Anyone familiar with the energy company, Enron, scandal in the US in 2001? Despite being named by Fortune magazine as "America's Most Innovative Company" for six consecutive years, it was later revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud.
Denmark is now having an Enron scandal of its own, in the name of a company called IT-Factory. Although the scale of the fraud is much lower than that of Enron, the similarities are quite similar. For one thing, IT-Factory was awarded "Denmark's Best IT-company" in September last year, and CEO Stein Bagger had himself recently been named Danish Entrepreneur of the Year by Ernst & Young, after seemingly miraculously rescuing the company from crumbling.
Read the story here.
What I want to talk about though, is the way the banks involved handled giving out loans to IT-Factory. Danske Bank (Denmarks biggest) is expected to have lost 350 million DKK (S$100 million) because of this fraud. Other banks like Nordea Bank and Jyske Bank had also lost some money, but not on such a large scale (10 million DKK - 25 million DKK).
I'm no expert in finance and the like, but it does make me (and many others) wonder how banks can agree to loan out huge amounts of money to companies just like that without doing thorough checks. When we requested for a loan of around 1 million DKK for our apartment, they required several papers from us such as our pay slips for the last 3 months, and our tax papers from the previous year.
When my VISA card from Jyske Bank was eaten up by the ATM in Rome last year, and I wanted to re-apply a new one, Jyske Bank didn't want to send me the same type of card with the same credit terms because I was not having much savings in my account there anymore. They can only offer something else that was worse than what I had. I had decided to just close my account there in the end, because it would be their loss anyway for losing a customer.
So yeah, one would expect more stringent and scrutinizing checks on companies who want to borrow hundreds of millions of kroners, right? Apparantly, fake contracts, invoices, statements of accounts, etc seem to be accepted too. Note to self on that... .
There should be a law that banks can only use money that they have for investments and loans. This applies on a private and personal scale too - never spend more than you have, and if you do, make sure you can afford to pay back.
Anyway, we received a mail from Danske Bank 3 days ago, inviting us for a meeting with them for a couple of hours where they can give us suggestions on making our private finances better, easier or cheaper, in the areas of our daily finances, investing and pension.
1st paragraph says: At Danske Bank, we work with advise teams that are made up of advisers with competence within daily economy, investing, pension and housing economy. That means, you can get light on your private economy from several angles and improve your total economic situation.They have got to be kidding, right? These are the guys who just lost 350 million DKK on one really bad investment. These are the same guys who advised Danish entertainer, Finn Nørbygård, to invest in IT-Factory, so he borrowed some millions from them to invest in this company's stocks, only to end up losing up to 700 million DKK on this bad advice.
It would have been more appropriate for them to send out this invitation on 01 April, so that if anyone questions them, they could just turn around and say it was an April Fool's joke... .
But yeah, since when did the big banks care about their customers' interests anyway? I've given up on these big guys a long time ago. We did manage to get a good loan agreement out of them for our apartment (20 years with 4% fixed interest), but that's it. The smaller banks are the ones with better interest rates on the savings account, and they provide better service too.
The bank I use now for my salary/savings account gives an interest of 4.5% on the very first kroner you put in. Interests earned this year alone from this account will amount to around 5800 DKK (S$1660). This is money "earned" simply by saving up. Sure, it's not giving any high returns compared to if we invest our savings in stocks, etc...but then again, the saying "easy come, easy go" still holds true till today. I'd rather sleep well at night.
The big banks though, they don't give you back a single kroner. Even if you, as an average customer, have a LOT of savings, you'll earn at most 2.75% interest. While of course, they make millions in profits.
So to Danske Bank, I say: Thanks, guys...but no thanks. I know you need money now, but you ain't gettin' it out of me.
