Denmark’s Public Prosecutor is preparing to contact Danske Bank A/S (DANSKE)’s top management after questioning traders in connection with a probe into the alleged manipulation of mortgage bond prices.
Police will seek interviews with those in the bank’s management who alerted the Financial Supervisory Authority to irregularities found in an internal audit, according to Henrik Helmer Steen, the deputy public prosecutor. He said he wasn’t sure exactly who they would be speaking to.
“Ultimately we want to know if there was a punishable offense by someone and who knew what and who should have known,” he said in a phone interview today. “Negligence is also punishable under the securities trading act.”
Denmark’s Public Prosecutor said on Feb. 7 it was investigating the country’s largest bank, its mortgage unit and six employees for manipulating bond prices in early 2009. The alleged rigging was designed to drive mortgage bond prices higher and make client redemptions more costly, the prosecutor’s office said.
The traders have during questioning said that “nothing unusual” happened and that they followed “standard procedure,” Helmer Steen said.
“The managers are oddly enough saying something different: that they didn’t have any knowledge of what happened,” he said. “The fact that management suspended the people in question as they broke internal guidelines doesn’t correspond with events not being out of the ordinary.”
Police are also looking into internal rules for bond trading at Danske Bank and its mortgage unit, Realkredit Danmark A/S, to identify possible weaknesses.
“Danske Bank continues to cooperate in full with the investigation,” Kenni Leth, a bank spokesman, said by phone today. He declined to comment further.
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. Consumers and businesses in the Nordic nation finance their property loans using bonds. Realkredit Danmark is the country’s biggest provider of bond-backed mortgages after Nykredit Realkredit A/S.
Police are hoping to arrive at some conclusion over the “summer” after Danske Bank demonstrated a willingness to cooperate, Helmer Steen said.
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