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MONEY

Swedish banking giant quits Baltics – says it’s not worth the cost

Swedish banking giant Handelsbanken is closing down its Baltic operations, but denied the decisionhad anything to do with recent money laundering scandals tied to two other Scandinavian banks.

Published: 16 May 2019 11:54 CEST
Swedish banking giant quits Baltics – says it's not worth the cost
Handelsbanken's office in Stockholm. Photo: Alexander Larsson Vierth/TT

Handelsbanken said on Thursday it was leaving the Baltics due to unsatisfactory performance.

“We have come to the conclusion that profitability is too low, while costs are too high. Despite efficiency-enhancing measures in the past few years, the operations in the three Baltic States have not shown satisfactory profits,” Richard Johnson, head of Handelsbanken International, told AFP.

He went on to say that circumstances had also changed drastically since the bank established its presence in the region a decade earlier, and that local offices were no longer necessary.

“Rapid technological advances, which have resulted in new players on the market, and new opportunities, mean that we can now help many of our customers directly from the home markets,” Johnson said.

The bank would therefore start to wind down its business in Estonia, Latvia and Lithuania during 2020.

READ ALSO: What you need to set up a bank account in Sweden

Johnson also stated that the bank's decision had nothing to do with the recent scandals surrounding allegations of extensive money laundering at two other Scandinavian banks tied to Baltic operations.

Denmark's largest bank Danske Bank is currently the target of criminal probes in several countries over some 200 billion euros ($226 billion) in transfers that passed through its Estonian branch between 2007 and 2015, involving some 15,000 foreign clients, many Russian.

Swedish competitor Swedbank has also been embroiled in a scandal since February when an investigative news show on public broadcaster SVT claimed to have seen documents showing that at least 40 billion kronor ($4.3 billion) of suspicious transactions had been channelled to Baltic countries from Swedbank accounts.

Many of the transactions took place between 2007 and 2015, and some of the money may have first transited Danske Bank.

Handelsbanken has largely remained clear of the money laundering scandals and its operations in the Baltic States have only represented a fraction of some of its Nordic competitors.

For instance, according to the Estonian Banking Assocation, Handelsbanken's market share in Estonia in 2017 was only one percent, compared to Swedbank's 40 percent.

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MONEY

How safe is your money in a Swedish bank account?

What protections are there for your money if your bank goes bust? We had a look at the rules in Sweden.

Published: 13 March 2023 16:29 CET
How safe is your money in a Swedish bank account?

US bank Silicon Valley Bank (SVB), a favourite bank to US tech firms and a well-known lender to start-ups, went bust on Friday morning after being hit by a classic bank run, as its clients sought to withdraw $42bn in a single day, a quarter of its deposits. Signature Bank, another American bank, was shut down on Sunday, after suffering a similar bank run on the back of the SVB collapse.

So, what would happen if your Swedish bank went bust? Should you rush to withdraw all your money if your bank looks to be in a precarious situation? Here’s the situation in Sweden.

Deposit guarantee

You may not have realised this when you opened your Swedish bank account, but most bank accounts in Sweden are covered by the government’s insättningsgaranti or deposit guarantee. Simply put, this guarantee means that, if your bank goes bust, the state will foot the bill and refund your money.

Most Swedish banks are signed up to the deposit guarantee, but you can check whether your bank is included on this list.

How much money does it cover?

In 2023, the deposit guarantee is 1,050,000 kronor per person per bank, so you will get all of your savings back if they are under this figure.

Note that this is per bank, so if you have accounts in multiple banks you have a separate deposit guarantee for each bank, meaning your deposit guarantee could cover millions of kronor if you spread it out over more than one bank.

If you have a joint account, you’ll each have an individual deposit guarantee, so a couple sharing an account would be able to get 2,100,000 kronor of savings back if their bank collapsed.

It’s also possible to apply for an extra supplementary amount of up to five million kronor for deposits “coupled to certain life events,” the Swedish National Debt Office explains on its website, if you’ve sold a property, received a damages payout from a court case, or an insurance payout, for example. This can’t be applied for until you’re in a situation where a payout is due. 

The guarantee applies to all private individuals (including children), as well as companies and other so-called “legal individuals”, such as the estates of deceased people, and it applies independently of any debts or loans you have with the bank in question.

Banks, municipalities, regions and government authorities are not covered by the guarantee.

How is it funded?

You may be wondering how the state is able to guarantee billions of kronor in the event that a Swedish bank fails. The answer is simple: the deposit guarantee is funded through fees charged to banks and other financial institutes which are then held in a fund.

The Financial Supervisory Authority has the power to decide when the guarantee should come into effect, and it also applies if the Swedish National Debt Office places a bank or other financial institute into administration.

Why does it exist?

The guarantee was originally introduced in the autumn of 1992, which was a turbulent time for the Swedish economy.

In order to stabilise the economy, the government introduced a general state bank guarantee, which in 1996 became a deposit guarantee covering 250,000 kronor per person per bank.

The idea behind the guarantee is to discourage people from withdrawing their money from a bank in crisis, thereby contributing to more stability in the financial system, as customers know they will get their savings back even if the bank eventually goes bust.

During the financial crisis of 2008, the guarantee was increased to 500,000 kronor. 

Since 2010, new EU rules have meant that the deposit guarantee should cover an amount equal to 100,000 euros, with the amount in local currency adjusted every fifth year to match this number.

The last adjustment was in 2021, where the guarantee was raised from 950,000 kronor to 1,050,000 kronor.

How many times have payouts been made?

Payouts have been made three times since the deposit guarantee was introduced in 1992. The first two payouts were in 2006, when two financial institutes, Custodia AB and Almänna Kapital went bust.

In Custodia AB’s case, 1,282 affected customers were reimbursed with a combined 134.2 million kronor, and 287 of Almänna Kapital AB’s customers received a combined total of 40.9 million kronor.

The third payout was in 2010, when Danish bank Capinordic went bust. As this was a Danish bank with a branch in Sweden, the Swedish deposit fund paid the difference between the Swedish guarantee, which was 500,000 kronor at that time, and the Danish guarantee, which was 50,000 euros. This meant that 825 customers received a combined payout of 10.6 million Swedish kronor.

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