Nordea Bank AB: A Case on Capital Relief Trades

• In Event: Case Studies

Abstract

I provide a teaching case on a capital relief trade via synthetic securitizations, which illustrates the interplay between accounting and bank regulation and banks’ potential response strategies thereupon. The case is based on the EUR 8.4bn securitization trade of Nordea Bank AB in 2016. It entails some “hands-on” guidelines of understanding related disclosures in the risk and annual report, analyzing related bank and market data, as well as interpreting deals of this size within the accounting environment of IAS 39/IFRS 9 and the regulatory environment of the Basel accords. The educational objectives of this case are to (1) illustrate accounting and regulatory regime changes related to securitizations, (2) explain synthetic securitizations as a bank’s potential response strategy, (3) provide guidance on how to read disclosures for such products and how they affect accounting and regulatory key measures of a bank, and (4) guide students how to gather and process stock market and credit risk data to expose students to market analyses and some preliminary empirical descriptive statistics. The case provides an opportunity to teach students the complex, interrelated, and partly opaque fields of accounting and regulation for financial institutions using a concrete case.

Author

• Barbara Seitz, New York University Stern School of Business