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The European Commission has authorised rescue measures to facilitate the merger of two Danish banks, Vestjysk Bank and Aarhus Lokalbank. The merger is intended in particular to address the funding challenges of the continuing bank, but also to improve its capital basis to meet the new capital requirements. The Commission therefore approved the measures for reasons of financial stability for a period of six months, or, if Denmark submits a restructuring plan within six months, until the Commission has adopted a final decision on this plan.
In connection with the merger between Vestjysk Bank and Aarhus Lokalbank, Vestjysk Bank as the continuing bank is to implement a strategy to improve both its capital basis and liquidity. This strategy consists of a capital increase with participations from both the state and private investors, and a sale of shares owned by Vestjysk Bank in a Danish mortgage institution to the Danish Central Bank. Moreover, the continuing bank will benefit from individual state guarantees for its new debt. In addition, as a part of the strategy, the continuing bank is to raise a subordinated loan from private investors.
The Commission found that all measures, apart from the subordinated loan, include elements of state aid, as the measures entail the use of state resources and enable the continuing bank to raise the capital that it requires to continue the activities of the merged entity and provide it with sufficient liquidity. However, as the measures are well-targeted, limited to the minimum necessary and foresee sufficient safeguards limiting distortions of competition, the Commission temporarily approved them as rescue aid for reasons of financial stability.
The continuing bank is to have a balance sheet of around DKK 35.2 billion (€4.7 billion).