Danske Loses Its Most Experienced Executive in New Scandal
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Danske Bank A/S didn’t just suffer a fresh hit to its reputation with its latest scandal, it also lost its most experienced and loyal executive.
Jesper Nielsen, who was fired on Monday in a scandal involving overcharging customers, was the longest serving of the 10 people at the top of Denmark’s biggest bank. The 50-year-old joined fresh out of the university in 1996 and was one of only two executives to have worked at the Copenhagen-based lender for more than a decade.
The bank has now all-but cleaned house in its upper levels in a bid to restore trust after a $230 billion money laundering scandal exploded at its Estonian unit. The unexpected dismissal of Nielsen shows its commitment to not accepting any more missteps, but it now also faces an uphill battle because its chairman, CEO and CFO are all less than a year into their jobs.
The loss of institutional memory adds pressure on new CEO Chris Vogelzang, a Dutch national who’s only been with the bank since June 1 and who will now have to steer the 147-year-old Danish institution out of more than one crisis.
“Danske is losing an important executive profile at a fairly critical time,” Simon Hagbart Madsen, an analyst at Jyske Bank, said by phone. “The stock market is getting a bit nervous over the number of experienced leaders who have left the bank at a time when it needs to get through the money laundering crisis and emerge on the other side.”
Shares in Danske fell as much as 3.1% on Tuesday, to the lowest in almost six years. The decline extended losses on Monday and sent the stock down by 60% since the start of last year, when revelations about the laundering scandal began to pick up.
The now nine members on the executive board have a total of about 44 years of experience at Danske between them. One of them, Glenn Soderholm who’s head of Nordic banking, has about half of those years, according to resumes on the bank’s website. The second-longest serving executive is Jacob Aarup-Andersen, head of wealth management. The 41-year-old was last year prevented by the Financial Supervisory Authority from taking over as CEO, with the regulator arguing he wasn’t experienced enough.
Jesper Berg, the head of the FSA, declined to comment on Nielsen’s dismissal.
“The bank fortunately also has a lot of good employees below the executive level, employees who have long experience at the bank,’’ Berg said in the phone interview. “But I would say that this underlines the need for Danske Bank to have succession plans for its managers and I’m sure that the CEO and the chairman have that up high on their agendas.”
Nielsen was named interim CEO in October, when the bank ousted Thomas Borgen; days later, Danske confirmed market fears, announcing that U.S. authorities were investigating the bank for laundering. In the months that followed, Nielsen drew praise for his handling of the crisis, including efforts to reach out to both corporate and retail customers.
But on Monday Nielsen was fired after it emerged that 87,000 domestic customers were improperly charged for investments in a savings product. Danske expects it will have to repay about $60 million in compensation. The news risk denting further its reputation among customers, many of whom have already left in protest over the Baltic laundering scandal.
Danske Chairman Karsten Dybvad praised Nielsen for his “significant contributions” but said that as the executive board member responsible for the investment product in question (called Flexinvest Fri), he couldn’t continue in his position, according to a statement.
Vogelzang said that Danske Bank must put customers “at the heart of everything” and that the company had failed to do so in this case because of “misguided management decisions.”
(Updates with share price, additional comment from Danske.)
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