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Basel III and housing fears fuelling demand for capital expertise

With one wary eye on fears the region’s housing market is at serious risk of over-heating and another responding to the new Basel III capital adequacy standards, Nordic banks are working to bolster their regulatory and risk expertise.

According to recruiters there is growing unease about the Swedish housing market in particular, with recent research from the University of Boräs suggesting the market was overvalued last year.

“Banks and regulators are working to create more of a cushion, but one of the problems is then new products keep getting created,” says one recruiter, who did not want to be named.

Norway last week signalled it could well follow Sweden’s lead in imposing much tougher capital requirements on lenders, with Bjern Skogstad Aamo, the head of Norway’s Financial Supervisory Authority, suggesting he backed the levels set by Swedish finance minister Anders Borg.

Borg earlier this month caused a public spat with Sweden’s banks by suggesting they needed to prepare for even tougher capital rules than those required by Basel III because of the continuing potential risks from the Baltic economies plus the ongoing fears around household credit exposure.

This is despite the fact that three of Sweden’s top four banks already exceed Basel III, with double-digit core tier 1 capital ratios at the end of 2010.

Basel III will require all banks eventually to hold a minimum core Tier 1 ratio of 7%.

Still, the Basel III-led climate is leading to more demand for people with regulatory capital expertise, with Nordea, for example, is recruiting for capital regulatory experts, both within its group and its Norwegian operations.

“This is something that, with Basel III and the increased pressure on capital management, European banks are becoming very interested in across the Continent,” says Priya Mariannie, senior risk consultant at recruiter PSD Group.

“They are looking at Basel III and their exposure, so demand for this sort of expertise is increasing and probably will increase further,” she says.

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