DNKEY Danske Bank AVS (PK)

By Dominic Chopping

Denmark's Financial Supervisory Authority said Friday it has reported Danske Bank A/S (DANSKE.KO) to the police for misleading its customers with one of its investment products.

The case surrounds Danske Bank's Flexinvest Fri investment product and has already cost one executive his job. Then-executive board member and Head of Danish Banking Jesper Nielsen was fired in June for his part in the mismanagement of the product that overcharged its customers.

In a statement Friday, the FSA said that although Danske became aware that a very large proportion of their customers could expect a negative net return from the investment, the bank did not inform the customers.

"In the opinion of the Danish Financial Supervisory Authority, this is a very serious breach of the consumer protection rules that apply in this area," the FSA said.

In addition to reporting the bank to the police, the FSA has ordered Danske to conduct new suitability tests of all customers with an investment agreement in Flexinvest Fri.

Danske Bank has previously said that the case affects about 87,000 customers in Denmark, and it expects to pay out a total of around 400 million Danish kroner ($59 million) in compensation.

"As expected, we have received harsh and justified criticism from the FSA," said Danske Bank Chief Executive Chris Vogelzang.

"We have taken a number of actions, including actions towards relevant staff members, and all affected customers will of course receive compensation."

All affected customers are expected to have received compensation before the end of the year.

Danske is also being investigated by Estonia, Denmark, France and the U.S. over allegations that around $230 billion in suspicious funds from Russia and other former Soviet states entered Europe through its tiny branch in Estonia.

It said in conjunction with its second quarter results last month that no material developments regarding the money laundering case took place in the second quarter, but that it continues to have a negative impact in terms of customer satisfaction and outflow among retail customers in Denmark.

Write to Dominic Chopping at dominic.chopping@wsj.com; @domchopping @WSJNordics

(END) Dow Jones Newswires

August 30, 2019 10:33 ET (14:33 GMT)

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