Equities: Swedish banks show rights issues can still work

Today few banks in Europe could raise equity capital from private sources. Governments are now the leading providers and will continue to be so for some time. But Swedish banks are hoping to complete a little flurry of conventional rights issue recapitalizations this month, in a reminder of how equity capital markets used to work in the days before banks in Europe resorted to taxpayers to cover their losses.

The Swedish banks face an immediate but probably manageable problem in bad loans to borrowers in the hard-hit Baltic states and see looming the bigger and less quantifiable worry of just how badly the European and global recession will hit corporate and retail borrowers at home in Sweden.

As they seek the capital they need to survive mounting loan losses, Swedish banks have one key advantage over banks in the UK and the rest of Europe.

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