Denmark’s FSA Says Biggest Banks Not at Risk After Bail-Ins
June 30 (Bloomberg) -- Denmark’s financial regulator said the country’s biggest banks have enough capital to withstand the fallout from a spate of failures amongst regional lenders as creditors balk at Europe’s toughest bank resolution laws.
“It is our strong belief that the amount of lending between banks does not constitute a substantial loan-loss risk to the bigger banks if we are to see more defaults,” Ulrik Noedgaard, the director general at the Copenhagen-based Financial Supervisory Authority, said in a phone interview yesterday.
Last week’s failure of Fjordbank Mors A/S, which had about $1.4 billion in deposits, triggered senior creditor losses for a second time since Amagerbanken A/S’s February collapse. Since then, the Copenhagen Interbank Offered rate reached a 20-month high while credit-default swaps on senior debt sold by Danske Bank A/S, Denmark’s biggest lender, yesterday hit the highest since 2009. Moody’s Investors Service last month downgraded six Danish banks, including Danske, citing an absence of state support and warned long-term funding costs will rise.
“The bigger banks are putting the crisis behind them after having done the necessary write downs'' and boosting capital, Noedgaard said. “That will not be altered by a group of small and mid-sized lenders having funding problems.”
Shares Gain
Danske Bank shares rose 2.7 percent to 94.30 kroner at 12:17 p.m. in Copenhagen. Shares of Jyske Bank A/S, Denmark’s second-biggest lender, gained 2.1 percent to 200.40 kroner, while the No. 3 bank, Sydbank A/S, advanced 0.7 percent to 114.20 kroner. The 49-member Bloomberg Index of European financial stocks rose 0.6 percent.
Danske Bank in March issued 20 billion kroner ($3.9 billion) in shares. The extra equity will bring the bank’s Core Tier 1 capital ratio to about 12.4 percent of risk-weighted assets from 10 percent, it said on May 10. The bank has seen a “marginal” increase in debt funding costs since Amagerbanken’s failure, Chief Executive Officer Peter Straarup said last month.
Fjordbank Mors said last week the FSA gave it a June 26 deadline to meet a 16 percent solvency
requirement after deeming the lender’s 9.7 percent too low. It sought state aid on June 24 after announcing it would be unable to raise the extra 700 million kroner needed to meet the regulator’s demands. The failure cost the Danish Depositors Guarantee Scheme 1.3 billion kroner, representing a 460 million-krone loss before tax for Danske Bank, according to an estimate by Nordea Markets analyst Simon Christensen. The loss will shave about 5 percent of the bank’s 2011 net profit, he said.
Market ‘Spooked’
“Though the big banks are not directly exposed, the way” the bank resolution package “is set up, investors worry if there are more costs hidden if more banks collapse,” said Nick Davey, an analyst at UBS Ltd. in London.
He says the FSA’s handling of Denmark’s latest bank failure unsettled markets. The difference between Cibor and Euribor held at the widest in two months today, at 5.8 basis points.
“What got people spooked in this instance was a question of solvency, not of liquidity,” Davey said. “If you go in overnight and, as the Danish FSA did, increase the write-down requirements and solvency needs of a bank, you create a massive solvency challenge rather than a liquidity issue.”
Denmark’s fourth-largest lender, Spar Nord Bank A/S, said June 28 it isn’t approaching bond investors outside the Nordic country because the “dust hasn’t yet settled” after Amagerbanken’s failure more than four months ago.
Government Measures
The government is considering how to ensure that investors outside Denmark don’t punish the country’s bank industry for its bankruptcy laws, Economy Minister Brian Mikkelsen said, according to Reuters Finans. Mikkelsen’s spokesman Erik Ljunggren didn’t respond to phone calls seeking confirmation.
The Borsen newspaper today reported that a majority of lawmakers would reject any new bank guarantee that put taxpayer funds at risk. The government is mulling a proposal that would allow it either to purchase bad bank debt to commercial construction and agriculture or to buy bonds that banks need to repay their creditors if they’re acquired, Denmark’s biggest newspaper Jyllands-Posten reported today, without saying how it obtained the information. The latter option would encourage bank mergers, the newspaper said.
The state winding-up unit, Financial Stability, said late yesterday it recalculated losses triggered by Amagerbanken’s failure and now expects creditors will be able to recoup 84.4 percent of their holdings, versus an earlier estimate of 58.8 percent. Fjordbank Mors holders of senior, unsecured claims face a 26 percent loss, Financial Stability said.
“Fjordbank Mors is bad news for the market,” Noedgaard said. “In the end, markets will decide if the bigger Danish banks will see their funding affected by what happened to Fjordbank Mors and Amagerbanken.”
