NFU News

Banks’ logic make little sense

RESPONSIBILITY. Bank revenues are increasing across the Nordic area revealing substantial profits. Whilst this is naturally good, it is not unquestionable so. The big question is: who is benefitting from these profits?

Whilst profits, for example, are needed to build equity capital to ensure that the bank meets the capital requirements from the EU, they could too be invested back into the organisation. These latter investments could be in employee training, development of products, work routines and so forth. All in order to make the bank more competitive in the long-run. Today’s tendencies indicate, though, that profit is channelled in another direction.

An increasing amount of the profit is going to dividend pay-outs, e.g. 75 percent in Swedbank and 44 percent in Nordea (see the table for more examples).

It is a puzzling state of affairs, and a cause of great concern. As people lose their jobs, and society put under increased pressure due to rising unemployment, others (the shareholders) are given more and more money.

It is important to question who actually benefits from the rise in dividend payouts other than the investors concerned.  It too is important to question whether this channeling of money is sustainable for the future – not only within the banks, but also for society as a whole.

EU believes capital requirement is a key to ensure sustainable and responsible banks, read our thoughts about capital requirement and the trend in the Nordic banks in our next NFU Update.

 

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