The scandal surrounding the Estonian arm of Denmark’s biggest lender, Danske Bank, is one of the biggest in the financial sector in many years.
Danske Bank admitted on Wednesday that as much as $235 billion of transactions flowing through its Estonian branch between 2007 and 2015 may have been suspicious, and connected to potential money laundering.
So far, the bank’s CEO, Thomas Borgen has resigned, saying that while an investigation into the branch found no legal wrongdoing from him, he believed the best course of action was to stand down.
“It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia,” he said in resigning on Wednesday.
As well as Borgen’s resignation, Danske has already had to contend with a sharp drop in its share price as investors pull out in anticipation of possible regulatory and legal punishments on the back of the scandal, similar to what happened with the Amazon share price back in 2011.
Going forward, however, another major issue the bank is likely to have to contend with is one or more substantial fines for its failings in the scandal. No one knows how much any potential fine will be yet, or even if any will be levied, but early estimates range from hundreds of millions of dollars, to billions.
Perhaps the biggest estimate of how much the fine may be so far comes from Danish bank Jyske Bank, a key competitor of Danske Bank. According to a column from Breakingviews, analysts at Jyske have calculated that the heaviest penalty for Danske Bank could amount to 53 billion Danish krone ($8.3 billion).
That is based on about $150 billion of the Estonian transactions being fraudulent, and regulators following the penalties they have imposed on the likes of Deutsche Bank and BNP Paribas in previous incidents.
Most estimates are significantly less extreme than that outcome. Credit Suisse, for example, said in a note on Wednesday that markets are expecting the total fine to be below 15 billion krone ($2.3 billion), around 28% of the most pessimistic forecast from Jyske.
The Danish government has also put a smaller number on a potential fine for Danske Bank if it is found to have committed any wrongdoing. The Danish government said on Wednesday afternoon it could be looking to levy a fine of 4 billion kroner ($630 billion) in the event wrongdoing is proved.
According to Bloomberg that estimate is “based on an assumption that the bank’s profits from transactions tainted by laundering amount to about 1.5 billion kroner ($235 million.)”
Danske Bank has not yet been found to be responsible for anything connected to the scandal, so it is possible that it could avoid a fine altogether.
The bank has already received a fine for violating anti-money laundering rules in relation to the monitoring of transactions to and from correspondent banks. In December last year, it was hit with a 12.5 million krone ($2 million) fine. That fine, however, did not concern its Estonian operation.
