Nordea Bank AB (STO:NDA-SEK) Danmark The Danish Bank Inspection “visited” Nordea Bank Danmark in November 2012, according to the official report from the Bank Inspection.


The Bank Inspection had chosen 174 cases, partly a random sample of 75 business cases in the range of 50-500 mio. DKK, subjectively chosen business cases above ½ bio. DKK, shipping cases above 50 mio. DKK and leveraged finance cases over 10 mio. kr.

Comment: They knew exactly what they were looking for – the random sample 75 out of 174 – that does not seem particularly random to me.

What did they find? Quote:

The Bank Inspection found the credit quality of the banks large lending customers in line with the quality of customers in other large Danish banks.

The Bank Inspection found that the banks credit control was satisfactory and the decision material with analysis of case risks of good quality, compared to other large Danish banks.

Comment: Nordea Bank Denmark in other words knew/know exactly what they are doing.

So no excuses! Quote:

The Bank Inspection found however, that the bank in a number of cases had not realised that an Objective Indication of Weakness (OIV) had occurred. The Bank Inspection ordered the bank to ensure that OIV’s are noted according to the rules in order to evaluate a possible need for impairment in time.

Furthermore the Bank Inspection estimated that the banks internal rating of customers with indications of weakness in a number of cases was too positive, and that the bank was late in down rating. Apart from business with the management, the rating in 17 of 157 was too positive equivalent to 11%. Of these shipping cases were 7 out of 17, equivalent to 41%. The Bank Inspection ordered ensuring the rating of clients to be correct, as it is necessary to correctly estimate risk weighted assets.

Nordea Bank AB (STO:NDA-SEK) Danmark replies on their home page – and prepare yourself for a healthy laugh.


With respect to the reports paragraph concerning OIV-realisation and impairments the bank remarks, that the inspection happened at a time when the bank’s balance day estimates of the cases for fourth quarter had been underway or immediate. The process in itself would have led to considerable parts of the impairments the Bank Inspection identified. There is as not impairments of 340 mio. DKK above and beyond what the bank otherwise would have impaired. In particular it is noted that the result of the inspection is not expected to influence the impairment level in Denmark (Banking Danmark og CIB Danmark) in Q4 2012 in relation to Q3 and the announcements in relation to this.

Comment: Sure, sure, sure……. the dog ate the school report and the check is in the mail.

In order to gain some perspective the following information on members of the board is also quoted from the Nordea home page:


Nordea Bank Danmarks board consists of Ari Kaperi (chairman), Fredrik Rystedt (deputy), Gunn Wærsted and Anne Rømer.

The auditing committee consist(s) of Ari Kaperi og Anne Rømer.

Anne Rømer, trained as an authorised auditor and is a director in Maersk Line responsible for reporting, consolidation and controlling,   [he] is regarded by the board as the independent member of the auditing committee, with qualifications in accounting and/or auditing according to the demands in Announcement concerning auditing committees and corporations under the juristiction of the Finance Inspection.

The position of Anne Rømer is especially noteworthy: She is from Maersk Line, where APM is a major shareholder in Danske Bank (the largest competitor to Nordea). What the devil is she doing auditing Nordea’s books?

Another point is that 2-3 years back, APM handled a major bond issue through Nordea and not Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) which caused some raised eyebrows.

Wild speculations:

I don’t know what is going on; but it is the sort of arrangement I would make if I was to de-merge Nordea from Denmark – and swap Nordea loans in Denmark for Danske Bank loans in Sweden. Be certain that apples were compared to apples and pears with pears. Nordea Bank AB (STO:NDA-SEK) has been notorious in Danish banking circles for NOT taking impairments – not that banks do that willingly.

This feeble assumption is supported by an almost identical inspection of Danske Bank and its loans in Sweden from May-June 2012:


The Bank Inspection inspected Danske Bank in May-June 2012. The inspection was an investigation of function, that is an investigation of one or more chosen areas. [No, it doesn’t appear clearer in Danish!]

On the inspection the Bank Inspection checked the credit for the corporation’s large costumers (Corporate & Institutions, Shipping og Special Financial cases) and loans to business customers in Denmark, Sweden Norway, Ireland, Northern Ireland, Germany and Poland. The inspection also included loans to the management…..


The Bank Inspection went over 590 loans larger than approximately 10 mio. DKK. Furthermore the Bank Inspection also went over loans to management and board. The inspected loans had drawing rights of a total 292 bio. DKK and was used to 191 bio. DKK. Danske Banks total loans were June 30th 2012 1,704 bio. DKK of which 899 bio. DKK is private clients not inspected..

The inspection took place at a time when the bank made the quarterly revision of loans to evaluate impairments Q2 2012. The Bank Inspection estimates that impairment as of June 30th 2012 are sufficient.

That would be what I would do if I had to ensure a level playing field in a major swap of clients: Make sure the big ones were handled properly and check the rest to guard against systematic sloppiness or attempted fraud.

The conditions were exactly similar, but Nordea Bank AB (STO:NDA-SEK) was caught out with the books still on the stove – and none but the most immature and pathetic defence.

But this opens up yet another perspective:

Sweden has declared it will not participate in the common European Bank Inspection – actually at the Finance and Economy ministers meeting they threw the spanner in the works for a week, postponing the general recommendation to the council. The Swedish Finance Minister Anders Borg must have known the terrible state of Nordea’s books – not that there are bad loans – all of them have that; but that the bookkeeping is deliberately NOT according to the international standards. There is possibly no way Swedish banks may be able to live up to ECB standards – which would preclude any inspection by a European Bank Inspection.

Considering the relative size of the Swedish banks (there are really only four) to the Swedish economy it is probable that Sweden might not hack it. Letting loose the Danish Bank Inspection in their own bailiwick brings misery enough – a bunch of German bank inspectors prowling in Sweden does not bear contemplating. No amount of leaving “small banks” to the national bank inspection will be sufficient – the “big four” IS the Swedish finance sector and they would in all circumstances come under the European Bank Inspection. The Danish Bank Inspection deliberately avoids mentioning the total amount of loans they have inspected in Nordea Bank Denmark – in contrast to the similar inspection of Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY).

Another aspect is that the Swedish banking crisis in the beginning of the 1990’ies might still surface some bloated dead bodies from the depth of the lake. The glimpse the Danish Bank Inspection has revealed – and that is only a tiny corner – is truly scary.