Following are excerpts from a CNBC interview with Casper von Koskull , CEO of Nordea Bank, from the World Economic Forum 2017 with Steve Sedgwick and Geoff Cutmore.
GC: Let's stick with the theme of how European banks are set to fare in full year 2017. Casper von Koskull has joined us, the CEO of Nordea Bank, good to see you Casper.
CK: Good morning.
GC: Thanks for coming up here. Well just give us a quick thumbnail. What do you think 2017 holds for you, and the other banks in the region?
CK: I think it's more of the same. I.e. we need to continue transforming ourselves. We need to actually focus on our customers, the customer is always first, and transformation actually means that we need to become more customer-centric, and be more efficient, and actually give real value to customers and society.
GC: Okay. Let's talk about some of the headwinds, then, because clearly Brexit is a political risk, Donald Trump is a political risk, elections across Europe are a political risk for this year. Do you worry about those issues, in terms of the business?
CK: I do. I mean, I think we also have to remember that we have actually lived in this low-growth, low rate environment, with geopolitical volatility, for already some time, and we'll probably see more of it. So hence, yes, I think we've shown that we can adapt, but of course, I am cautiously optimistic but at the same time realistic that we have events, and we need to be able to react to those events.
SS: Casper, I'm fed up with banks whining about regulatory capital. I must be honest. And I say to all these guys, 'If you're Scandinavian, you'd have much higher regulatory capital. Do you think there's any case, for the people who are having to put together you know, 11, 12% CET1 ratios and what have you-, you guys are around about 19%, I think 18.6%-,
CK: Yes, correct.
SS: I think, last time round. You've had a return on capital of around about 12% on that, and I know you'd like it to be better than that, of course you would, every banker would, but it's very respectable in the current environment, as well. Do you think there are too many bankers out there whining about regulatory capital, when actually it's totally understandable why the regulators want more capital, and actually they should just get on and run the business?
CK: I think we do need to look at regulation as well, that we need to calibrate that it's right. I mean, I think now we are come to the point where it would be, kind of, more evidence based, what is-, we should actually view what we have in place, but then we need to get on with business. We do need to actually also restructure our businesses. Focus on the core, become more efficient and become more relevant. So I have-,
SS: So are you having to hold too much regulatory capital, then?
CK: I actually think that we need to have a robust financial system. We need to have the trust of the broader society, and hence capital is important, but capital is not everything. Trust is not only capital, and hence I think we have come now to the point where we need to look at other things, as well.
GC: But there is an issue here, isn't there? I mean, it seems to me that a lot of the Scandinavian banks have been bulking up on their mortgage loan books, because they've taken advantage of the rising prices, and obviously every time we get a bust, it seems to be started by mortgage loans and housing. Should markets be worried at all about this concentration in mortgage lending?
CK: I mean, when you look at mortgage lending at Nordea, it's relatively low, actually. I mean, I think it's less than 7% of our balance sheet. So no. Overall, of course, if you get higher and higher house prices, yes, we should be concerned. But I don't think from a bank point of view-, it's more what is the impact on the real economy, and actually we've seen, already, a little bit of a slowdown there.
SS: But I mean, in terms of, you know-, when we look at negative interest rates, or low interest rates, or matching what the ECB is doing, central banks are trying to do that, as well. That's not creating a very sustainable environment in the long-term, is it? Because it's creating so many assets and bubbles across the board, not just in housing, isn't it?
CK: That's true, and that's why I would also say that we now need also structural change. I mean, I think the monetary policy, you know, monetary policy has really been the only game in town, and now we need more structural reforms and we need, really, the economy to start growing, rather than just be, you know, dependent on monetary policy.
GC: And just let me ask you, Basel 4 is worrying a lot of European bankers. Is it going to arrive in its current shape? Is Basel 4 going to be a problem for you?
CK: What I've heard here this week from policy makers and regulators is that whatever we call Basel 3 calibration, or Basel 4, should not lead to more-, meaningfully, more capital, and I actually-, and if it would, I don't think we will have a Basel 4.
GC: Nice to see you, thanks very much for joining us here.
CK: Thank you.
GC: Casper von Koskull, the CEO at Nordea Bank.