The Financial Supervisory Authority of Norway imposes a NOK 50 million penalty on Danske Bank for market manipulation in Norwegian interest rate swaps

The Financial Supervisory Authority of Norway issued a decision imposing an administrative penalty of NOK 50 million on Danske Bank A/S for breaching the prohibition on market manipulation under the Market Abuse Regulation (MAR). The decision follows an investigation, conducted in cooperation with the Danish Financial Supervisory Authority, into trading linked to Norges Bank’s syndicated government bond transaction on 7 February 2023. The misconduct relates to trades in the Norwegian interest rate swap market used to set the reference swap rate for the bond’s pricing during a defined “Price Call” window (15:15 to 15:20), where the final swap rate was based on the average of two reference screens (Tullett Prebon and BGC) at 15:20. Finanstilsynet focused on 12 trades executed by Danske Bank during the Price Call, totalling NOK 1.4 billion notional (1,193,473.27 DV01) in a 10-year NOK interest rate swap instrument (ISIN EZ8KF586K277), and concluded these trades moved the swap rate from 3.12% to 3.16% and then immediately reversed after pricing. The authority found the activity both “secured” the price at an abnormal or artificial level and was capable of giving false or misleading signals about price, supply or demand, rejecting the bank’s characterisation of the trading as purely legitimate hedging in light of the timing, concentration and price effects around the reference point. Danske Bank can appeal the decision within three weeks of receipt, with the Norwegian Ministry of Finance acting as the appeals body. Collection is handled via the Norwegian tax authorities after the appeal deadline expires or, if appealed, after the Ministry’s decision.