UPDATE 3-Norway police charge DnB NOR with insider trading

(Rewrites, adds news conference, DnB NOR backing CEO)

OSLO, Oct 23 (Reuters) - Police charged Norway's biggest bank DnB NOR DNBNOR.OL and two of its employees with insider trading on Thursday for bond deals carried out before the government unveiled a banking-sector rescue package.

Okokrim, the police’s economic crimes unit, made the charges after a probe into DnB NOR’s sale of 2.3 billion crowns’ ($329.1 million) worth of government bonds on Oct. 9 and Oct. 10.

The deals took place before the government announced its 350 billion crown banking rescue on Oct. 12 but after consultations between leading banks and the authorities about the potential shape of the bailout.

The rescue plan is based on allowing banks to swap their covered bonds for fresh government debt. It hit the prices of government bonds and raised speculation that 34 percent state-owned DnB NOR might have been tipped off about the scheme.

Police raided DnB NOR’s headquarters to secure information in a case that has political overtones. Chief Executive Rune Bjerke is a former Oslo leader of the ruling Labour party and an associate of Prime Minister Jens Stoltenberg.

“Okokrim has charged DnB NOR and two people employed in DnB NOR Markets due to suspicion about violation of the securities trading law,” DnB NOR said in a statement.

DnB NOR board chair Anne Carine Tanum told a news conference the board retained “full confidence” in its chief executive.

“If there have been any wrongdoings in this case, DnB NOR will take the responsibility for them, but I cannot see that Rune Bjerke is to blame for potential errors,” Tanum said.

Bjerke said he would cooperate fully with the authorities and wanted the suspects to get a fair chance to clear their names. An internal DnB NOR investigation found no wrongdoing.

Shares in DnB NOR fell 5.3 percent to 34.95 crowns at 1414 GMT compared with a 1.7 percent fall on Oslo's index .OSEBX.


Bjerke said he had no advance knowledge of the rescue package, even on the Sunday it was announced. “So I cannot see how I should have stopped all trading in (such government) bonds at DnB NOR,” Bjerke told reporters.

The two employees who have been charged are from DnB NOR Markets, the bank’s investment banking arm. A lawyer for one of them told TV2 television that his client denied the allegations.

Finance Minister Kristin Halvorsen said the charges showed that the authorities were “doing their job”.

“Insider trading is a serious issue, but will not affect the (rescue) measures for the banking sector,” Halvorsen said.

Separately, Norway’s financial regulator Kredittilsynet said its investigation into the case cleared the government and the central bank from leaking any information about the bailout.

Kredittilsynet said, “The information Kredittilsynet has gives no foundation to believe that insider information has been given from public authorities to any unauthorised people.”

The row has created a political stir with less than a year to go to parliamentary elections, with Norwegian media questioning close contacts between Labour and top executives.

Norwegian newspapers estimated DnB NOR made a profit of 20-70 million crowns on the bond trades as government bond prices fell after the rescue package was unveiled. (Additional reporting by Camilla Knudsen; Editing by Hans Peters and Quentin Bryar)