×

UPDATE 1-Banking group Nordea to move HQ to Finland in blow to Sweden

* Nordea had warned it could move its HQ in March

* In Finland, Nordea will fall under ECB supervision

* First shift by major bank to avoid tough rules since 2008 (Adds background, share price reaction)

STOCKHOLM, Sept 6 (Reuters) - Nordea, the Nordic region's biggest bank by market value, said on Wednesday it would move its headquarters to Finland to cut the cost of complying with Swedish regulations.

The move is the first time since the 2008 financial crisis that a major bank shifts headquarters to avoid tougher rules.

In Finland, it will fall under the European Central Bank, which has since 2014 sought to establish common supervision standards across the euro zone.

Nordea said in March it could move if the government hiked fees to cover the cost of winding up banks that fail, prompting the government to soften some terms.

"Domiciling in a country that is participating in the banking union will mean that Nordea will be subject to the same regulatory framework as our European peers," Nordea said.

Nordea shares were broadly unchanged.

Sweden has imposed some of the toughest capital requirements in Europe on its banks, which have assets worth about four times Sweden's gross domestic product.

Analysts have been divided about the effects of such a shift for the bank, once owned by the Swedish state, and for Sweden.

The bank said the move could lead to savings of about 1 billion euros. It did not give a timeframe.

The move could also reduce regulatory uncertainty for Nordea, ahead of next year's election. Sweden's centre-left government has been considering ways to tax banks more heavily.

On the other hand, Sweden's demand for big capital buffers has acted as stamp of quality for buyers of bank debt, lowering borrowing costs for Swedish banks, which partly explains why they are twice as profitable in terms of capital employed (ROCE) as European rivals.

Nordea said its capital and dividend policy would remain unchanged.

However, it risks upsetting Swedish customers. Some unions said they would withdraw funds and business if Nordea moved.

Losing Nordea, Europe's ninth biggest bank by market capitalisation, will be a blow to Swedish prestige as it seeks to attract financial firms when Britain leaves the European Union. It will also fuel criticism from those who say the government is hostile to business.

Finance Minister Magdalena Andersson said the move would reduce risks to the economy from the outsized banking sector, although she also said she wanted to Nordea to stay in Sweden.

Given banks have major cross shareholdings, regardless of where a bank was based, problems at one institution could quickly hit other banks in other centres, experts say.

(Reporting by Stockholm newsroom; Editing by Niklas Pollard and Edmund Blair)