This week, the Swedish National Debt Office, or Riksgälden, announced that it seized Carnegie Investment Bank AB and Max Matthiessen Holding AB, both previously subsidiaries of D. Carnegie & Co. AB, and directly or indirectly responsible for all business operations conducted by the Carnegie group. This move followed the announcement by the Swedish financial supervisory authority, Finansinspektionen (FI), that it had revoked Carnegie’s banking and securities licenses for breaking the law in taking “exceptional risks for a long time by lending large amounts to one individual client” and in “acting as the depositary for the same funds as those managed.” A few weeks ago, FI had sent a letter to Carnegie regarding its investigation into Carnegie’s internal management and control practices and into its handling of large credit exposures, to which Carnegie responded with a letter outlining measures it was taking to ensure its compliance with Swedish laws.
Following the seizure of Carnegie Investment Bank, the Swedish central bank, Sveriges Riksbank, announced that the Riksgälden had granted Carnegie Investment Bank a loan of up to SEK 5 billion (approximately $630 million), which replaced the SEK 5 billion of special liquidity assistance that the Riksbank had granted earlier to Carnegie. The Riksgälden took over the shares posted as collateral for its loan to Carnegie, “in order to protect the financial stability and preserve the value of the collateral,” following which the FI reinstated Carnegie’s banking and securities licenses.
Following these actions by the Swedish government, Carnegie Investment Bank announced that its clients’ assets and securities remain safe, and operations could continue as usual, though trading in its shares had been halted until further notice. The Riksgälden stated that the government’s new ownership “provides sufficient support for Carnegie’s commitments,” and “is a safe and secure solution” for all of Carnegie’s counterparties and stakeholders.
The Riksgälden also announced its intentions to eventually sell the Carnegie business to “a new, stable owner that also has a long term ownership ambition.” Carnegie stated that the Riksgälden would provide compensation to D. Carnegie & Co. AB for the collateralized shares of its subsidiaries, based upon a valuation of the shares. According to Carnegie, this compensation will ultimately be transferred to Carnegie’s shareholders.