Danske Debt Scandal Triggers FSA Probe and Police Scrutiny

(Bloomberg) -- Danske Bank A/S is the target of a fresh probe involving the police after it emerged that the lender may have misled Denmark’s financial watchdog about its handling of debt collection errors.

The Financial Supervisory Authority has given Denmark’s biggest bank until Sept. 10 to answer a series of questions relating to the case, including exactly when Danske first discovered there was something wrong. Denmark’s economic crime squad, known locally as SOIK, said on Wednesday it is in talks with the FSA regarding the case.

Danske, which is still being investigated separately for a $230 billion Estonian dirty money affair, has now landed in a new scandal after revelations that about 15,000 customers repaid too much in debt over a period of several years. The bank, Denmark’s biggest, has acknowledged the mistake and says it’s going over roughly 100,000 accounts in an effort to repair the damage.

Danske is “keeping all relevant authorities informed about the matter” and is “at their disposal,” Danske spokesman Stefan Singh Kailay said by email.

“We have been in dialogue with the DFSA about this issue since June 2019 and have kept them updated on developments of the investigations and our remediation plans, and we will continue to do so,” Kailay said. “Our main priority is to make sure we continue to correct the mistakes we have made by going through all these cases and reimbursing all affected customers.”

Read: Danske Summoned by Danish Government to Explain Debt Errors

The Danish government was swift to condemn the error, and says it plans to involve parliament as it looks into the matter. Meanwhile, Danske is growing increasingly unpopular in its home market, with a recent survey in Borsen (taken before the latest scandal) showing that more than half those polled would never use the bank.

Danske said in February, in its annual report, that it had made a 400 million-krone ($64 million) provision for losses related “to a data quality issue that affects a limited part of our operations.” The bank said then that it was still looking at the problem “to determine the exact extent of the issue.”

“The risk is if they get any sanctions from the FSA, any fines or capital add-ons, because of this,” said Robin Rane, an analyst at Kepler Cheuvreux. “As with other issues with Danske Bank, this also has escalated...On Monday, people thought like me, and it was down very slightly because they already took the charge.”

“This won’t blow up to the proportion of the money laundering scandal, I would be very surprised if it did. It’s a data failure,” Rane said. “The share is already quite beaten down...But certainly it doesn’t help Danske Bank to get out of this quagmire from the money laundering.”

Read: Danske Bank Hit by New Scandal Over Debt Collection Errors

The Timing

The FSA said it was informed by Danske last year that errors had occurred in the bank’s debt collection system. Danske told the FSA then that it was working on fixing the failure and on compensating the customers affected.

“Based on that information, the FSA was under the impression that the bank had acted when the bank became aware of the situation,” the regulator said in a statement.

Already last year, Danske’s law firm warned the bank that the case was so serious that some of the executives involved might be facing prison sentences, according to the Berlingske newspaper.

Danske has apologized for the errors. Kailay called the situation “deeply regrettable,” in a statement earlier this week, and said customers “should of course count on the calculations we make, and we regret that this has not been the case in this instance.”

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