The Danish financial regulator has reported Danske Bank to the police over allegations the country’s largest lender broke investor protection rules over an investment product that lured savers trying to escape negative rates.
The Danish Financial Supervisory Authority said on Friday that it suspected Danske of breaking two rules on providing misleading information under the Scandinavian country’s investor protection legislation.
The complaint to police is the latest blow to Danske following a €200bn money-laundering scandal that has led to multiple criminal investigations as well as the ousting of the bank’s chief executive and chairman, and a halving of its share price.
Jesper Nielsen, the man brought in by Danske as interim chief executive last year to help clean the bank up, was fired by the lender in June when news first broke of the mis-selling scandal.
The bank said then that 87,000 customers in its Flexinvest Fri product had been overcharged fees compared with the expected return and that it would spend about DKr400m compensating them.
The Danish regulator said on Friday that despite knowing a large number of customers were likely to have a negative net return from the product, Danske failed to tell them and continued selling it “for a continued period”. It amounted to a “very serious breach” of consumer protection rules that “could weaken confidence in financial stability,” the regulator added.
The regulator has repeatedly warned that it is worried that Denmark’s protracted period with negative interest rates — the longest of any country in the world — could lead banks to push riskier savings products to customers such as Flexinvest Fri.
“It is crucial for consumer confidence that banks’ advice is fair. The latest interest rate development places great demands on banks’ advice related to the selling of wealth products,” said Jesper Berg, head of the Danish FSA. The regulator added that it was further sharpening its focus on supposedly low-risk investment products.
Two Danish banks have said in recent days that they will impose negative deposit rates on customers with more than DKr7.5m in their accounts, although Danske itself has so far resisted such a move.
Chris Vogelzang, Danske’s chief executive, said on Friday that the bank had expected the “harsh and justified criticism” from the regulator.
He added: “Our customers must be able to trust that we have their best interests in mind and that we provide correct and adequate information and advisory services to them. We have not lived up to this in this case.”
The Danish regulator also made a number of orders to Danske over the case including to conduct new suitability tests for all Flexinvest Fri customers and correct the miscommunication to each individual client.
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