Danske Bank: Does Banking Regulation Need an Overhaul?
Wondering about the final consequences associated with a scandal which involves an estimated 200 billion euros is perhaps inevitable. In the end, the bigger the amounts then the larger the headlines. Any financial scandal has implications for that company and people concerned but it's also only natural that onlookers want to know what happens next. The size from the problem at Danske Bank makes it imperative that how it happened is determined and that the opportunity of it happening again is taken away.
But it goes beyond the staff at Danske, its customers and also the various figures who have been while using bank to launder their ill-gotten gains on a massive scale. It involves taking a long, critical look in the issue of regulation: both quality of regulating financial institutions in general and also the exact duties and activities from the regulators whose job it was to make sure a Danske Bank scandal never happened. As there seems little doubt that regulation failed at this juncture.
This was an event where a large number of apparently suspicious customers were accountable for 200 billion euros' price of transactions over nine years at Danske's Estonian branch within the capital, Tallinn. The Danske Bank scandal has so far been focused – and quite rightly – on what went wrong and who had been responsible. But if anything will be learnt from what now seems to be the biggest money laundering scandal in history, the investigators have to be discovering exactly what the regulators were doing to avoid wrongdoing on such a massive scale.
Only by taking this kind of approach can we have any confidence that a problem of this scale and nature will never happen again.
At time of writing, nine Danske managers happen to be charged regarding the the scandal; including former leader Thomas Borgen, who stepped down last October once the scale from the scandal became apparent. To be fair to the Danish prosecutors, they've acted swiftly and decisively. They have been the subject of global scrutiny and what happened at Danske bank is one thing which has implications for that trustworthiness of the Danish banking system in general. This is a matter that needs to be resolved quickly and any lessons learned immediately if Danske and Denmark's financial system as a whole will be to restore their reputations.
The authorities have investigated, assessed the scale and also the nature from the problem and taken the actions necessary to identify and prosecute those that they believe are responsible for it happening.
While matters are at this stage, it might be unfair and unwise to pre-judge the problem or cast aspersions on any of those who've been – and even anyone who has not been – charged. We all know there has been wrongdoing and we know that it's been allowed to happen because of either assistance or incompetence from those within Danske Bank.
But what we have no knowledge about is the effectiveness of regulation and / or people who had the task of enforcing it. And that can't be something which could be left unaddressed.
The competence of the regulators and how much they knew about what was happening are problems that are as central to the Danske Bank scandal because the conduct of the launderers and the bank staff. There's a clear and urgent need to discover the reasons for why the regulators either knew little or nothing – or knew more but did little or nothing.
What has happened at Danske has done the financial institution, its staff and Danish banking in general no favours at all. It has to be seen as an wake-up demand either new methods to bank regulation or at least better enforcement of existing regulation.
