The Bank of Lithuania requires immediately stopping the Danske Bank A/S Lithuania branch’s advertising which may be misleading for users 

Having identified that users can be misled while being informed about the financial services, the Bank of Lithuania required the Danske Bank A/S Lithuania branch to immediately take action and ensure that information being provided is compliant with the requirements and does not arouse groundless expectations. The Bank of Lithuania has also applied to the Competition Council asking it to instigate an investigation into a likely violation of the Republic of Lithuania Law on Advertising and likely unfair commercial activities.  

Advertising the financial product “long-term saving campaign” offered by the Danske Bank A/S Lithuania branch aroused suspicion to the Bank of Lithuania. On its website the Bank announces that a customer who has placed a deposit with this Bank can receive significantly higher interest than that currently offered in the market.    

According to the established regulations for this financial product, the highest interest rate – 25% is promised for a 7 month time deposit of LTL 3 000, however those who have been tempted by this gain must conclude a new long-term investment life insurance contract with the company’s Mandatum Life Insurance Baltic SE Lithuania branch. Under this contract, the customer should pay an insurance premium of at least LTL 130 on a monthly basis.   

The Bank of Lithuania draws attention that, offering the customer this product, the Danske Bank A/S Lithuania branch emphasises the one-time benefit of a time deposit suppressing, however, the risk assumed by the customer involved in investment life insurance. The Danske Bank A/S Lithuania branch does not warn potential customers that, after conclusion of an investment life insurance contract, the risk of investment falls on the customer, investment profitability is not guaranteed, and the amount of insurance payout at the end of the contract is unknown.   Moreover, the assumptions presented on the Bank’s website that the average annual profitability of investment life insurance will be 9% may form groundless expectations on the part of potential customers.  

The Bank of Lithuania holds the opinion that the information provided in the advertising is incomprehensive, part of certain information is omitted, which, given the other information provided in the advertising, must be provided so that the customer has the full view and, most importantly, is aware of the likely threats and risks. Therefore the information provided by the Danske Bank A/S Lithuania branch can be recognized as misleading advertising, and, under the Republic of Lithuania Law on Advertising, such advertising is prohibited. The Danske Bank A/S Lithuania branch’s advertising may also not comply with the requirements to disclose to the customer all important information in relation to the terms and conditions of the life insurance contract and avoid incorrect information.  

In view of the above, the Bank of Lithuania has applied to the Danske Bank A/S Lithuania branch requiring taking immediate action and ensuring that publicly announced information about the services being provided does not mislead and arouse groundless expectations for customers. The Bank of Lithuania has also applied to the Competition Council asking it to instigate an investigation into likely misleading advertising and likely unfair commercial activities.  

The Bank of Lithuania emphasise that such practice when customers are encouraged to conclude long-term investment life insurance contracts offering them one-time benefit for a time deposit should be treated as inappropriate for customers and should not be continued in the future.   

“The financial sector is not the place for psychological tricks.  It is irresponsible to lure people stressing the relatively little one-time benefit but disguising new long-term obligations and quite substantial risk estimating which adequately would be complicated even for professionals”, Vilius Šapoka, Director of the Financial Services and Markets Supervision Department of the Bank of Lithuania’s Supervision Service stated.   

According to him, the Danske Bank A/S Lithuania branch was already punished for a similar infringement in 2008, when it still operated under the name of AB SAMPO bank. Then, the Securities Commission (SC) imposed this bank a fine of LTL 25, 000 for the likely misleading advertising of “deposit with an investment fund”. Then, consumers who chose this financial product were offered high interest rates on a deposit too, although most of customer funds were invested in quite a risky fund. The SC established that, in the provision of information on the financial product, at that time the Bank accentuated the likely benefit alone too, suppressing information about the risk involved in it.