BRUSSELS – The Swedish bank tax -- used as a benchmark by many EU policymakers -- is unreasonable and favours banks that take risks, critics say.

• G20 fails to agree on bank tax • ECB warns of hasty Swedish-style bank tax
• European bank tax could raise €50 billion • EU to examine Swedish bank tax pitch

After pumping in billions of euros into the European banks the EU and its member countries are looking at the Swedish bank levy system, with a stability fund as a buffer, when discussing ways to let actors on the financial market themselves pay for future banking crises. But how fair is the Swedish model when the most stable bank in Sweden, with the lowest amount of credit losses, actually pays the highest fee to the stability fund, critics ask.

The fee to the Swedish stability fund is based on the banks' liabilities minus equity. However, it's only the figures of the parent company that are taken into consideration. This implies that banks which focus on and lend a lot of money on the Swedish market pay more than others which to a bigger extent focus on foreign, and sometimes more risky, markets via daughter companies.

The bank that paid the highest fee last year, 344 million kronor (€35 million, $48 million), was Handelsbanken, It's a bank known to be conservative and non risk-taking and when other Swedish banks like SEB and Swedbank expanded and invested heavily in Eastern Europe Handelsbanken chose to focus on the Swedish market. Later Handelsbanken was not as affected by the economic downturn as the others. In 2009 its credit losses amounted to only 3,4 billion kronor which is around 10 percent of the bank's income. In comparison, Swedbank reported 24,6 billion kronor in credit losses, which equals over 300 percent of the income. Still, Swedbank paid much less to the stability fund than Handelsbanken, only 224 million kronor.

When The Swedish Wire asked representatives in Handelsbanken they didn't wish to comment, they simply accept that the tax is based on Swedish liabilities. However, in their submission for comment to the Ministry of Finance, which was written before the fund and the levy was put in force, the bank did express another point of view. In the submission executive vice president, Björn Börjesson, wrote that the fee should be based on the liabilities of the bank group as a whole rather than of the parent company.

”The stability of a bank is not limited to a certain country or solely the parent company. There's a risk that the fee does not reflect the actual risk of the bank”, Björn Börjesson wrote.

Claes Hemberg, savings economist at Sweden's largest online stockbroker Avanza Bank, agrees.

”The tax is unfair and it doesn't consider the fact that banks are different. It's like having the same speed limit for a tractor and Porsche. It favours risk taking”, he said in an interview with The Swedish Wire.

Several other banks and institutes, like Nordea and the Swedish central bank, have expressed similar concerns to the Ministry of Finance.

However, according to Finance Minister Anders Borg, it was more important for the Swedish government to get the levy in place than to base it on actual risk.

“The fee will be risk diversified at a later stage. But even today there's some diversification since the banks can deduct equity and pay a lower fee than those who finance their business with loans”, he told The Swedish Wire.

So far Sweden is the only EU country that has imposed such a tax but Anders Borg has since successfully promoted the Swedish model among his European peers.

“I've had discussions with several of my European colleagues and there is an interest in the Swedish model. Countries like Germany, the UK and France have announced similar fees, and the European Commission has pointed out its' advantages", he said.

The Commission has written a report on the matter concluding the EU-governments could collect as much as 50 billion euros a year from European banks while another report from the Economic and Monetary Affairs Committee in the European Parliament has called for a European stability fund controlled by the European Banking Authority.

On a more global level the US has announced a look-alike to the Swedish levy and the IMF is suggesting a similar model to the Swedish one, i.e. based on the banks balance sheets excluding capital, according to an internal and confidential IMF report published by BBC.

“I get worried when I hear that other countries are looking at the Swedish model. There hasn't been so much discussion about this and I think that many people on the financial market were so chocked that they didn't think this through”, said Claes Hemberg at Avanza Bank.

The discussions will however go on, despite the critique on the market, and the ambition within the EU is to be able to present a common position on the G20 summit in Toronto in June.

Facts: Credit losses vs fees to the stability fund in the four major Swedish banks (2009):

- The fee equals 0,036 % of the parent companys' liabilities minus equity.
- During the first two years, 2009-2010, the fee is 0,018 % due to the market conditions.
- Within 15 years, the fund shall have a value of 2,5 % of the Swedish GDP.

Andreas Liljeheden is a freelance journalist based in Brussels.