Sweden’s largest lender, Handelsbanken, is the latest bank to announce that it will be leaving the Baltic market, closing its branches in Estonia, Latvia and Lithuania.
After a decade of operations in the Baltic States, the bank issued a statement saying that it is set to gradually discontinue its operations in the three countries. “Despite the implementation of efficiency-enhancing measures, operations in the region have not performed satisfactorily. Profitability is too low, while costs are too high,” read the statement.
Handelsbanken is not the first bank to leave the region. Danske Bank has also recently pulled out of the Baltics, though for different reasons. Denmark’s largest lender announced it would retreat from the entire Baltic region in February after being kicked out of Estonia in the wake of a money laundering scandal. Nordea Bank and DNB are also retreating, after deciding to sell most of their Baltic joint venture Luminor to a group of buyers led by Blackstone.
The heads of both Estonia’s and Lativa’s financial regulators have expressed concerns over the fact that Swedish banks are leaving the region.
“Sure, we are very worried. Should other banks follow the route of Danske, it would be very destabilising in all three Baltic countries,” Pēters Putniņš, head of the Financial and Capital Market Commission (FKTK) in Latvia told the Financial Times.
“If you think that somebody in the headquarters of the large Swedish banks would think their Baltic banks are more of a liability than an asset, it’s rather uncomfortable for me. You don’t know who would replace them,” added his Estonian counterpart Kilvar Kessler, chairman of the Estonian Financial Supervisory Authority (FI).
“This is the price you pay if you don’t have your own banks,” added Mr Putnins.
However, Erik Thedéen, the head of Sweden’s financial regulator said in an interview with the Financial Times that his institution would be sensitive to the geopolitical need for Swedish banks to stay in the Baltics when imposing remedial action. “It’s extremely important that we do this in a manner that does not push the Swedish banks out of the Baltics. It goes beyond my [professional] responsibility; it’s important for the European context.”