HQ board cleared over bank's collapse: audit
TT/The Local · 24 Sep 2010, 15:40
Published: 24 Sep 2010 15:40 GMT+02:00
The news lifted shares by slightly more than 38 percent just after noon local time.
However, the former CEO, board, auditor and trading director of HQ Bank were found to have failed in their obligations to the company and their inaction may result in legal grounds for seeking damages, lawyer Anders Malm, who was commissioned by the previous owner of HQ Bank to investigate irregularities at the bank, announced on Friday.
"The investigation has found that there may be a legal basis for demanding compensation from one or more of the people currently mentioned," HQ wrote in a statement on Friday.
According to the audit reports, substantial trading losses at HQ Bank were made possible because positions were valued based on a model "that was not appropriate and opened up opportunities for manipulation."
Moreover, trade "was not kept in check by appropriate risk limits or monitored by appropriate risk measure," wrote HQ.
Malm believes that these deficiencies were exploited by the responsible traders without catching the attention of the risk department, senior management, board or external auditors.
As a result, HQ Bank was forced to liquidate its trading portfolio "under very unfavourable conditions." HQ notified the police about the former trading director earlier this month and filed a complaint about accounting firm KPMG's services.
At the same time, the trading director has launched a fierce attack against his former employer. He considers himself the victim of a smear campaign and considers the police notification baseless, both Dagens Nyheter and Svenska Dagbladet wrote on Friday.
The Financial Supervisory Authority (Finansinspektionen) revoked HQ Bank's licence on August 28th, claiming that risky securities deals carried out by the bank's trading department threatened its survival.
On August 30th, the bank was put into involuntary liquidation and was purchased by Carnegie on September 3rd, the same day the Swedish Economic Crime Authority (Ekobrottsmyndigheten) launched an investigation into suspected fraud and accounting crimes.