June 30 (Bloomberg) -- Denmark’s financial regulator said the country’s biggest banks have enough capital to withstand the fallout from a spate of failures amongst regional lenders as creditors balk at Europe’s toughest bank resolution laws.
“It is our strong belief that the amount of lending between banks does not constitute a substantial loan-loss risk to the bigger banks if we are to see more defaults,” Ulrik Noedgaard, the director general at the Copenhagen-based Financial Supervisory Authority, said in a phone interview yesterday.
Last week’s failure of Fjordbank Mors A/S, which had about $1.4 billion in deposits, triggered senior creditor losses for a second time since Amagerbanken A/S’s February collapse. Since then, the Copenhagen Interbank Offered rate reached a 20-month high while credit-default swaps on senior debt sold by Danske Bank A/S, Denmark’s biggest lender, yesterday hit the highest since 2009. Moody’s Investors Service last month downgraded six Danish banks, including Danske, citing an absence of state support and warned long-term funding costs will rise.
“The bigger banks are putting the crisis behind them after having done the necessary write downs'' and boosting capital, Noedgaard said. “That will not be altered by a group of small and mid-sized lenders having funding problems.”
Shares Gain
Danske Bank shares rose 2.7 percent to 94.30 kroner at 12:17 p.m. in Copenhagen. Shares of Jyske Bank A/S, Denmark’s second-biggest lender, gained 2.1 percent to 200.40 kroner, while the No. 3 bank, Sydbank A/S, advanced 0.7 percent to 114.20 kroner. The 49-member Bloomberg Index of European financial stocks rose 0.6 percent.
Danske Bank in March issued 20 billion kroner ($3.9 billion) in shares. The extra equity will bring the bank’s Core Tier 1 capital ratio to about 12.4 percent of risk-weighted assets from 10 percent, it said on May 10. The bank has seen a “marginal” increase in debt funding costs since Amagerbanken’s failure, Chief Executive Officer Peter Straarup said last month.
Fjordbank Mors said last week the FSA gave it a June 26 deadline to meet a 16 percent solvency
requirement after deeming the lender’s 9.7 percent too low. It sought state aid on June 24 after announcing it would be unable to raise the extra 700 million kroner needed to meet the regulator’s demands. The failure cost the Danish Depositors Guarantee Scheme 1.3 billion kroner, representing a 460 million-krone loss before tax for Danske Bank, according to an estimate by Nordea Markets analyst Simon Christensen. The loss will shave about 5 percent of the bank’s 2011 net profit, he said.
Market ‘Spooked’
“Though the big banks are not directly exposed, the way” the bank resolution package “is set up, investors worry if there are more costs hidden if more banks collapse,” said Nick Davey, an analyst at UBS Ltd. in London.
He says the FSA’s handling of Denmark’s latest bank failure unsettled markets. The difference between Cibor and Euribor held at the widest in two months today, at 5.8 basis points.
“What got people spooked in this instance was a question of solvency, not of liquidity,” Davey said. “If you go in overnight and, as the Danish FSA did, increase the write-down requirements and solvency needs of a bank, you create a massive solvency challenge rather than a liquidity issue.”
Denmark’s fourth-largest lender, Spar Nord Bank A/S, said June 28 it isn’t approaching bond investors outside the Nordic country because the “dust hasn’t yet settled” after Amagerbanken’s failure more than four months ago.
Government Measures
The government is considering how to ensure that investors outside Denmark don’t punish the country’s bank industry for its bankruptcy laws, Economy Minister Brian Mikkelsen said, according to Reuters Finans. Mikkelsen’s spokesman Erik Ljunggren didn’t respond to phone calls seeking confirmation.
The Borsen newspaper today reported that a majority of lawmakers would reject any new bank guarantee that put taxpayer funds at risk. The government is mulling a proposal that would allow it either to purchase bad bank debt to commercial construction and agriculture or to buy bonds that banks need to repay their creditors if they’re acquired, Denmark’s biggest newspaper Jyllands-Posten reported today, without saying how it obtained the information. The latter option would encourage bank mergers, the newspaper said.
The state winding-up unit, Financial Stability, said late yesterday it recalculated losses triggered by Amagerbanken’s failure and now expects creditors will be able to recoup 84.4 percent of their holdings, versus an earlier estimate of 58.8 percent. Fjordbank Mors holders of senior, unsecured claims face a 26 percent loss, Financial Stability said.
“Fjordbank Mors is bad news for the market,” Noedgaard said. “In the end, markets will decide if the bigger Danish banks will see their funding affected by what happened to Fjordbank Mors and Amagerbanken.”
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