Danske Says Senior Bankers Knew About Debt Errors for Years

Danske Bank A/S said some staff, including managers, have long been aware of a number of the debt collection issues that resulted in up to 15,000 clients being overcharged.

The bank, which is still being investigated separately for money laundering, said on Friday it has submitted a report to its watchdog in Copenhagen as it tries to deal with the fallout of its latest scandal.

Danske “deeply regrets” the mistakes made, it said in a statement, in which it also revealed that people at “different levels of the organization, including managers,” knew about the issues for years.

“But despite efforts to address the problems, the underlying errors were never properly seen to,” Danske said.

Shares in the lender traded about 2.3% lower after the statement was published, putting it close to the bottom of the Bloomberg index of European financial stocks.

Investigating Danske

The Danish Financial Supervisory Authority launched an investigation into Danske last week, and said the bank may have misled the watchdog regarding its efforts to fix errors in its debt collection system. The FSA has now involved the police in its probe, and the bank’s conduct has been condemned by the government.

Business Minister Simon Kollerup has summoned party leaders to discuss the debt scandal next week in Denmark’s parliament, he said in a Facebook post on Friday, calling it “a very serious case” for Danske and its customers.

In its report to the FSA, Danske said that “members of the executive management were informed of the systemic data flaws affecting the bank’s collection systems in May 2019 and reacted by initiating” what it described as “remedial measures.”

The bank acknowledged that it should have been clear to those working with the debt collection system decades ago that it was faulty.

“The planned implementation of DCS spanned over a period of time prior to 2004,” Danske wrote in its report. “The bank understands that it was known that the data being transferred to DCS had some inherent issues. Therefore, at the time of the implementation of DCS in 2004, there was awareness in the bank that there would be systemic data flaws in DCS.”

“A number of audit observations were issued during 2005-2016, some of which were linked to the issues that the bank is now facing,” Danske said. “The bank recognizes that it did not do enough to fully address the root causes of the findings made by audit or to effectively follow-up on all of the actions.”

Danske Bank’s chief executive, Chris Vogelzang, said management has also identified a number of additional problems, which it’s investigating as it tries to get a full overview of the extent of the errors and how to handle them.

These include potential mistakes in how much the bank charged clients on overdue debt payments, as well as incorrect records of clients’ taxes.

The new cases, “and possibly others,” mean that more clients might be affected, Danske said.

©2020 Bloomberg L.P.

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