Danish bank set to refund $16m to clients for losses

Bloomberg

Danske Bank will pay out as much as $16 million to its private banking clients after failing to warn them that putting their savings into low-risk investments could cost them money.
“Our review shows that approximately 900 customers were not adequately informed about the expected negative net return for the affected low-risk strategies,” Bente Nielsen, head of private banking in Denmark, said in a statement. “We offer our apologies and will of course pay compensation to the affected customers.”
Denmark’s Financial Supervisory Authority (FSA) said it’s monitoring the case, which is similar to one last year that led the agency to issue a number of corrective orders to the bank and to report it to police.
The FSA started its own investigating into whether other banks besides Danske may have recommended loss-making investment products to their clients a year ago. That probe continues, the agency said.
The development is the latest in a string of scandals to hit Denmark’s biggest bank. Earlier this week, police and regulators said they were investigating the lender for possibly misleading authorities after local media reported it had collected more debt from customers than it was entitled to.
This week’s events come on top of a massive money laundering scandal that’s weighed on the bank since it first revealed in 2018 that a large part of 200 billion euros ($237 billion) in transactions handled by its Estonia branch were suspicious. Danske faces potential penalties in the billions of dollars.
Late last year, police filed preliminarily charges against the bank for overcharging retail customers who used its Flexinvest Fri product to buy low-risk products that also ended up with negative net returns after fees.
The latest revelation comes out of that case. After agreeing to compensate Flexinvest Fri customers 400 million kroner ($64 million), the bank initiated a review of its investment products to see whether similar failures existed elsewhere.
Danske said that the review, which covered the February 1, 2017 to July 5, 2018 period, revealed that its managed account product Danske Portefoljepleje “had a similar issue” to the Flexinvest Fri product. The bank said it has now changed its procedures so customers are informed if they’re likely to get a negative return on their investment after fees, “to prevent something similar from happening again.”
Danske Chief Executive Officer Chris Vogelzang told local newspaper Borsen that he couldn’t rule out that further revelations may emerge from its ongoing investigations.
Vogelzang took over as CEO last year after his predecessor was fired in the midst of the laundering scandal. The 57-year-old Dutchman has since replaced much of the top management and restructured the bank, which is expected to cut more jobs to meet a 2023 goal of a return on equity of 9-10%, up from 5.7% in the second quarter.