By Eva Odefalk

STOCKHOLM, Nov 10 (Reuters) - Sweden took over struggling investment bank Carnegie on Monday after a series of mishaps that drained the bank of funds and led regulators to revoke its licence.
The takeover is the state's first nationalisation of a major bank since a financial crisis in the early 1990s and marks the decline of a once-distinguished name in Swedish investment banking circles.
The national debt office will own Carnegie after it offered loans of up to 5 billion Swedish crowns ($645 million) to the firm, replacing loans that the central bank had previously provided to keep the bank liquid.
Carnegie's shares were posted as collateral for the debt office loan. "The decision has been taken in order to protect the financial stability and to preserve the value of the collateral," the debt office said in a statement.
The central bank welcomed the takeover.
"In the current climate on the financial markets, it is good that the debt office is now giving support to Carnegie and is prepared to go in as owner to safeguard financial stability," said Riksbank Deputy Governor Svante Oberg in a statement.
Sweden's financial watchdog announced on Monday it was revoking Carnegie's licenses, rebuffing the firm's efforts to stay independent. But the debt office said that following the ownership change, the licenses were returned.
The Financial Supervisory Authority (FSA) had been investigating the bank over possible shortcomings in management and controls, in part concerning credit exposure.
Erik Saers, deputy chief of the FSA, told a news conference there was little question about what to do: "The board was united in its decision to not allow the company to continue."
Saers said the debt office could now sell Carnegie as a whole or in parts. In its statement, the debt office said it did not want to remain an owner of Carnegie for an extended period.

OLD NAME, NEW PROBLEMS
The probe came a year after Carnegie was handed the FSA's maximum punishment, a 50 million crown fine, after some employees were alleged to have inflated profits at the firm.
That scandal, which led to a management overhaul, came after Carnegie had secured a prestigious mandate to help with Sweden's biggest-ever privatisation programme.
Carnegie's takeover not only highlights the problems facing the global banking industry but also runs directly counter to the goals of Sweden's Moderate-led government, which came to power in 2006 and pledged to sell off state assets.
The company, established as a trading house by Scotsman David Carnegie in 1803, has around 1,100 employees.
Carnegie made a last-ditch effort to stay independent, earlier on Monday, by announcing an action plan which included two new share issues totalling about 1.2 billion crowns ($153 million).
The FSA, however, was not convinced and the debt office painted a grim picture had the state not stepped in. "If the Debt Office had not taken ownership, the bank's business operations would have had to be wound up."
The head of the debt office, Bo Lundgren, said at a news conference Carnegie had so far borrowed a little more than 2 billion crowns from the state.
Shares in Carnegie were suspended before trading began on Monday. The FSA said it will take a decision in conjunction with the Swedish bourse as to whether to allow the shares to resume trading.
The debt office plans to appoint a new board for Carnegie. It said Peter Norman, chief executive of Seventh AP fund, will be the new chairman.

(Additional reporting by Johannes Hellstrom, Niklas Pollard and Anna Ringstrom; writing by Adam Cox)

(Editing by Jon Loades-Carter and Simon Jessop) ($1=7.753 Swedish Crown) Keywords: FINANCIAL CARNEGIE/

(Stockholm Newsroom, tel: +46-8-700 1017, e-mail: stockholm.newsroom@thomsonreuters.com)

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