Tag Archives: Bjørn Skogstad Aamo

Financial Authorities See No Point In Stress Testing Norwegian Banks

The Financial Supervisory Authority of Norway can’t see any need for Norwegian banks to participate in EU‘s stress tests. Neither does Committee of  European Banking Supervisors (CEBS) who is conducting the test on behalf of the EU administration.

“We don’t see any national need for Norwegian banks to participate in this test.”

Bjørn Skogstad Aamo

Bjørn Skogstad Aamo

While seven Nordic banks are among the 91 tested, there is no Norwegian on the list. Director of the Financial  Supervisory Authority of Norway, Bjørn Skogstad Aamo, thinks that’s okay, and don’t see any need for stress testing Norwegian banks.

“We don’t see any national need for Norwegian banks to participate in this test. The CEBS came to the same conclusion, and that is not surprising,” Mr. Skogstad Aamo says to the Norwegian website DN.no.

The Financial Authority of Norway, however, have been in contact with the European Committee of European Banking Supervisors (CEBS) with an inquiry about Norwegian banks was to be include in the stress tests.

CEBS dis not find this necessary, according to the Norwegian director.

The Smoke And The Mirrors

There are mainly two reasons why the Norwegian banks was excluded from the EU stress test, says Mr. Skogstad Aamo.

“One reason was that the effects of the crisis in Europe will be modest for Norwegian banks,” he says.

CEO Rune Bjerke, DnB NOR ASA

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“Only DnB NOR has operations in other countries, and it is limited. If DnB NOR had significantly larger market shares or businesses in other countries, the EU would have seen a need for Norway to be included,”says Mr. Skogstad Aamo.

Financial supervisory director emphasizes that they’ve been in contact with DnB NOR and that Norway’s largest bank in no way would object to go through the European stress test.

“The second reason was that Norwegian banks have an extremely low exposure to the so-called PIIGS-countries. Only one percent of the balance of the Norwegian banks are loans or securities to these countries, while other countries’ banks have up to 10 and 20 times as much exposure,” the supervisory director says.

According to the Financial Supervisory Authority of Norway, the EU believes that Norwegian banks are stable even if the PIIGS-countries default on its debt.

“It wouldn’t had any consequences for Norwegian banks,” Mr. Skogstad Aamo says.

What?!

One might wonder if the Norwegian supervisory director is speaking against better knowledge, or if he really doesn’t have clue to what’s going on in his own back yard.

Unfortunately, earlier statement from the Norwegian Financial Authority suggest the last alternative is closest to the truth.

In May 2007 I made a phone call to the Norwegian Financial Authority. after I had conversations with several international experts, like Paul Wilmott and Espen Gaarder Haug, who both expressed deep concerns about the situation that was beginning to unfold in the credit derivative market.

Speaking with the director of market supervision, Mr. Eirik Bunæs, I was told that the Financial Authority could not see any immediate danger in either the international or the national financial markets.

“But we’re keeping our eyes on things,” Mr. Bunæs said.

Prime Minister Jens Stoltenberg, Norway

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After Lehman Brother went bankrupt about a year later, Norway’s Financial Authority sided with the Central Bank of Norway and the Finance Ministry in a joint statement, saying the Norwegian banks was rock solid and that the crisis would not have any fundamental effect on the Norwegian economy.

Two weeks later the Norwegian government was forced to come up with a NOK 350 billion bailout package to the Norwegian banks – mainly to save DnB NOR, (who used the occasion to make the biggest illegal insider trade in Norwegian financial history).

In this context, it’s only fair to mention that both the CEO of DnB NOR, Rune Bjerke and the director of the Financial Supervisory Authority of Norway, Bjørn Skogstad Aamo, is members of the same political party as the Norwegian prime minister, Jens Stoltenberg.

The Little Nice Bank of Norway

Okay, back to the point in case: The only bank in Norway that could have been subject to the EU stress test is DnB NOR, as the director rightfully points out.

But according to Mr. Skogstad Aamo, the banks operations outside Norway is “limited.”

The fact is that DnB NOR make about 20% of its income abroad, and is one of the largest players in the international offshore market.

Looking at the international organization chart, DnB NOR don’t seem very “limited” to me:

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In addition, DnB NOR is among the largest bank holding companies operating in the Baltic region, side by side with the Swedish banks; SEB,  Handelsbanken and Swedbank who all are being tested by the CEBS.

So, what makes DnB NOR that much safer?

The Extremely Low Exposure

According to the director of  The Financial Supervisory Authority of Norway, Norwegian banks have an extremely low exposure to the so-called PIGS-countries, compared with other European countries’ banks.

