Tuesday, June 21, 2016

Secret memo from FI 80 billion missing in Nordea – Swedish Dagbladet

the internal document warns that Nordea for a long time grossly underestimated the risk in their lending to their corporate customers. Photo: Annika af Klercker

The content of the document is dynamite. About Nordea deliberately provided incorrect figures, these are a very serious case of corporate fraud. The memorandum, according to SvD Näringsliv sources prepared several months ago by an analyst at the Financial Supervisory Authority and is registered.

The analyst working allegedly on the department right examines banks’ estimates of their risks. The document should be based on several sources to be known by a large number of people within the Financial Supervisory Authority, which is responsible for monitoring the Swedish banks. Despite the sensational content of the memorandum FSA has not communicated anything out of the question.

The internal document warns that Nordea for a long time grossly underestimated the risk in their lending to their corporate customers. Thus, the bank has also just grossly underestimated how much capital the bank needs.

The question of how much capital banks should hold buffers to protect against future losses has become absolutely central for the financial crisis. The amount of capital that Swedish banks must have as collateral under rules governed by the risk in their loan portfolios – so-called risk-weighted capital requirements.

High risk in lending means that the bank needs a lot of capital, low risk means less capital. This risk is allowed banks calculate themselves with the help of so-called internal models. It is in these numbers it has uncovered serious deficiencies in Nordea.

According to sources with knowledge of the contents of the secret FI memorandum is about Nordea’s own assessment of the likelihood of its corporate collapses, suspected grossly inaccurate.

Nordea Chairman Björn Wahlroos and CEO Casper von Koskull. Photo: Tomas Oneborg

SvD Business talked to , people in the financial market with very good knowledge of the banks who say that there is concern about the reliability of banks’ models. Banks’ estimates of risks should be according to the regulations based on how large the losses in lending has been in previous years.

In addition, there must be a safety margin. That is the estimate of the probability that the Bank will suffer losses and how big those losses will be higher than what it actually gone.

But the memo from the official the FI should according to sources point out that in Nordea’s case is just the opposite. Nordea forecasts for the probability of customers going bust is far below Nordea’s historical losses, according to the memorandum. For distinction is as large as 40 to 80 percent.

Another way to put it is that Nordea appreciate the risk in their lending to firms at only half as high as it should be. The consequences of this are very large. Nordea’s lending to companies is breathtaking 1600 billion. In total, Nordea has nearly 600,000 corporate clients.

According to sources with knowledge memo pointing officer at Nordea, the situation looked like at the end of 2015, would be forced to increase their capital with between 50 and 80 billion to reach up to the Financial Supervisory minimum requirements for capital adequacy.

the capital requirement, that is what the FI require that the bank holding the buffer would thus increase from the current 265 billion to between 315 and 345 billion. To achieve this would Nordea have to go to their owners and ask for money in a new share issue, a message that would come unexpectedly and put down like a bomb on the financial market.

The amount can be compared with Nordea’s market capitalization in the current situation is just over 300 billion.

the information SvD Business now can reveal risks triggering a crisis of confidence in Nordea. It can also create great anxiety among the bank lenders and rating agencies as well as among ordinary customers.

The large capital shortfall of Nordea emphasized in the secret document stands in stark contrast to how the bank acted in recent years. Nordea, under the leadership of its President Björn Wahlroos, have distributed large sums to shareholders. Only dividends for the year added up to 24 billion.

It is a dividend therefore not have been possible if the information in the memorandum are correct.

When the bank released its financial statements in January, Nordea forecasts of future dividends, slightly lower than the stock market hoped for causing the price plunging. Another meaning of the content of the memorandum is that Nordea can systematically violating the rules. It raises the question of Nordea live up to the requirements to conduct banking operations.

Already earlier, Nordea has for several years been scathing criticism for poor compliance. Last year, among other FSA that the Bank once again broken the rules on money laundering. It cost the bank 50 million crowns in fines. Several sources also claims that it cost then CEO Christian Clausen job.

Nordea dealings with the notorious law firm Mossack Fonseca in Panama has also attracted strong criticism. FSA is currently examining the bank’s actions regarding suspected tax evasion and even the US government has requested information from the bank.

Nordea is the Nordic region’s largest bank and has great significance for the Swedish economy. A total bank lending to companies and individuals at 343 billion euros. The total assets amounted to 676 billion euros – 6350 billion. This corresponds to about 1.5 times the entire GDP.

Nordea was recently approved to do their branches in other countries to subsidiaries. Thus falls the heavy responsibility of the Swedish authorities of Nordea in crisis. That it increases the risks of Sweden as a country is one that, among other things, the Riksbank has warned.

FI’s Director General Erik Thedéen would not comment on the particulars of the secret memorandum.

– I can not exactly go into this memorandum. It would be violating the confidentiality order. Therefore, I can neither confirm nor deny.

In the next breath sticks Erik Thedéen no secret that there has been a criticism at Nordea, but then prevailing Bank’s governance of the models but not the actual calculations. It got FI to act last year.

– We added nearly 14 billion in additional capital of Nordea last year when we saw deficiencies in the control.

Are you supposed to be worried about Nordea’s capital buffer?

– it is always important that banks have enough buffer if it goes bad. Therefore all the shortcomings we discover serious. But I have not seen more failures than we have in the current situation has been announced, says Hans-Ole Jochumsen.

Nordea is terse in his comments. Rodney Alfvén, Head of Investor Relations at Nordea, said that the bank never publicly commented its dialogue with the FSA. He argues, however, that the bank by far is FI’s requirements for capital buffers.

– As with FI also believe that we have more than enough capital, says Rodney Alfvén at Nordea.


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