Danske Bank's choice of a new chief executive was blocked by the Danish Financial Supervisory Authority (FSA) on Wednesday.
The Danish regulator rejected the appointment of Jacob Aarup-Andersen, 40, warning that the internal candidate was not experienced enough to take over the helm of the country’s biggest lender.
While the FSA found he was “well qualified in many areas”, it added “longer experience, including within certain of Danske Bank’s business areas, is needed,” the Copenhagen-headquartred bank said.
Aarup-Andersen, who joined Danske Bank in 2016 and has been head of wealth management since May, was the board’s choice to lead the bank after the previous CEO Thomas Borgen stepped down last month.
Borgen resigned after an investigation revealed payments totalling 200 billion euros ($234 billion) through Danske's small Estonian branch, many of which the bank said were suspicious.
Danske is facing criminal investigations in several countries. The bank's shares hit a four-year low this month after the lender said it faced a criminal investigation led by the US Department of Justice.
Analysts surveyed by Bloomberg have estimated that the bank may need to pay about US$800 million in fines for its breaches.
Since its peak in May 2017, Danske's market value has plunged by about US$14 billion and its shares are down more than 40 percent this year.
The lender, whose share is listed on NASDAQ Copenhagen and is part of the OMX C25 index, has cut its forecast for annual net profit to 16-17 billion Danish crowns, from a previous 18-20 billion.
Last week Moody’s said it has downgraded all of Danske’s long-term debt ratings, following similar moves by rating agencies DBRS, S&P and Fitch.
Danske is the latest in a string of large European lenders to have been tainted by money laundering scandals, prompting authorities to take action.
Germany's Deutsche Bank AG was fined nearly $700 million last year for allowing money laundering. Earlier this month Dutch bank ING agreed to pay 775 million euros ($900 million) after admitting criminals had been able to launder money through its accounts.
Prior to the Danske scandal, Borgen had managed to improve the bank’s earnings and image. Shares had doubled in value from when he took over in 2013 to July 2017.
The bank will continue its executive search and Aarup-Andersen will remain head of wealth management and a board member.
“The Board has noted the FSA’s reply. The Board is in dialogue with other potential candidates and will now continue the recruitment process in order to find the best possible person for the position” Ole Andersen, Chairman of the Board of Directors, said.
“I am proud and happy that Danske Bank’s Board of Directors recommended me for the position as CEO, as it is a strong sign of recognition,” said Aarup-Andersen. “I have of course noted the FSA’s reply and their reasoning.”
Interim CEO Jesper Nielsen, who was the head of Danske Bank's domestic banking business, is in charge until a permanent replacement is selected.
Danske Bank was founded in 1871 in Copenhagen. It is now present in 16 countries, it has 20,357 employees, 2.7 million personal customers, 211,000 small and medium-sized business customers and 2,000 corporate and institutional customers.