TALLINN — Following the poor results in their third quarter pension funds Swedbank is refunding customers whose pensions lost their value and has now announced that they will even compensate clients who have submitted applications to change their pension fund.

The bank will compensate customers for the third quarter decline of the net value of Private Debt Fund shares, interlinked with the pension fund, before the end of 2009 Swedbank told Baltic Reports.

The compensation comes after an investigation into the bank from the Estonian Financial Supervision Authority found that there was a conflict of interest between the pension fund and the Private Debt Fund.

A financial authority spokeswomen told Baltic Reports in mid-October that the laws in Estonia on conflicts of interest are too vague.

Swedbank's Baltic operations have seen sunnier times — in addition to the Estonian investigation into the bank's pension fund, the third quarter brought €320 million in losses. Photo by Nathan Greenhalgh.

Swedbank Investeerimisfondid, the bank’s investment arm, has compiled a plan and received an approval from the authority on how to restore the change in the value of the share of Private Debt Fund that took place in the third quarter to clients of the fund, including pension funds, the bank announced.

The bank aims to compensate the gap before the end of this year. Clients affected should receive more specific information about the process within weeks.

For clients of pension funds, restoring the net value of the fund means an increase in pension assets. There will be no cash compensation, Swedbank spokesman Mart Siilivask said.

At the end of September, Swedbank devalued its Private Debt Fund, writing off 120 million krooni (€7.67 million), a fifth of its value.

Over 300,000 Estonians have put their savings into Swedbank pension funds, including those who have preferred the most conservative funds with the lowest return on investments and they all suffered considerable decrease of the value of their investment as the result.

The negative headlines about Swedbank’s pension fund comes on top of the bank’s €320 million loss during the third quarter in its Baltic state subsidiaries.