Banks go uninspected for years

Tønder Bank went bust after its first inspection in five years revealed that the bank was on the cusp of financial ruin

Over a fifth of the nation’s banks could be on the brink of collapse, but no-one knows because the industry watchdog hasn’t inspected them for more than three years, according to finance authority Finanstilsynet’s own inspection reports.

Twenty of the 94 banks in Denmark have not been inspected by Finanstilsynet since June 2010, something that investor association Dansk Aktionærforening found woefully inadequate.

“We don’t think that Finanstilsynet is doing its job well enough. The authority must have the resources to inspect banks every year, but the current inspection procedure has been shown to be insufficient,” Niels Mengel, the head of Dansk Aktionærforening, told Politiken newspaper.

John Nordén, the head of Mybanker, a banking analysis firm, said the lack of monitoring means no-one knows if a bank is teetering on the brink of collapse.

“Far too much time passes between Finanstilsynet inspections and a number of recent bank failures have illustrated that you can’t trust the accounts of the banks themselves,” Nordén told Politiken.

An example of what can happen is Østjydsk Bank, which was believed to be healthy until just a few weeks ago, when an inspection revealed it lacked hundreds of millions of kroner in required reserves. That was the first inspection of Østjydsk Bank for two years.

“When the inspection reveals massive issues like that, shareholders lose a great deal of their investment. The rule of thumb has become that an inspection is equal to investment losses and that is unreasonable,” Mengel said.

In another notable example, Tønder Bank, which looked to be in good shape seven months ago, was found in its first inspection in five years to be on shaky financial ground. Soon after the November inspection, the bank declared bankruptcy.

Another consequence of the lack of inspections has been that investors have become hesitant to put their money in banks that haven't been inspected recently.

Ulrik Nødgaard, the head of Finanstilsynet, said the number of inspections was ultimately a political decision, and that conducting more would require more resources.

The business and growth minister, Annette Vilhelmsen (Socialistisk Folkeparti), maintained that she had faith in Finanstilsynet, pointing out that most of its inspections were focused on major financial institutions and banks that had a high risk of failure.

Banks that are under heightened surveillance are inspected at least once a year, while banks with moderate risk are called on every three or four years.

According to Børsen newspaper, the 20 banks that have not been inspected in over three years are:

– Andelskassen Fælleskassen
– Den Jyske Sparekasse
– Djurslands Bank
– EkspresBank
– Fanø Sparekasse
– Falster Andelskasse
– Fjaltring-Trans Sparekasse
– Frørup Andelskasse
– Lægernes Pensionsbank
– Møns Bank
– Refsnæs Sparekasse
– Rise Spare- og Lånekasse
– Rønde og Omegns Sparekasse
– Spar Nord Bank
– Sparekassen Balling
– Sparekassen Sjælland
– Thy, Sparekassen
– Ulfborg Sparekasse
– Vestfyns Bank
– Vistoft Sparekasse




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