Nordea Miscalculated Credit Risk for Danish Unit, FSA Says

Nordea Bank AB has miscalculated credit risks and capital needs for its unit in Denmark, according to the country’s financial watchdog.

The bank’s recent change in an internal rating-based methodology resulted in a capital need that was too low and some of the changes ought to have been approved by authorities in advance, the Danish Financial Supervisory Authority said in a website statement on Tuesday.

“Furthermore the FSA discovered a need for increasing the solvency requirement when accounting for the company’s operational risks, primarily associated with weaknesses in how the bank prevents money laundering and its IT systems,” the FSA said in the statement. “Finally, the FSA recovered a need to increase the capital requirement associated to Nordea Bank Danmark’s credit concentration risk.”

Nordea’s Danish unit has raised its capital need by a total of 8.5 billion kroner ($1.2 billion) as a result of the review, which was conducted in concert with Nordic and European regulators, the Danish FSA said.

Nordea said the higher capital need for the unit was included in the new regulatory requirements it announced for the group on Oct. 2.

“We’re taking note of today’s decision, while, as it appears, the bank has already begun amending Nordea Bank Danmark’s solvency need in accordance with the FSA’s observations,’ ’ Peter Lybecker, chief executive officer of Nordea’s Danish unit, said in an e-mailed statement. “We’ve started fixing the shortcomings which the supervisor pointed out in our risk management.”

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