Nordic-Baltic banking group Swedbank is to open a Baltic subsidiary, to be based in Riga. The bank's Estonian branch was hit by money laundering allegations last year, while Swedes will be at the helm of the new subsidiary.
The bank says that it will formalize its current operating model with the move, while increasing accountability and responsibility of the division.
Swedbank President and CEO Jens Henriksson said that: "We have been working on improvements of our internal governance model since early 2020, taking into account the recommendations of regulators as well as industry best practices.
"The changes aim to ensure a simple and transparent governance structure with clear decision making that supports the bank's long-term strategy in all four of Swedbank's home markets – Estonia, Latvia, Lithuania and Sweden," Henriksson went on, via a Swedbank press release.
Should be operational mid-year
Pending regulatory approvals, including permission from the FSA, the holding company responsible for the Baltics subsidiary will be operational by mid-2021, Swedbank says.
A report by Swedish public broadcaster SVT in early 2019 linked Swedbank in Estonia to the Danske money laundering case. Billions of euros in potentially illicit funds are later found to have passed through the bank's portals, adding to the €230 billion thought to have passed through the now-defunct Danske Estonia, during the period 2007-2015.
Swedbank was issued a fine of 4 billion Swedish kronor, or approximately €360 million, in March of 2020.
Swedbank says that the changes will bring governance improvements, which will clarify mandates and responsibilities for each of the country management teams in its Baltic subsidiaries in Estonia, Latvia and Lithuania, strengthening them in the process.
Swedbank: Riga had slight advantages over Tallinn, Vilnius
Swedbank says its customers will not be impacted by the changes.
The holding company to be set up will create a sub-consolidated group within Single Supervisory Mechanism ,and serve as a legal counterpart to relevant authorities, in addition to the local subsidiary banks, the bank says.
Riga was chosen ahead of Tallinn or Vilnius due to slight advantages in its staff recruitment and tax systems, a Swedbank Estonia spokesperson told ERR Tuesday.
Kristiina Herodes, head of communications at Swedbank Estonia, said that Latvia, Estonia and Lithuania's banking environments were "… very similar to each other. [In Latvia's favor] there were small details about staffing and tax differences."
Existing CEO, Baltics chief will be be at reins
Jens Henriksson will become supervisory board chair of the new Swedbank baltics holding company, while head of Baltic banking Jon Lidefelt will be the holding company's CEO, the bank says.
The holding company will be 100 percent owned by Swedbank AB, and will be the sole owner of Swedbank subsidiary banks in Estonia, Latvia and Lithuania.
The holding company will be registered in Riga, while having employees from all Swedbank's home markets.
Swedbank employs 6,000 staff and serves over 3 million private customers and 280,000 business customers across all three Baltic States, the bank says. Swedbank AB is headquartered in Stockholm.
Another Swedish-owned bank operating in Estonia, SEB, was fined €1 million last June after shortcomings in its anti-money laundering (AML) activities were found. The bank was also fined a little under €100 million in its home country.
Editor: Andrew Whyte