A bank can also profit if it is more competent than its competitors in some areas, for instance in offering certain services or if its organisation runs smoother and more efficiently or if it is regarded as being more reliable or customer-friendly than other banks. For various reasons, Swedish banks have rapidly gained market shares in other markets. It has proved more difficult for foreign banks to gain inroads into the Swedish market, with the exception of the Danish bank I mentioned. The main challenge from cross-border operations comes from the new risks to the bank. It will start operating in a new legal environment and in a new customer market. If the bank has not prepared itself carefully, it may run into unexpected problems because it approaches the new situation in an erroneous way. A challenge for the cross-border banks as well as the authorities is to monitor the activities on a consolidated basis for the whole bank group in all countries where it operates. It is important for the head office and the supervisor to identify early any indication of problems in the entities abroad and to take the necessary measures. If this does not take place, the problems may grow and threaten the  4  BIS Review 111/2006  survival of the bank. In a crisis situation, the bank together with the authorities must decide on the appropriate course of action. This can lead to difficult questions such as whether a bank branch or subsidiary abroad should be closed or rescued.
In fact, after the consolidation phase we have witnessed a period in which the number of banks and bank-like institutions in Sweden is increasing. The new ones have mostly been small banks specialising in certain activities and services, for instance linked to major retail store chains and benefiting from the cash flow from the stores’ customers. We call them “niche banks”. Sweden never had a large share of state-owned banks in its financial system. In the crisis one bank had to be nationalised during the resolution phase but that bank was rapidly merged with another bank. Another of the banks which suffered during the crisis was state owned already at the outset but the shares of this bank were gradually sold to private investors as soon as the bank had recovered its financial health. The Swedish government remains a shareholder in the bank but holds only 19 percent of its total equity capital. Today, this bank which is named Nordea, is highly profitable and has formed a large group which has significant market shares in the countries in the Nordic region. As a government official deeply involved in the banking crisis, I took the decision that although some banks had to be rescued by public funds, the management of the banks should be left to professionals, without undue operational interference from the government. The banks should be run in accordance with market conditions just like any other bank.