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Swedish banking giant quits Baltics – says it’s not worth the cost

Swedish banking giant Handelsbanken is closing down its Baltic operations, but denied the decisionhad anything to do with recent money laundering scandals tied to two other Scandinavian banks.

Swedish banking giant quits Baltics – says it's not worth the cost
Handelsbanken's office in Stockholm. Photo: Alexander Larsson Vierth/TT

Handelsbanken said on Thursday it was leaving the Baltics due to unsatisfactory performance.

“We have come to the conclusion that profitability is too low, while costs are too high. Despite efficiency-enhancing measures in the past few years, the operations in the three Baltic States have not shown satisfactory profits,” Richard Johnson, head of Handelsbanken International, told AFP.

He went on to say that circumstances had also changed drastically since the bank established its presence in the region a decade earlier, and that local offices were no longer necessary.

“Rapid technological advances, which have resulted in new players on the market, and new opportunities, mean that we can now help many of our customers directly from the home markets,” Johnson said.

The bank would therefore start to wind down its business in Estonia, Latvia and Lithuania during 2020.

READ ALSO: What you need to set up a bank account in Sweden

Johnson also stated that the bank's decision had nothing to do with the recent scandals surrounding allegations of extensive money laundering at two other Scandinavian banks tied to Baltic operations.

Denmark's largest bank Danske Bank is currently the target of criminal probes in several countries over some 200 billion euros ($226 billion) in transfers that passed through its Estonian branch between 2007 and 2015, involving some 15,000 foreign clients, many Russian.

Swedish competitor Swedbank has also been embroiled in a scandal since February when an investigative news show on public broadcaster SVT claimed to have seen documents showing that at least 40 billion kronor ($4.3 billion) of suspicious transactions had been channelled to Baltic countries from Swedbank accounts.

Many of the transactions took place between 2007 and 2015, and some of the money may have first transited Danske Bank.

Handelsbanken has largely remained clear of the money laundering scandals and its operations in the Baltic States have only represented a fraction of some of its Nordic competitors.

For instance, according to the Estonian Banking Assocation, Handelsbanken's market share in Estonia in 2017 was only one percent, compared to Swedbank's 40 percent.

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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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