Danske Bank bonus culture investigated

Danish police are looking into how Danske Bank’s bonus programme might have influenced employees now being investigated for alleged bond price manipulation.

The public prosecutor for serious economic and international crime, which on February 7 accused Danske, six of its employees and its home-loan unit of rigging mortgage bond prices in 2009, needs to find out what role the prospect of a bigger paycheck played,

“It’s not apparent from the information that we have now that the employees made the transactions for their own benefit,” public prosecutor Hans Fogtdal said.

“But we are looking more closely at the bonus programme to see whether it has any bearing on this case, whether the employees benefited from it.”

The alleged misdeeds were designed to drive mortgage bond prices higher, making client redemptions more costly, according to the public prosecutor.

The trades in question date back to some of the darkest hours of the global financial crisis, after the 2008 failure of Lehman Brothers sucked liquidity out of most markets.

The case raises questions as to how widespread price fixing was, lawmakers said last week.

Danske Bank shares slipped 0.7 per cent to 138.90 kroner as of 10.56 am in Copenhagen. The lender’s stock has gained 12 per cent this year.

Denmark’s $550 billion mortgage bond market is the world’s largest per capita and more than 1 1/2 times the size of the economy.

Bloomberg