Commission approves Danish state support scheme for banks

11 October 2008

The Danish scheme includes a guarantee on claims by depositors and ordinary creditors, and a legally established company to wind up banks that do not fulfil statutory solvency requirements and for which no viable private solution could be achieved.

The Commission approved a Danish scheme aimed at restoring confidence in the Danish financial markets. The scheme would provide liquidity facilities for banks operating in Denmark and protect depositors and ordinary creditors in case of insolvency. The scheme will be remain in force for two years.

 

“The Danish scheme is an excellent example of the type of intervention that can strengthen financial markets without making the situation worse in other countries”, Competition Commissioner Neelie Kroes said. 

 

The Danish scheme includes a guarantee on claims by depositors and ordinary creditors, and a legally established company to wind up banks that do not fulfil statutory solvency requirements and for which no viable private solution could be achieved.

 

It is limited to fundamentally sound financial institutions that are affected by the current liquidity crises and open to all banks established in Denmark. The banks would pay an appropriate premium to remunerate the debt guarantee. State would cover only losses that occur in excess of the significant financing of DPB which is equal to 2 % of the GDP of Denmark. Once a bank became insolvent, it would be mandatory to wind it up.

 

Press release

 

© European Commission