Danske Bank won't recover from scandal for years

Stockholm — It will be years before Danske Bank is fully rehabilitated from the shock of one of Europe’s most spectacular money-laundering scandals, according to its chair, Karsten Dybvad.

Since admitting in late 2018 that a large part of the €200bn in non-resident cash that flowed through an Estonian unit was tainted, Danske has been cleansing its organisation of any processes or personnel associated with the scandal. It’s also tried to build an iron-clad compliance unit, as it tries to reform itself and win back the trust of clients and investors.

“All the different projects we are undertaking right now, also relating to our financial crime plan and all this, will take, not many years, but it will take years to actually complete,” Dybvad, who was brought in after the dirty-money scandal erupted, said.

Danske is still being investigated by prosecutors in the US and Europe for alleged money laundering. The US department of justice and Securities and Exchange Commission (SEC) probes alone may lead to penalties of up to $1bn, according to Elliott Stein, senior litigations analyst at Bloomberg Intelligence in New York.

“Other countries are also investigating and may levy penalties,” Stein said in a note on March 16.

Not enough

ATP, Denmark’s biggest pension fund and a Danske shareholder, says the bank hasn’t yet made all the cultural changes needed to move on. It points to a string of more recent, albeit smaller, scandals that once again thrust Danske into the spotlight. The list includes debt collection errors that hit thousands of the bank’s most financially vulnerable customers, drawing condemnation from Denmark’s government.

Danske made mistakes, Dybvad said. Management could have “communicated earlier and better” the bank’s acknowledgment of the situation and efforts to fix it, he said.

The chair, who spoke after Danske’s AGM, declined to provide details on whether the bank’s current management or board is being held accountable for past mistakes. “We are where we are, and we have to move forward and that’s what we are doing,” he said.

Under Dybvad, who was once one of Denmark’s highest ranking civil servants, Danske has gone through a series of reforms. These include pouring record amounts into fighting financial crime. Meanwhile, the tough competitive environment has led to cost cuts that will reduce headcount by about 1,600 (of which 700 jobs have already been cut since the plan was announced in October).

“We’re working to really remediate a lot of the old cases, and we are, at the same time, transforming the bank to become a better bank, changing the way a lot of our employees are working and also investing in changing the culture,” Dybvad said. 

Dybvad has previously suggested that Danske might not manage to emerge fully from the fallout of its money-laundering scandal until as late as 2024. “I am sure that we’ll get there,” he said. “But you have to work and you have to be resilient.”

Bloomberg