Danske Bank reprimanded over lack of transparency at trading unit

Pointing The Finger

Danske Bank A/S said the financial regulator decided to reprimand Denmark’s biggest bank over its risk controls because of a surge in revenue at its trading unit.

Bloomberg News reports that net trading income climbed 34% from 2007 to 10.6 bn kroner ($1.9bn) last year, according to the Copenhagen-based bank.

Income from trading grew 21% last quarter from the first three months of 2013, Danske said August 1st.

After net interest income, revenue from trading securities made the biggest contribution to Danske’s total income last year.

The Financial Supervisory Authority said this week that Danske, whose assets are almost twice Denmark’s gross domestic product, needs to improve the transparency around its value-at-risk models - a measure of how much a bank stands to lose within a given time frame.

The reprimand follows questions in the U.S. about the ability of VaR to predict risks after JPMorgan Chase & Co.failed to prevent a $6.2bn trading loss.

Danske, identified by a government panel as one of Denmark’s too-big-to-fail banks in March, reported a 46% jump in second-quarter net income earlier this month as impairments dropped by almost half. The bank said its solvency need was 11.3%, up from 11% three months earlier.

The FSA has toughened its oversight of the financial industry since Denmark’s property bubble burst in 2008. Spar Nord Bank A/S said today an inspection found Denmark’s fourth-biggest listed lender had correctly stated losses.

To access the complete Bloomberg article hit the link below

Danske Bank Trading Gain Provokes Regulator Reprimand

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