The Latest On The Baltic States And The Swedish Banks Who Operate There

The current account surpluses in Estonia and Lavia continues to increase to increasingly significant levels. Both are now experiencing significant surpluses after having just two years ago experienced extremely large (We’re talking of current account deficits of 15-25% of GDP) deficits. In relative terms that makes the American adjustment that Brad Setser is so excited about appear trivial in comparison.

I am not sure about whether actual balance of payment accounting takes these effects into account, but whether or not the statistics reflects it, it seems clear that certain Swedish banks (meaning primarily Swedbank and and only to a slightly lesser extent also SEB) that through reckless lending standards was responsible for the boom-bust cycle that wrecked the Baltic economies, are paying the price for that by showing significant losses in the case of Swedbank and no profits in the case of SEB.

By contrast, another major Swedish bank, Handelsbanken, who is renowned for more prudent lending standards and who never had any significant Baltic exposure, is actually showing a small increase in its profits. This illustrates that strategic choices by management does matter in rewarding winners and losers-as Swedbank and SEB are now paying the price for the reckless lending standards of their Baltic subsidiaries while Handelsbanken is seeing its more prudent strategy vindicated.

Technorati Tags: account, Account Deficits, Balance Of Payment, baltic economies, Baltic States, Boom, Brad Setser, bust cycle, Current Account, Estonia, Gdp, Handelsbanken, Lavia, Profits, Relative Terms, SEB, Subsidiaries, Surpluses, Swedbank, Swedish Bank, swedish banks, Winners And Losers

Related posts:

1. Baltic Crisis Not As Bad As It Seems
2. Monetary Timelag In The Baltic States
3. "Good" News From Latvia
4. Baltic Disinflation Continues
5. Is it the Banks’ Fault?

Tags: account, Account Deficits, Balance Of Payment, baltic economies, Baltic States, Boom, Brad Setser, bust cycle, Current Account, Estonia, Gdp, Handelsbanken, Lavia, Profits, Relative Terms, SEB, Subsidiaries, Surpluses, Swedbank, Swedish Bank, swedish banks, Winners And Losers

This entry was posted on Thursday, July 23rd, 2009 at 10:47 pm and is filed under Austrian Economics. You can follow any responses to this entry through the RSS 2.0 feed.