible piece of documentation before you enter the service branch and maybe a printout of your rights entitling you to a bank account. I’m a non-EU citizen, I think this record abundance was crucial to my quick success,” said a US citizen in Malmö who was able to get his account and BankID on the same day as walking into one of Nordea’s service branches.

“Always be extremely clear and direct about your intentions with the bank. If you’re failing to make progress over the phones or via email, drop in to a physical location. I’ve discovered employees at many smaller or more rural branches are much more willing to help if I’ve been ignored at their central downtown branches or can’t resolve issues over the phone,” said Theodore Squires, a PhD student who said Nordea was unwilling to set up an account before he had his personnummer, but on the other hand gave him a mortgage despite limited tax history and a complex salary set-up.

Don’t be afraid to shop around, and there’s always the option of changing banks further down the road – perhaps start with one that is liberal with offering accounts to foreigners without a personnummer and, once you’re in the system, change to one that better suits your long-term needs.

“Nordea was a disorganised mess while I awaited my personal number and ID. It introduced me to the low quality bar for customer service in general in Sverige. I switched to SEB after I got my ID and staff were much more willing to help me get started in the country,” said Jeremiah from the US.

Some readers recommended online-only neobanks such as Revolut, as good options for a first account, as it’s often easy to set up an account with them and transfer money internationally.

But bureaucratic nightmares and long waits for an appointment notwithstanding, many readers urged fellow newcomers to Sweden to play the long game if your plans are to stay in the country.

“I could never get a credit card until my first year’s tax return was complete. Advice, if possible try wait for a year before trying to get credit. If rejected it just brings your credit score down and no one tells you it’s because they cannot see your income until after your first tax return is complete,” said Clifford, an IT consultant from South Africa.

“Be patient and endure. Like with many other aspects of life in Sweden,” said Dusan, a university lecturer.

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