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Danish watchdog criticises Danske Bank over Estonian money-laundering controls

Danish watchdog criticises Danske Bank over Estonian money-laundering controls

COPENHAGEN, May 3 (Reuters) - Denmark’s financial watchdog said on Thursday it had found “serious weaknesses” in Danske Bank’s governance after investigating management and senior employees as part of an anti-money-laundering probe into the bank’s Estonian branch.

It concluded Denmark’s biggest bank was exposed “to significantly higher compliance and reputational risks than previously assessed” and that it now would assess the bank’s capital requirements.

“The case has uncovered serious weaknesses in the bank’s governance in a number of areas,” the Financial Supervisory Authority (FSA) said in a statement.

The FSA said it initially estimated the increase to Danske Bank’s Pillar II capital requirements should amount to 5 billion Danish crowns ($805 million), which would increase its capital ratio for ensuring solvency to 11.2 percent from 10.5 percent.

Danske Bank said it had a total capital ratio of 21.4 percent at the end of March and “will thus continue to have a considerable solvency buffer”.

The investigation resulted in eight orders for reforms at Danske Bank and eight reprimands.

“We take the criticism expressed by the FSA very seriously,” said chief executive officer Thomas Borgen.

“We agree that we should have understood the depth and scope of the problems in Estonia at an earlier stage and should have reacted faster and more forcefully”.

The FSA also said on Thursday its chairman Henrik Ramlau-Hansen, a former finance chief at Danske Bank, had decided to step down as he did not think he should play any further role in the discussion of Danske Bank’s handling of the case.

Last month, a senior executive quit Danske Bank after it concluded there should have been an earlier and deeper inquiry into alleged money laundering at the Estonian branch. According to media reports, the bank was first alerted to the allegations by a whistleblower in December 2013.

Danske Bank said it expected its own investigation, which is being conducted by Danish law firm Bruun & Hjejle and overseen by the bank’s board, to be completed in September at the latest.

At 0810 GMT, Danske Bank shares were down 0.3 percent at 217.4 crowns.

Source: www.reuters.com

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