The economic recovery in each of the countries that comprise the Nordic and Baltic region (Denmark, Estonia, Finland, Latvia, Lithuania, Norway and Sweden) has been a key driver of the banking sector’s fortunes in the past year. Led by a particularly sharp economic rebound in the Baltic countries after the deep recession of 2009, economic growth across the entire region has helped strengthen balance sheets and stabilize, in some cases even grow, banking businesses. However, the recovery so far has been fragile, and important risks to the Nordic and Baltic banking sector persist, with the threat of contagion from the eurozone crisis chief among them. In May, ratings agency Moody’s downgraded Sweden’s Nordea, Handelsbanken and Landshypotek, as well as Norway’s DNB Bank, on such concerns even though they are some of the largest and best capitalized banks in the Nordic region. Moody’s said the decision was chiefly because of the banks’ "comparatively high reliance on wholesale funding" and modest profitability, which would make it hard for them to quickly build capital in a crisis. |
