Nordic banks gain new status as safe haven

Nordic banks are experiencing the halo effect from having adopted the Swedish Model to handle a previous bank solvency led financial crisis.

First, knowing they would not be bailed out, the Nordic banks restrained themselves in the buildup to the current financial crisis.  As a result, the losses at most of the banks were within the bank's capacity to absorb.

Second, since they are viewed as solvent, they have become a safe haven for individuals looking to escape the risk of having deposits in Greece, Portugal, Spain or the EU more generally.

As reported by the Wall Street Journal,

Two decades after a devastating banking crisis, Nordic banks are playing a new role: a safe haven for scared euro-zone depositors and investors....

"It's a totally new situation for us," Torsten Ostensen, Nordea's head of Norwegian private banking, said in an interview. "We have received so many requests [to open accounts] that we have had to introduce completely new routines." 

Winning international clients comes with a new set of tasks, including being able to speak in more languages, applying more scrutiny to depositors to prevent fraud and money laundering, and establishing national identification numbers for foreigners, Mr. Ostensen said. 

Thus far, the trouble has been worth it: The growth in deposits has shrunk Nordic banks' reliance on flighty capital markets as a source of funding, reducing their risks at a time of heightened uncertainty in Europe....

Scandinavian currencies are particularly strong against the euro, making Nordic banks solid candidates for clients wanting to pull cash out of troubled banks in Southern Europe. 

As a result, Norwegian and Swedish bankers are profiting from the continued outflows in Greece and Spain, and the nervous posture many investors are taking toward the common-currency bloc as whole.... 

"Sweden and Norway are like safe islands while the rest of the world is to a large extent drowning in debt," said Constantin Bolz, a currency analyst with UBS Wealth Management in Zurich. His group offers products and advice to customers ranging from private pension savers to ultrahigh-net-worth family offices and institutional funds, and he said many have turned to Scandinavia because they want to diversify away from the dollar and euro. Sweden and Norway are both outside of the euro zone, and Norway isn't even a member of the European Union. 

"Clients were afraid of what would happen if the euro would break apart and the U.S. [Federal Reserve] continues to print vast amount of U.S. dollars," he said....