Dagens Nyheter has yesterday:
Michael Mauboussin: Here’s what active managers can do
The debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More
Anders Borg [Swedish Finance Minister] is more optimistic about the prospects of reaching an agreement about the controversial EU Bank Union at today’s [yesterdays] finance minister summit. The Swedish demand for a change of the EU constitution to give non-Euro countries the same treatment has gained support.
– We are starting to see the components for a compromise, Finance Minister Borg said on his way to the meeting.
– But Sweden has a very clear position. We will not accept a solution in which we get second class members in this authority. Everybody must get the same treatment and this is a hard demand from our side.
Anders Borg pointed out that the EU-commission in a new report also says it will need a change of the EU-treaty to insure the non-Euro countries a position in a European Bank Inspection under the ECB.
– The Commission says in the blueprint that it will create a firewall between the monetary policy and the inspection of the banks as the Germans demand, and if you also create equality between the countries, then a change of the treaty is the most reasonable alternative. Obviously the Commission has made the same legal analysis as we have.
– Much talks pro a simplified change of the treaty. Paragraph 127 is already in the treaty. This is not a question of transferral of sovereignty, as it already was in the former change of the treaty, says Anders Borg.
He thinks such a change would take 18-24 months to complete, when it must be ratified by the parliaments of all EU-countries. It probably will mean that Sweden does not join the Bank Union before this constitutional change has been made.
We now know that the meeting was postponed a week, and here we see why.
The stumbling block is clearly Sweden demanding a change of the treaty, and in the worst cases this will mean a delay of 18-24 months. Treaty changes are almost as difficult to get through parliaments as through the Congress in the USA.
This is known as a spanner in the works.
Equal treatment will mean that Finland, which is a Euro-zone member, will take second place to Sweden in practice, as Finland’s two largest banks (Nordea and SEB) are Swedish. Thus, the Swedish state owned bank. Nordea Bank AB (STO:NDA-SEK), and the Swedish state would be on opposite sides of the Finnish table – there was a reason for the disgruntled expression on the Finnish Finance Minister.
The German Finance Minister Wolfgang Schäuble must have had a fit – tampering with the German currency?
The reason is obviously that Sweden cannot afford a retreat out of both Denmark and Finland of the major bank units. These retreats involve impairing assets to a “reasonable” value – which probably would leave precious little equity in the Swedish banking system – as National Irish Bank has for 5 years bled Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) white. On the other hand, Finland is not likely to just accept losses incurred by the Swedish state through irresponsible transactions in their country.
Denmark will have to pay Finland to disengage – fair enough. But Sweden could very well be ruined. That is also why the Swedish position “in principle” is positive, as that would mean that recapitalization would be through the EU – making Spain look like the teacher’s pet. Secondly – if I’m not mistaken (and I might be) – Sweden has already been wrestled into leaving Danish real estate mortgage banking (nothing official, but the Danish CB stopped quoting interest rate on a daily basis of sovereign bonds as of November 30th).
One thing is certain: If Sweden does not accept a compromise, there will be no help for Sweden recapitalizing Nordea Bank AB (STO:NDA-SEK) and SEB – and all possible support for Finland with the full might of Bundesbank behind it.
That is only the start! Impairing those assets will have a snowballing effect on all real estate mortgages and value in Scandinavia. The bank loans on top of the mortgages are, in Denmark, alone around 40 bio. USD. The real estate values for September 2012 (yes, they are only available now) has strangely enough “stabilized,” so collateral for real estate mortgages is intact!