Swedish bank goes into liquidation

Mon, Aug 30, 2010, 01:00

Small Swedish investment and private bank group HQ Bank AB went into liquidation today after losing its operating licence and failing to find a buyer over the weekend.

The closure of the bank, which shut its trading arm in June following big losses, caused few ripples in the wider bank sector, although HQ's shares plummeted 80 per cent.

The liquidator said he aimed to find a buyer for the bank, while the company said: "The process for the forced liquidation of HQ Bank has begun".

Sweden's Financial Supervisory Authority (FSA) cancelled HQ's bank licence on Saturday, saying the bank had broken "some of the most basic rules".

It said these included unacceptable shortcomings in controlling its trading operation and taking "such large risks that the company endangered its own survival".

The FSA saw little risk of contagion. "We consider that financial stability is not under threat. HQ Bank is a relatively small bank," the FSA said in a statement on Saturday.

The FSA said HQ Bank had about 20,000 investor accounts. Some 900 clients had deposits over the level guaranteed by the state, which is up to €50,000, it added.

HQ closed its trading unit this year at a cost of 1.2 billion crowns ($162.4 million), blaming losses on the financial crisis and market upheavals.

Swedish banks' main problems in the global financial crisis arose from their exposure to the crisis-hit Baltic states, but banks have of late painted a brighter picture in the region.

Swedish bank shares showed little reaction to the HQ news. Largest bank Nordea was off 0.8 per cent, SEB was down 0.02 per cent, Handelsbanken edged 0.15 per cent lower while Swedbank was up 0.7 per cent.

The benchmark index slipped 0.5 per cent.

Swedbank said it had an exposure of 88 million crowns to HQ, which it said was secured with cash and shares. Handelsbanken said it had no exposure.

Investment group Oreseund -- which this year bought HQ's investment funds, HQ Fonder Sverige AB -- said it had total exposure of 749 million crowns to HQ Bank. The FSA decision on HQ Bank has no effect on HQ Fonder, it added.

According to HQ's 2009 annual report Oreseund was the biggest shareholder with a 24.5 per cent stake.

Bjorn Riese of law firm Mannheimer & Swartling said he had been appointed as liquidator of the bank -- in practice replacing the chief executive and the board -- and that he wanted an orderly process.

"... but the main track is naturally to try to dispose of the bank and try to find someone who can drive operations further," he told a news conference.

Nordea and Handelsbanken declined to comment on whether they were interested in HQ assets. Swedbank said it was a bit early in the process to express an opinion.

The Dagens Industri (DI) newspaper reported unnamed sources as saying the FSA had vetoed a deal between HQ and brokerage Carnegie, itself nationalised during the financial crisis in 2008 and then sold to private equity firms in 2009.

DI's sources said Nordea, Handelsbanken, SEB and private equity fund EQT had been part of discussions over HQ at a price tag of about 650 million crowns versus a market capitalisation of 1.55 billion crowns at the close on Friday.

Its liquidation came days after it announced terms for a capital hike for up to 1 billion crowns.

Reuters