Roine Vestman Roine Vestman is an associate professor of economics at Stockholm University. Photo: Rickard Kilström

Why is the profitability of banks important for society?

Swedbank reports a doubled profit, and SEB an increase of forty percent. According to the banks, the profit, through dividends, will also benefit society, as the banks are owned by insurance companies, pension funds, and direct shareholders in Swedish households.

But is it really so?

”It can be difficult to see the societal benefit of the banks’ operations,” says Roine Vestman in Ekonomiekot Extra. It is mainly because the services provided by the banks are abstract.

”A prerequisite for banks to be stable is that they have their own capital. But if the profits are distributed, it does not contribute to their own capital and, consequently, not to stability either.”

What banking stress tests show

Furthermore, Roine Vestman explains what Finansinspektionen’s stress tests on Swedish banks may look like:

”The banks have been given a tough scenario where GDP is assumed to fall quite significantly, housing prices fall by twenty percent, and unemployment rises by 3 to 4 percentage points.”

But Swedish banks show great resilience, precisely because of their high profitability, he summarises.

Text by: Anneli Eriksson