JESPER RANGVID C H A I R M A N , D A N I S H F I N A N C I A L C R - - PowerPoint PPT Presentation
The Danish experience : Why did more than a third of banks disappear and how was it handled? FINANCIAL SATEFY NET CONFERENCE 2015 JESPER RANGVID C H A I R M A N , D A N I S H F I N A N C I A L C R I S I S C O M M I T T E E P R O F E S S O R
C H A I R M A N , D A N I S H F I N A N C I A L C R I S I S C O M M I T T E E P R O F E S S O R , C O P E N H A G E N B U S I N E S S S C H O O L
Financial crisis in Denmark. J. Rangvid (CBS)
Financial crisis in Denmark. J. Rangvid (CBS)
50 75 100 125 150 175 2008 2013
Banks transferred to Finansiel Stabilitet. Banks receiving capital requirement from FSA, but private solutions found. Other banks ceasing existence
Financial crisis in Denmark. J. Rangvid (CBS)
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Financial crisis in Denmark. J. Rangvid (CBS)
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Lending Deposits Deposit deficit
DKK bn DKK bn
Financial crisis in Denmark. J. Rangvid (CBS)
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2003 2004 2005 2006 2007 2008 2009 Lending (bn DKK) 7.1 8.3 13.3 18.3 24.7 25.7 23.9 Large commitments, % of Tier 2 194.7 219.9 470.5 294.5 349.1 416.3 180.4 Commercial property exposure 16.5 22 24.8 27.6 34.7 40.7 38.5 Deposit deficit 0.9 1.0 1.2 1.4 1.6 1.8 1.8 Return on equity 22.7 27.8 39.4 36.0 22.7
Financial crisis in Denmark. J. Rangvid (CBS)
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Total lending 2007 Selected loans Impairments 08-11 / Mio. Mio. Lending 07 Roskilde Bank 44972 12003 49.6 Amagerbanken 27246 6029 58.2 Fionia Bank 25980 1010 56.5 Fjordbank Mors 13390 346 108.7 EBH Bank 9525 323 263.7 Max Bank 8163 295 54.2 Eik Bank 8001 514 53.3 Sparekassen Østjylland 7593
4861 552 3.4 Totalt 149730 21072 73.9
Financial crisis in Denmark. J. Rangvid (CBS)
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Financial crisis in Denmark. J. Rangvid (CBS)
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Bank package I
General state guarantee lasting until September 30, 2010. Bank package II
Capital injection (Tier 1) from the State and Individual state guarantee. Bank package III
Haircut on unsecured senior loans and deposits above EUR 100,000
Timeline of transfer
Assets and liabilities of failing bank
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Source: Danmarks Nationalbank
Financial crisis in Denmark. J. Rangvid (CBS)
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Financial crisis in Denmark. J. Rangvid (CBS)
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Financial crisis in Denmark. J. Rangvid (CBS)
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Fjordbank Mors. June 24, 2011
Absolutely tiny bank.
Here’s FT quoting CreditSights: This is a tiny bank by international standards – at end- 2010 Fjordbank Mors had total assets of DKK 13.2 bln (€1.8 bln) and equity of DKK 0.8 bln (€0.1 bln) – but there are wider implications for the banking system in Denmark and Europe. Following the failure of Amagerbanken, Moody’s downgraded the senior ratings
latest move underlines the determination of the Danish authorities to impose losses on senior creditors of failing
Ireland, where the ECB has blocked haircuts for senior bondholderrs in Irish banks, but, of course, such action is much easier in respect of such a tiny, domestic
the headlines and at the forefront of the rating agencies’ thinking.
Bank package IV
Opportunity for the Danish
Deposit Guarantee Fund to supply funds or provide guarantee against losses to a buyer bank.
Since then, solutions founds
and no bail-in required.
Financial crisis in Denmark. J. Rangvid (CBS)
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Danish crisis due to a combination of being a small open economy,
procyclical fiscal policy, optimistic lending practices, liberalization of mortgage lending rules, house price bubble, etc.
Extensive bank packages introduced during the crisis. Bank package III – that was the first to implement and use bail-in in
Europe – grabbed international attention.
It is possible to wind down a (small) bank during a weekend,
including imposing losses on senior debt holders, and continue
Denmark first to use bail-in.
Costly for Danish banks. Initiatives were taken to soften impact.