(City A.M.) -- Five Scandinavian banks have been fined a total of €2.5m (£2.2m) for providing "shadow credit ratings" without gaining regulatory approval, the EU's markets regulator said today.
The European Securities and Markets Authority (Esma) said Danske Bank, Nordea Bank, SEB, Svenska Handelsbanken and Swedbank had all issued credit ratings without authorisation.
The banks, who were fined €495,000 each, issued credit research reports which included "opinions" on firms and their debt instruments which constituted credit ratings in Esma's view.
European authorities cracked down on credit ratings agencies in the aftermath of the global financial crisis in 2008, before which the agencies were perceived to have been too lax in their approach to complex financial instruments, resulting in abrupt downgrades which contributed to market instability.
The five lenders gave out the ratings for more than five years up to August 2016, although Esma said they have all since taken voluntary measures to stop the practice.
SEB, which continued the practice as late as May 2018 even after an initial warning, said in a statement that is will pay the fine and adjust its practices, but is considering appealing the ruling. The bank said Esma had adopted a stricter interpretation of an exception for investment analysts in the rules.
Danske Bank said that it has now created an independent credit rating agency, Nordic Credit Rating, to carry out ratings of small firms when they are looking for finance.
Peter Rostrup-Nielsen, executive vice president of Danske Bank said: “We apologise for having misinterpreted the rules. We consider it important to ensure that we comply with the rules applicable."
Handelsbanken, Nordea and Swedbank have been approached for comment.