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A G E N T
Continuing currency restrictions mean foreign investment in
Icelandic government bonds is minimal and purchases of equi-
ties listed on the Nasdaq Iceland exchange actually decreased
in 2018 – even though they are exempt from the special reserve
requirements imposed on foreign currency inflows.
Íslandsbanki
The market leader here has attracted more responses than its lo-
cal rivals, but in only one question in four do the average scores
rise above the ordinary. This is not surprising, since there is not
that much business to service. In fact, the sheer complexity of
the residual controls is a deterrent to investors, diverting the
attention of relationship managers (RMs) into explaining what
their clients cannot do rather than what they can. “RM very
patient and reactive to explain the specificities of the market on
the cash side,” as one network manager puts it. “Very helpful!”
Arion Bank
Arion did not attract many responses, and the scoring by those
that did respond shows a wide spread from weak to very good. A
client grumbles that the bank is “systematically late in respond-
ing to yearly due diligence questionnaire.” Another notes that,
“Generally speaking, the capital control restrictions in place
since 2008, and recent changes since 2016 in particular, has
slowed down the market activity with our customers very seri-
ously…Until the regulation of offshore assets is either completely
lifted, it is expected that the situation cannot evolve from an
international investor perspective.”
Landsbankinn
Landsbankinn has provided sub-custody services in Reykjavik
for more than 20 years but, judging by the lack of responses this
year, the pickings are thinner than ever.
LATVIA
Even if the OMX Riga index has under-performed the OMX
Baltic Benchmark of the Nasdaq regional market in the last few
years – that has been powered mainly by the performance of
Tallinn – it still had a great run to the beginning of 2018. It has
trended down-to-sideways since then, but the country has une-
quivocally recovered from the spectacular bust which followed
the boom years between accession to the European Union (EU)
in 2004 and the financial crisis of 2008. Since 2017 investors
here have had the additional benefit of settling in a single Baltic
central securities depository (CSD). Nasdaq merged the Estoni-
an, Latvian and Lithuanian CSDs into Nasdaq CSD, creating the
first cross-border depository to be regulated under the Central
Securities Depositories Regulation (CSDR) of the EU as well as
settling trades via the TARGET2-Securities (T2S) platform run
by the European Central Bank (ECB). As it happens, the Nasdaq
CSD is based in Latvia.
SEB
The Stockholm-headquartered bank has a substantial retail and
corporate banking presence here dating back to its effective take-
over of Latvijas Unibanka in the wake of the Russian financial
crisis of 1998. It gets a handful of responses from inbound clients,
who between them record a much-improved performance by
B A N K S
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F R O N T I E R
M A R K E T S ]
SEB in Latvia. It would have been better still were it not for a
continuing perception that the bank is the luxury option. The
detailed scores (see page 78) point to ways of delivering value to
clients that do not depend on fee reduction alone, ranging from
greater sensitivity to the cash, collateral, credit and capital needs
of clients to faster and simpler opening and closing of accounts.
Swedbank
Swedbank, inheritor of the former Hansabank Latvia franchise
here, attracted too few responses from foreign clients for a rat-
ing. This is disappointing, since local regulations, membership
of the euro and the Nasdaq infrastructure make it easy for them
to invest.
LITHUANIA
OMX Vilnius has tracked the OMX Baltic Benchmark in-
dex closely since 2016. The economy is growing healthily by
European Union (EU) standards – GDP growth averaged 3.5%
a year between 2011 and 2017. The Nasdaq Baltic market and
the associated infrastructure add assurance as well as liquidity.
Portfolio investment flows retain the volatile pattern of any
emerging market, but they were positive in 2016 and 2017 (the
more important 2018 data is not yet available).
SEB
SEB achieves a lower overall score here than it managed in 2018.
The service area scores are also below its returns in the other
two Baltic states, but this is a quirk of the limited number of
responses, because most SEB clients are buying the Baltic mar-
kets as a package. The vast majority of category scores remain
in the Good range (5.00-5.99). What is familiar from Tallinn and
Riga is that SEB is regarded as a relatively expensive provider.
That matters in smaller markets, because transaction costs eat
returns, which have been more than respectable in Lithuania in
recent years.
Swedbank
Swedbank has inherited the Lietuvos Taupomasis Bankas
franchise in Vilnius, which Hansabank acquired here in 2001.
Its focus in the local market is primarily retail. Though it has
foreign as well as Lithuanian business clients – and the Swed-
bank Lithuania balance sheet sports a not insignificant volume
and value of assets in custody – the small number of responses
suggests that the bank is not servicing a large volume of inbound
portfolio flows on behalf of global network managers. What
scores were received indicate room for improvement in cash and
foreign exchange, and a demand for a denser and more mutually
rewarding relationship. As its competitor has also found in the
Baltic markets, clients would also like keener pricing.
NORTH MACEDONIA
Those bold enough to invest here have enjoyed rewards. The
index of the top 10 listed shares (MBI 10) has climbed continu-
ously for five years and reached an all-time high in February this
year. The Macedonian Stock Exchange (MSE), whose founda-
tion dates back as far as 1995, is courting more inbound invest-
Spring 2019
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