FI noted during the spring that Nordea’s reported Probability of Default (PD) as a percentage of its corporate lending was larger than its estimated PD during certain years and in certain markets. In other words, actual PD was higher than the bank’s estimated PD. Because the PD estimate serves as a basis for the bank’s capital requirements, this means that there is a risk that Nordea’s capital requirements may be too low. In an initial internal analysis, it was noted that the capital deficiency could potentially be as large as SEK 50-80 billion. The conclusion drawn from this analysis was that the matter must be analysed in more detail, and FI opened an investigation in April. The investigation has not been concluded yet; to date FI has only sent a first verification letter to the bank outlining FI’s preliminary assessments.
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