DnB NOR's Latest Fuck-Up

The grand national bank of Norway, DnB NOR, have done it again; five Norwegian fish exporters is filing for bankruptcy after buying structured foreign exchange products from the bank as hedge against losses. Over the last two years four small towns and over 150 000 private investors have lost all their money after buying complicated derivatives from DnB NOR.

“I had a fucking bad Christmas.  There was a lot of aquavit.”

Geir Børre Johansen

Several exporters of dried fish in Norway have bought foreign exchange products from DnB NOR as a hedge against losses. Now, five companies are out of business, the Norwegian news paper Dagens Næringsliv reports.

Many exporters of dried fish in the Lofoten area in northern Norway feared currency losses last year and thought they could secure their income with foreign exchange products from DnB NOR Markets.

Instead they are left with heavy losses, and several are already bankrupt, the Norwegian news paper writes.

DnB NOR Markets have earned more money on foreign exchange market than ever.

Recommended By The Bank

“DnB NOR Markets recommended to ensure the currency,” fish exporter Geir Børre Johansen at Røst Seafood says in a interview with Dagens Næringsliv.

“I had a fucking bad Christmas.  There was a lot of aquavit, he adds.

He thinks back on Christmas for just over a year ago. The euro had gone through the roof as the financial crisis ravaged. For an exporter with hedged against a fall in the euro exchange rate, it would mean big losses.

Many exporters like Røst Seafood was affected by the large exchange rate movements.

Several of these companies had purchased a type of foreign exchange product, sold by DnB NOR Markets, which could provide an additional benefit when/if the euro rose – up to a certain level, that is.

But if the exchange rate exceeded the agreed level, they risked heavy losses.

According to the news paper at least ten out of about 20 dried and salted fish businesses in the Lofoten area have entered into such contracts, in addition to regular currency hedging agreements.

A total of five companies have filed for bankrupt in recent months.

Total debt is around NOK 150 million.

Extreme Speculation

“This is miserable bank craftsmanship,” Professor Thore Johnsen at the Norwegian School of Management (NHH) says.

He thinks DnB NOR have behaved irresponsibly towards the fish exporters.

“The agreement that this is a hedging product is quite incomprehensible. It is an extreme speculation in the euro exchange rate. The bank provides the companies with an opportunity for disaster,” Professor Thore Johnsen says.

But he also points out that the companies that have signed such agreements, must take their share of the responsibility.

Strategy Specialists Ståle Johansen at DnB NOR Markets says he believe the dried fish exporters themselves must take responsibility for the fact that their foreign currency exposure was many times higher than sales revenue.

In 2008 four small town i northern Norway lost billions after buying U.S. mortgage backed securities from other banks in the DnB NOR system.

Over 150 000 private investors are still fighting DnB NOR in court after loosing all their savings when they bought  complicated products with hidden risks.

Related by the Econotwist:

DnB NOR: “Comprehensive System Failure”

DnB NOR Except Penalties of NOK 26 million

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