Saturday, October 31, 2020

Swedbank top managers denied bonuses amid money laundering probe


The most senior managers working at Sweden’s biggest mortgage bank won’t be getting bonuses to reflect last year’s bumper profits.

Swedbank’s board wants to send a clear message that a bank being investigated for money laundering can’t reward its highest-ranking people, no matter how much business they bring in. So it’s withholding payments into two bonus programs for 170 top managers.

“The money-laundering crisis has damaged the trust in the bank,” Unni Jerndal, a spokeswoman for Swedbank, said by email. “The board wishes to make the point that all senior executives share responsibility for full compliance.”

The Stockholm-based bank, which dominates financial markets in the Baltic region, is being investigated in Europe and the US after Sweden’s public broadcaster said it channelled as much as $155 billion (€140 billion) in potentially dirty money into the West. When investors learned of the allegations early last year, they fled, wiping almost a third off Swedbank’s market value within weeks.

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Swedbank has spent the time since then trying to restore confidence. It fired a number of top executives implicated in the scandal, including its chief executive officer, chief compliance officer and its Baltic head. The bank also parted ways with its chairman. Meanwhile, management has shifted huge resources over to compliance. Swedbank’s new CEO, Jens Henriksson, said on 28 January the bank is freezing the accounts of clients who can’t explain their financial transactions.

Speaking to reporters after publishing fourth-quarter results, Henriksson said the decision to withhold bonuses will hit some bankers who “may not have had anything to do with this”. But, he said, “being a manager at Swedbank means that you have to take responsibility for the whole picture”.

Henriksson, who joined Swedbank in October after running Sweden’s largest insurance company, won’t be among those affected. The new CEO’s terms for employment “do not contain any variable compensation”, Swedbank said.

Swedish and Estonian authorities are due to publish the findings of their investigations into Swedbank in March. Around the same time, Swedbank plans to release the results of its own probe. The bank has also hired a US-based attorney, amid expectations that American investigations could take years.

Scandals in Nordic banks

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Swedbank is one of several Nordic banks to have been tainted by money-laundering scandals in recent years. The biggest centers on Danske Bank. Denmark’s largest lender admitted in late 2018 that its failure to properly screen non-resident accounts in Estonia meant that a large part of around $220 billion in flows is suspicious and may have been laundered money.

Penalties for both Danske and Swedbank could run into the billions of dollars, according to some estimates.

Henriksson said his bank has the resources to pay potential Swedish and Estonian fines. He’s even pledged to stick to a dividend policy of 50% of profits and committed to savings targets, despite the cost of dealing with the laundering allegations.

The decision by Swedbank’s board to withhold bonuses means it will save 13 million kronor (€1.2 million), reducing the bank’s total allocation for variable remuneration by 30%, it estimates.

Swedbank has two programmes through which it awards variable pay. A general program (Eken) is available to most employees while specialists and managers receive bonuses through IP, the individual programme, according to the bank’s website. The programmes award cash and shares on both a deferred and non-deferred basis.

Swedbank said it won’t withhold any bonuses to which executives are entitled under previous programs. In 2018, 638 so-called material risk takers received 124 million kronor in variable pay. That included deferred cash and share distributions.



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