The chief executive of Carnegie resigned on Friday after regulators called for sweeping management changes after a trading scandal and fined the investment bank 50 million Swedish crowns ($7.7 million).
The government said it would review Carnegie's role as an adviser in the country's biggest-ever privatisation programme, a prestigious mandate the bank received just two months ago. In the harshest judgement it has ever issued the Financial Supervisory Authority (FSA) said a new Carnegie chief executive should be found to replace Stig Vilhelmson and the entire board should step down.
But the regulator stopped short of suspending the bank's licence as some in the market had feared it might. Carnegie shares rose 10.9 percent to 135.25 crowns by 1510 GMT. Most of the purchases of Carnegie stock on Friday were by Icelandic bank Glitnir, Reuters data showed.
The Icelandic firm bought 1.8 million shares or more than 2 percent of the company, although it was not clear if the purchases were for itself or on behalf of a third party.
Financial Markets Minister Mats Odell said the government would review whether to keep the investment bank as advisor in the sale of state-owned mortgage lender SBAB. "I will explore this," Odell told reporters, adding he expected the review to be concluded before the end of the year.
The head of the government's official panel for its 150 billion crown privatisation programme - the biggest in the country's history - is Karin Forseke, former chief executive of Carnegie, who left the firm in early 2006.
Odell said he still had full confidence in her. Carnegie said Vilhelmson had resigned effective immediately and that Anders Onarheim, head of investment banking and Norwegian operations, would take over as acting chief executive.
The election committee for the firm said new board nominations would be presented in November. It said major changes would be made although it added the entire board may not need to be replaced. Carnegie said in May its net profits from 2005 to 2007 would be cut by 227 million Swedish crowns after three employees had inflated profits by overstating trading positions. The bank took a 315 million crown write-down as a result of the scandal.
"All this is very serious. We could have pulled their licence, but we see that there is hope that their measures are sufficient," said Ingrid Bonde, the regulator's director general. "The guidance and control which we have criticised involves the entire bank and the bank management."
Lars Malmstrom, a spokesman for the regulator, told Reuters 50 million crown was the maximum fine on its books and that this was the first time it had been used. Malmstrom said as far as he knew, this was also the first time the regulator had asked an entire board to step down. Carnegie's chairman vowed to work with regulators.
"We have just received the Financial Supervisory Authority's report. We will study the report in detail and revert to the FSA," said Carnegie Chairman Christer Zetterberg. "Changes in the board of directors of Carnegie Investment Bank AB will be managed in close collaboration with the nomination committee," Zetterberg said in a statement. In a news conference, the chairman said the company would consider appealing the regulatory ruling. "On many counts, we have a completely different view than the FSA. We will examine this and in time consider an appeal," he said.
Separately, one Carnegie employee who had been arrested in connection with the affair will now be charged with insider trading, a Swedish prosecutor said.
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