Thread by @jeuasommenulle

A funny story & a cautionary tale on the shortcomings of the banking union.

Nordea is the biggest Swedish bank - which is not in the banking union.

At one point, they decided that they were not happy with Swedish supervision (too conservative) and they moved their HQ to Finland

Of course, they didn't say it, but they were hoping for substantial capital relief by using SSM rules instead of Riskbank rules.

But you see, the trick is that under the maze of EU rules, supervisors are in charge of Pillar 1 & Pillar capital requirements...

BUT not of macro-prudential capital requirements!

So the Finnish authority, not the SSM, is in charge of macro-ppu in Finland. Amusingly, they decided to apply to *Swedish mortgages* owned by *Finnish banks* the same risk weight as applied by the Swedish Riskbank!

(But only if the book size is above 5bnSEK - if you have the impression this was designed only for Nordea you might be correct.)

This will reduce Nordea's CET1 ratio by 90bps.

But the real lesson here is that it so funny that by escaping the Riskbank for the SSM, Nordea ended applying Riskbank rules decided by the Finnish authority.

Yeah, the banking union works so well

@nicolas_veron tu vas adorer

Sorry guys, Riksbank, of course, not Riskbank !