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In Sweden, Banks Differ on Paying Bonuses

Sweden’s top banks are going their separate ways on the question of employee bonuses.

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Ulf Sjostedt | Photographer's Choice RF | Getty Images

On Thursday, Nordea, the biggest lender in the Nordic region, said it would pay out 280 million euros ($390 million) in bonuses for 2009, a move it said was necessary to retain the best employees. A day earlier, a rival, Swedbank, said it was canceling its 2009 bonuses.

As financial firms that faced collapse without government support have returned to making big profits, their employee bonuses, some of them staggering, have become a political issue on both sides of the Atlantic.

The Swedish government, which owns 20 percent of Nordea, has provided various forms of support to the country’s banks since the financial crisis erupted. Prime Minister Fredrik Reinfeldt said in September that the era of excessive bonuses “must come to an end.” The same month, the finance minister, Anders Borg, accused bankers of “partying like it’s 1999, when it’s 2009.”

Writing in Dagens Nyheter, a Swedish daily, Hans Dalborg, Nordea’s chairman, and Christian Clausen, its chief executive, said they “understand the debate about the financial sector that is ongoing throughout the world.”

However, they said, to maintain leadership, companies must hire and retain the very best. “The market for the skills required is global, with high salaries and a strong bonus element,” they wrote. “We often face international competitors who tempt our employees by multiplying and guaranteeing their bonuses for several years.”

They said Nordea, which is based in Stockholm, had scaled back its total bonus payout, to about 16 percent of the bank’s revenue from investment banking, asset management and capital markets for 2009, down from about 20 percent last year. In absolute terms, the 2009 bonus payout of 280 million euros still represents an increase of 22 percent from 2008, because the business performed better.

Mr. Dalborg and Mr. Clausen also said that the top seven executives had waived their bonuses and pay increases for 2009.

Swedbank, also based in Stockholm, said Wednesday it would cancel 2009 bonuses, except for “situations where such a decision would violate employment contracts.” As a result, it will pay out bonuses for 2009 of only 17 million kronor ($2.3 million), an unpleasant surprise for employees who had been banking on a pool of 406 million kronor through the third quarter of the year.

One difference between the Swedish banks, both of which report full-year results next month, is clear: Nordea was firmly in the black through the third quarter last year, racking up net profit of 1.9 billion euros. Swedbank, badly exposed to financial problems in Latvia and other Baltic countries, had a loss for the same period of about 8.7 billion kronor.