That may be right.

But Norwegian life insurance companies have a significant exposure, with 4% of their total assets (NOK 12 billion) invested in Portugal, Italy, Ireland, Greece and Spain.

Norway’s biggest life insurer is Vital Forsikring – owned by DnB NOR.

My guess is; with about 80% of the market share among Norwegian private citizens, and a state ownership of 34%, DnB NOR can’t be allowed to fail anything.

If the bank fails, most of Norway’s financial system is at risk of breaking down – a systemic risk = that means “too-big-to-fail”…

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Two Tests – Two Results

Director Skogstad Aamo stress that Norwegian banks are being stress tested on regular basis by the Central Bank of Norway.

And the test are probably tougher than what the banks in Europe are exposed to at the moment, Mr. Skogstad Aamo believes.

“In the stress test conducted in May, Norges Bank assumed a very negative economic progress for the Norwegian economy, where GDP was set seven percentage points lower than the main estimates. The test showed that even then, they would all  manage the capital requirements,” the Finance Authority Director says.

(In comparison; some news reports claims that the worst case scenario in the EU’s test is a 3% lower than estimated GDP).

But here’s the really interesting part:

Governor Svein Gjedrem, Central Bank of Norway

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The Norwegian Central Bank also did a stress test in December last year, but with a completely different – and probably far more realistic – worst case scenario.

In the December test was the worst case scenario a total freeze in the credit markets, and a withdrawal of deposits of 5%.

120 out of a total of 149 Norwegian banks would not be able to survive more than one month, the test showed.

This also goes to show how important the matter of method will be when EU reveals parts of the test, Friday afternoon.

By the way; the Norwegian Financial Authority Director also hopes that the financial markets soon will regain confidence, according to DN.no.

Related by the Econotwist:

Norway: Most Banks Fail In Stresstest

Norway’s GDP Fall For First Time In 20 Years

DnB NOR: “Comprehensive System Failure”

DnB NOR Except Penalties of NOK 26 million

Nordic Central Banks Agree On Baltic Bank Bailout

European Banks Hunting For EUR 1,65 Trillion

All Nordic Banks Will Pass Stress Test, Nordea Says

The EU Stress Test: Working The Media

European Bank Stress Tests Are Loosing Credibility

DnB NOR Net Profit Reduced By 33%

How To Make A Rat Look Like A Puppy

DnB NOR’s Latest Fuck-Up

Norway: Storebrand Subsidiary Sued Over Insurance Contracts

Morgan Stanley To Buy Bad Baltic Loans?

The Nordic Superbank Dream

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Tre bobler og en bank

Kristin Halvorsen
Image via Wikipedia

REBLOG IN RESPONSE:

This comment was written almost a year ago. Today the norwegian bank says the problems in Latvia comes as a “big surprise” to the company (HegnarOnline.no)……Excuse me, but where have they been the last year?!…

Tre bobler og en bank

Norske banker er bunnsolide og Norges største bank, DnB NOR, er den mest solide av dem alle, blir det hevdet. Det er i beste fall en påstand med modifikasjoner.

Finansminister Kristin Halvorsen, sentralbanksjef Svein Gjedrem og kredittilsynsdirektør Bjørn Skogstad Aamo har de siste ukene forsikret oss om at norske banker er bunnsolide, trygge og ikke kan bryte sammen slik vi har sett amerikanske og europeiske banker gjøre.
Vel, la oss se nærmere på Norges største bank, DnB NOR.

Kreativ finansboble

DnB NOR, har vært en av de ivrigste bankene i Norden når det gjelder å finne opp nye, kompliserte spareprodukter.
Produkter, som garanterer avkastning, er blitt solgt til cirka 150 000 norske småsparere gjennom flere banker. De fleste gjennom DnB NOR. Førstkommende tirsdag kommer Bankklagenemda med en prinsippavgjørelse i forhold til de mange klager fra folk som har tapt betydelige summer på spareproduktene og føler seg lurt.
Får klagen medhold i nemnda vil det åpne for massesøksmål mot DnB NOR. Noe som kan koste banken milliardbeløp.
Datterbanken DnB NORD, med hovedsete i København, eies 51 prosent av DnB NOR og 49 prosent Norddeutsche Landesbank. Sistnevnte er en av Europas fremste spesialister på såkalte strukturerte produkter. DnB NORD, opererer i Tyskland, Polen, Skandinavia og Baltikum, og har for eksempel nettopp startet salg av treårige banksertifikater, knyttet til utviklingen i fire ledende aksjeindekser, med garantert avkastning på 15 prosent.
Det kan lett bli flere søksmål.

