Creditors warned to expect losses from latest Danish bank collapse

Creditors and depositors with deposits of more than €100,000 at Fjordbank Mors should expect losses of about 26% on the closure of the bank, according to Danish authority Finansiel Stabilitet (FS).

FS announced on 26 June that it had concluded an agreement with Fjordbank Mors to transfer its assets and liabilities into a new bank, structured as a subsidiary to FS – the authority tasked with taking over and running off failed banking businesses.

A preliminary price set by FS of DKK7.8bn for the assets and liabilities was equivalent to about 74% of unsecured senior liabilities.

FS said: “The final amount to be paid can be increased by valuers appointed by the Institute of State Authorized Public Accountants in Denmark. In this case, the subsidiary bank will take over additional liabilities. There are currently known liabilities of DKK3.6bn which will not be taken over – of these, DKK0.8bn are subordinate liabilities and DKK1.1bn are liabilities individually guaranteed by the State, while obligations towards the Guarantee Fund for Depositors and Investors amount to DKK1.3bn.”

The extent of damage to other Danish banks is as yet uncertain, although Jyske Bank said: “In view of the latest developments of Fjordbank Mors, we point out that Jyske Bank has no credit exposure in the form of credit facilities at, bond holdings or shares in Fjordbank Mors.”

“As part of ordinary trading activities, Fjordbank Mors had, as at 27 June 2011, a net outstanding amount at Jyske Bank of approx. DKK1.2m.

“The Danish banking sector must expect a loss in connection with the Guarantee Fund for Depositors and Investors’ coverage of secured deposits at Fjordbank Mors. Jyske Bank’s recently calculated share of the sector’s obligations towards the Guarantee Fund for Depositors and Investors amounts to 7.12%.”

FS intends to sell off the Fjordbank Mors acitivies including its private customers as soon as possible, before starting a legal investigation into the events that led to the collapse.

Fjordbank Mors was created in 2010 through the merger of two financial institutions.

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