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Danske names interim CEO as Borgen is relieved of his duties

Jesper Nielsen has been with bank since 1996, most recently as head of Danish banking

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Danske shareholders have voiced anger at the board's initial decision to allow Mr Borgen (left) to stay on until a permanent replacement was found, arguing that he needs to leave immediately.

Copenhagen

DANSKE Bank A/S has appointed Jesper Nielsen from within its ranks to replace Thomas Borgen for the time being, after the chief executive officer was relieved of his duties following his role in one of Europe's worst money laundering scandals.

The European Union is trying to come to grips with the stunning string of revelations surrounding the dirty money saga. Danske's admission that a large part of about 200 billion euros (S$318 billion) that flowed through a tiny Estonian unit was probably laundered has sent shock waves through Denmark's parliament, with criminal investigations now under way. The scandal has also triggered a European investigation into Danske's local regulators.

The decision to give the interim CEO job to Mr Nielsen, who has been with Danske since 1996, most recently as its head of Danish banking, shows that it was a matter of "urgency" for the board to remove Mr Borgen from the bank, according to Per Hansen, an investment economist at Nordnet in Copenhagen.

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"There are several reasons why it makes sense to appoint an interim CEO instead of already naming a permanent replacement," Mr Hansen said. "Danske Bank probably decided that it was important to start the post-Borgen era as quickly as possible. But for investors, it will be more relevant when a long-term solution is found."

Shares in Danske traded less than one per cent higher in Copenhagen trading on Monday morning, broadly in line with Bloomberg's index for European banks.

Mr Borgen, 54, announced his resignation on Sept 19, the same day that Danske published a long-awaited report on the scale of its suspicious dealings in Estonia. Shareholders at the bank had voiced anger at the board's initial decision to allow him to stay on until a permanent replacement was found, arguing that he needed to leave immediately.

Mr Borgen said on Monday that he and the board agreed that it was "best for all parties that the person who leads management is also around to complete the job, and seeing as I've resigned, that person is not me", said a comment.

Mr Nielsen said that he considered his interim post "mostly a formality" and that he is "looking forward to a permanent solution being found".

The Danish bank is one of several big lenders across Europe to have been tainted by money laundering scandals. Deutsche Bank AG was fined well over US$600 million last year for its misdeeds, while ING Groep NV received a US$900 million penalty for similar failures.

Mr Nielsen, 49, will start immediately as the new Danske CEO, the Copenhagen-based bank said. He is not a candidate for the permanent position, Danske said. Chairman Ole Andersen said that the task of finding a long-term replacement was "progressing according to plan".

Changing the bank's CEO is just one of many hurdles facing the board. Mr Andersen, 62, has hinted that he himself may need to go before too long because of the scandal. Danske is facing a potential fine as high as US$630 million in Denmark alone. That is in addition to regulatory penalties and fines that the bank may be subject to in other jurisdictions. It also remains unclear whether Danske executives may be facing separate lawsuits.

Investors have bolted as news of Danske's involvement in money laundering has emerged. The bank's market value has plunged by about a third this year, making it the worst performing European bank in the Bloomberg index, after Deutsche Bank. Danske's board has said that it hopes that a new CEO will help restore confidence in the bank's management.

It is worth noting that the money laundering scandal is not the worst crisis ever to hit Danske Bank. In the 1920s, its rapid expansion ended in near-collapse with the Danish state coming to the rescue. The CEO back then, Emil Glueckstadt, ended up in jail for downplaying the extent of the bank's woes. He died in custody pending trial, and much of his estate was used to cover the court expenses relating to the scandal. BLOOMBERG