The biggest banks of Scandinavia have failed to curb risks of financial innovation and would avoid downgrades unless national regulators requiring stricter measures, according ratings agency to Standard & Poor's.
The lenders are Denmark's Danske Bank A/S and Nykredit A/S, while Sweden would be Nordea Bank AB and Svenska Handelsbanken AB and according to S&P analyst Per Tornqvist, the moves done still are not enough. He said that competitive pressure would force banks to retain short term funding and this would require regulators to intervene to help banks extend their funding maturities.
S&P said that the AAA-rated Scandinavia banks are vulnerable to funding shocks compared to their peers in the US, France and Italy. The ratings company had called out Nordic lenders' practice of utilizing funds as short as a year to finance loans for terms of 30 years. There is also increaaed reliance on short-term offshore borrowing. This was confirmed by the Financial Supervisory Authority, as Swedish banks have become more dependent on market funding compared to banks from other countries.
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