In 1992, the Faroe Islands, controlled by Denmark under a home rule arrangement, were hit by financial problems. At the time, Den Danske Bank owned the majority shareholding of Føroya Bank, a major Faroe Islands Bank.
In spring 1993, Den Danske Bank transferred its stake in Føroya Bank to a special Faroe Islands financing fund in exchange for shares in Sjovinnu Bank, owned by the Islands' home rule authority. After the transfer, it became clear the Føroya Bank was in need of additional capital, while Sjovinnu Bank was in a slightly stronger financial condition. A special Commission was set up by the home rule authority to investigate the allegation both the government and Den Danske Bank had known about Føroya Bank's economic condition before the transaction and should have disclosed it.
On January 16 1998, the Commission published its findings. Its report concludes that the primary purpose of Den Danske Bank in entering into the share exchange was to divest its contingent liability to inject capital into Føroya Bank, and that Den Danske Bank's original claim that Føroya Bank was not in need of further capital did not represent a full disclosure of the facts. The report also criticizes the Island's authority for permitting Den Danske Bank to dictate the terms of the share exchange, failing to protect adequately the best interests of the Faroe Islands.
As a result of the Commission's report, Den Danske Bank has publicly offered, without admission of any wrong-doing, to repay the difference between the actual losses of Føroya Bank, attributable to the shares of Føroya Bank formerly owned by Den Danske Bank, and the actual losses of Sjovinnu Bank, attributable to the share of Sjovinnu Bank received by Den Danske Bank in the share exchange.