The pensions industry in the Nordic region is still largely state led, however governments in Denmark, Sweden and Norway are beginning to redirect some of the state sector provisions into the private sector. A slow-moving industry, pensions custody and servicing mandates traditionally change hands infrequently.

But there are signs of movement in the market. The recently elected Swedish government is to review state sector involvement in a variety of areas, including pension provision.

In Norway, some companies have been given greater responsibility for pension matters on behalf of employees via employer-led schemes such as the Confederation of Norwegian Enterprise.

In Sweden, the Premium Pension System sees 2.5% of salaries taken from the state pension contribution and placed into an approved defined contribution scheme of the employee's choice.

The Premium Pension System is part of Sweden's Public Pension System, introduced in 1998 and covering about 5.4m people.

"The Nordic region doesn't typically have the company-segregated pension schemes that you would see in the rest of Europe," says Stuart Thompson, head of sales and client management, Nordic region, JP Morgan Worldwide Securities Services.

"There is a growing focus on the question of how much accountability companies should have for their own pension liabilities. There is some doubt as to whether the pooled scheme arrangements that are so popular in the region will be able to support the growing requirement for individual company reporting on their pension liabilities.

"In the past, clients used local providers as a "one stop shop" for local and global investments, says Thomson. This changed to a model where global investments were split from local investments and providers were chosen for each.

"However, it was increasingly realised that having two separate providers was less efficient and many clients now realise that having one securities services provider is a preferred model," he says.

"We are increasingly acting as the custodian for clients' global assets as well as the assets in their own markets, which we put back into the hands of a local custodian. We then provide an integrated offering, where reporting and processing for both sets of assets is integrated."

Goran Fors, head of investor services at SEB, agrees that clients are becoming much more global in their outlook. "We are seeing growing investment in Africa, and not just in the south but also in countries like the Ivory Coast.

"There is investment going into Eastern European countries such as Russia, Ukraine and Serbia. As a result, we have to cover more markets in our offering to clients," he says. SEB's relationship managers have to open up accounts in new countries and have to be able to monitor risks, particularly infrastructure risks. "We have been increasing our coverage of these markets and the way we keep our clients informed about what is happening there," says Fors.

Along with a growing trend to invest more globally, Fors says he is seeing growing interest from SEB's clients in outsourcing fund administration. "This is being driven by the difficulty smaller institutions have in achieving efficient administration to meet the demands of regulations such as Ucits III and Mifid on their IT infrastructures. By outsourcing, they share development costs."

"The main advance in the Nordic
markets in recent years has been the consolidation of stock exchanges. Since the union of the Helsinki and Stockholm stock exchanges in 2003, OMX (the merged entity of Sweden's OM Group and Finland's HEX) has gained influence over all five Nordic markets in
addition to three in the Baltic region. Under OMX Exchanges, the integrated Nordic and Baltic marketplace, OMX owns either entirely or has majority stakes in the Helsinki, Stockholm, Tallinn, Riga, Vilnius and Copenhagen exchanges. The Oslo exchange, while remaining independent, collaborates extensively with OMX Exchanges.


n September, OMX acquired the Iceland Stock Exchange (Icex) and Icelandic Securities Depository. "Icex listed companies will gain increased visibility and be able to benchmark against a larger peer group," says Thordur Fridjonsson, president and chief executive of Icex.

"Furthermore, we expect more international members to participate in the Icelandic market thereby enhancing the liquidity. At the same time the Nordic list will benefit from the addition of some of the fastest growing companies in the Nordic region.

The combination should also broaden the investment alternatives for Icelandic investors."

Jukka Ruuska, president business area Nordic marketplaces, OMX, says the company aims to create an integrated Nordic home market to increase intra-Nordic trading and improve the attractiveness to international investors.

While the move was another step towards an integrated Nordic and Baltic securities market, the pace is still slow. Despite the consolidation of the exchanges, the central securities depositories (CSDs) remain separate.

Says Fors: "In terms of the exchanges, now only Norway is not a part of the Norex alliance, but it does use the same trading system. But we have not yet seen any movement on the CSD front. I think it will take a longer time than anyone anticipated to get to a consolidated CSD in the region."

Thomson says: "Despite the consolidation that has been taking place in the securities markets in the region, we still have five separate countries, languages, regulatory systems and tax regimes. The exchanges are consolidating, but the central securities depositories have not yet - it is very much a work in progress."

Another trend Thomson points up as one for custodians to watch is alternative investments. "While the majority of assets are in equities and bonds, asset managers are increasingly surrounding these with investments in alternative instruments such as hedge funds, OTC derivatives, property, fund of fund and private equity funds," he says.


long with the increasing interest in Eastern European markets, Thomson says these trends require custodians to service needs "across the complete securities space.

"It is as important for us to be able to play in the hedge funds, fund of funds and private equity spaces as it is to play in the equities space."

Last month (October) Citigroup Global Transaction Services announced it would provide direct custody and clearing (DCC) services to clients in Sweden, after 20 years in the country.

The US global custodian claims the move will make it the only global bank offering a full suite of DCC and cash services in the country.

Services will include clearing and settlement, safekeeping, pre-matching, corporate actions, market expertise and information services, cash management, foreign exchange, Swift reporting and portfolio valuation.

"The entire Nordic region is expanding rapidly and we believe Citigroup's leading global network, products and services will be of great benefit to our clients and the Swedish market," says Andrew Gelb, global head of direct custody and clearing, Citigroup GTS.

Thomson says there tend to be only a couple of significant securities services mandates per year in the region. "Clients are very loyal and work with their providers to affect routines, systems and processes.

"They prefer to invest in the relationship to make it work on a long term basis, rather than changing providers every few years," he says,

"We seek to improve our technology and the efficiency of our clients, with the goal of delivering STP. Our clients in the Nordic region achieve STP rates of around 95%, compared to the average in the rest of Europe of about 85%. The populations in Nordic countries are not high, so clients cannot afford to have high volumes of people working in their back offices. Our clients are highly automated and they tend to have very small back office operations."