A massive lawsuit and negative rates plague Danske Bank

Marshall Wace has taken a short position against Danske Bank. The Danish FSA said that the firm has a short position that reaches the threshold of 0.5% of issued shares.

Paul Marshall’s hedge fund is the first to take a short position at or above that level. This is the threshold required for disclosure with Danish regulators. The position draws significant attention to events impacting the largest lender in Denmark. Reuters reported the position on Friday.

Marshall Wace, Danske Bank, and the Future       

Danske Bank is facing pressure on two fronts: One legal and the other based on economic policy.

Danske Bank has faced public backlash in recent years over a massive money-laundering scheme that rocked Denmark’s largest bank. Last week, Reuters reported that roughly 60 investors sued the bank for 1.5 billion crowns ($224 million) over the alleged scheme. Several nations are investigating the firm over more than 200 billion euros in payments that processed through its Estonia branch between 2007 and 2015. The bank said that many of these transactions appeared suspicious.

The plaintiffs claim that the firm deliberately violated Danish Capital Market Laws by misleading investors over the situation for years. The lawsuit said that the company failed to disclose updates in “its financial income statements and retained earnings included significant earnings from known illegal high-risk money laundering activities”.

In addition, Danske Bank has been one of the oldest victims of negative interest rate policy on the European continent. The country has faced negative interest rates for about eight years. Now, banks are trying to press back with new products that incorporate negative interest rates.

In August, it watched rival Jyske Bank – the third largest bank in the country – introduce the first negative interest rate mortgage. That action was a response to a larger debate about the banking system and monetary policy. Recently, Danish banking Governor Lars Rohde also said that Denmark may not see positive interest rates for another decade.