Den Danske Bank

114 European banks get a punch on the nose – and we are talking major downgrades.
Credit rating agencies are the subject of some debate as to the validity and timing of their evaluations. As banks pay for their rating it will always remain dubious. “You can’t buy love.” – Well money can get you something VERY similar.
Be that as it may. But let’s look into it from a country perspective, Denmark:
Danske Bank, DLR Kredit, Jyske Bank, Nordea Bank Danmark and Nykredit – both the bank as well as the real estate mortgage part. To mention some that they have a remote chance of being know outside their hamlet.

Take this as a case study:

This is put into perspective, as Denmark as a country has NOT been downgraded.
It seems like Moody’s concur with this author: The credit crunsh is a bank problem (notably the far largest bank), not a national problem.
Except Nordea Bank, Denmark that is downgraded one notch – the rest are downgraded 3 notches! Thus closing the barn door after the horse has bolted.
We are talking the largest banks in Denmark. Danske and Nordea together are 2/3 of Danish Banking.

Interesting enough the new CEO of Danske Bank Eivind Kolding, has few words of comfort to his predecessor – first day in office! (Quoting and translating JyllandsPosten newspaper):

“We have had too big loses, so something has gone wrong. Up to the financial crisis there were 12-14 years when were were “World Champions” in credit, but perhaps in the latter part of the period we were “speedblind”. Generally speaking: I don’t consider us to poor in credit granting today. But it is of course an area we have to look into”, says Eivind Kolding.

Furthermore it is noted that the Credit Executive last November announced his retirement, as “he needed more time with the family.” Kolding has this comment:

”I hope we have a candidate in place within 2 or 3 months; but there is a risk that it will be someone tied to a competitive clause – that can delay the date.”

Now the credit executive is indeed a key figure in any bank – though the PR-manager thinks himself of greater importance – as he is in charge of valuation of credit worthiness. What basis a credit is granted on and what security is admissible. Generally the career position.
This means we are not just talking top management – we are talking the entire management. This is not just a smooth handing over the torch – it is a hand grenade with pulled spilt. It is more than implied that this successor is also to be found outside Danske Bank – apparently a shortage of qualified internal candidates.
Again we should note the dates. November 2011 was when the CEO of the Central Bank announced the enlarged collateral base for the CB advancing credit to include not only sovereign bonds but also “good loans”.
Again it suggests a close connection to the Central Bank (thus government)  and its efforts to stabilize both banks and currency.

The desperate buy of flexible interest bonds – of own issue – has not gone unnoticed to say the least.
The ploy to get finance through the emergency measures of the European Central Bank has NOT succeeded. Instead of hiding the problem the legerdemain has secured publicity.
The state of affairs is not, as Danske Bank has tried to project, a case of a few hillbilly banks in remote areas gone native. It is the major banks with international ambitions. That other large banks are stuck in the muck as well is a very small comfort indeed.