Tapene kommer

Ifølge finanshuset Carnegie vil den norske banken bli nødt til å skrive ned verdien på sin obligasjonsportefølje med 4,4 milliarder kroner i tredje kvartal som følge av finansuroen.
DnB NOR må trolig bokføre et tap på rundt en halv milliard kroner.
Men det kan bli mer.
DnB NOR har en såkalt “eksponering” mot konkursbanken Lehman Brothers i form av et usikret lån på 25 millioner dollar. Det betyr at DnB NOR i verste fall kan tape alt; 150 millioner kroner. I tillegg har Lehman vært DnBs motpart i en rekke derivatkontrakter, og ingen vet nøyaktig hvilken risiko som ligger her. Lehman Brothers er for øvrig ikke det eneste finanshuset DnB NOR har handlet med. Det finnes sikkert en “Lehman” eller to i Europa også, og i Asia.
Meglerhuset First anslår DnB NOR sine utlånstap til 1,24 milliarder kroner i år, og til 3,57 milliarder neste år.
Det er konservative anslag. Med den eskalerende utviklingen vi ser i økonomien, vil tapsanslagene i DnB NOR trolig bli oppjustert i tiden fremover.

Krasj- eller nødlanding?

Alt peker mot en kraftig økonomisk nedkjøling i Norge.
DnB NOR gruppen, som også inkluderer Postbanken, vil merke dette i form av tap på investeringer, økt mislighold av lån og generelt lavere omsetning.
Men det blir neppe bankens største problem.
Den rød/grønne regjeringen, med plass i DnB-styret og LO på sidelinjen, vil bruke det som kan brukes av økonomiske og politiske virkemidler for å opprettholde folks velferd og levestandard. Det blir nok en turbulent, halvkontrollert nødlanding, men myndighetenes mottiltak vil trolig gjøre at folk får betalt regningene sine og bedrifter som er viktige for arbeidsmarkedet vil trolig få støtteordninger som holder dem flytende i den mest kritiske perioden.
Det vil indirekte støtte bankene.

Baltisk boble

DnB NORs strategi er å befeste sin markedsposisjon i Norge og vokse i utlandet – spesielt i nærområdene Baltikum og Øst-Europa.
I 2007 kom rundt 20 prosent av bankens inntekter fra utlandet.
I Baltikum har nordiske banker, inkludert DnB NOR, blåst opp en boligboble ved hjelp av lave renter, få reguleringer og aggressiv markedsføring. Datterbanken DnB NORD lokker boliglånskunder med 90 prosents finansiering, to års avdragsutsettelse og gratis kredittkort.
Men gjeldsgraden i landene er blitt farlig høy, samtidig synker produktiviteten, og priser og lønninger stiger.
Økonomer mener det er sannsynlig at valutaene i de baltiske statene blir devaluert. Med to tredjedeler av gjelden i euro, vil det bli kollaps i det baltiske lånemarkedet hvor DnB NOR er blant de tre største aktørene.

Shippingboble

DnB NOR har også bygget seg opp til å bli en av de største aktørene i det internasjonale shippingmarkedet, med forpliktelser for 25 milliarder dollar (150 milliarder kroner).
Veksten i shippingindustrien, som i stor grad har vært drevet av økende import og eksport i Kina, er nesten stoppet opp. Det er overkapasitet av skip og fraktratene for tørrlast er halvert de siste fem månedene, mens prisen for å leie tankskip har falt 90 prosent bare den siste måneden.
Rederier tjener ikke penger nok til driften og kan snart få problemer med å betjene gjeld.
Lastebåter er vanligvis 80 prosent lånefinansiert. Her dreier det seg om store penger – og om store potensielle tap.
Dessuten har kredittkrisen satt en stopper for mange planlagte byggeprosjekter som kunne bidratt til å opprettholde vekst i sektoren. DnB NOR er blant annet involvert i utbyggingen av en rekke kinesiske havner.

Vinn eller forsvinn

Den globale banksektoren er inne i en fase som kan redusere antall banker med inntil 50 prosent.
Kun de største, sterkeste og smarteste vil overleve.
I global sammenheng er ikke DnB NOR spesielt stor eller sterk. Hvor smarte Rune Bjerke & co er gjenstår å se.
Aksjekursen til DnB NOR er halvert siden januar. Om finansproblemene vedvarer, tapene oppjusteres og aksjekursen faller ytterligere – noe som ikke er helt usannsynlig – vil også Norges største bank være moden for en redningspakke.

PS:
Thee days after this article was published for the first time the Norwegian government presented a NOK 300 bn bail-out package to Norwegian banks.

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