Government bailout worth €819m

The European Commission has approved a €819m Danish government rescue package for Fionia Bank.

The Commission found that there would have been a clear risk of failure of Fionia Bank in the absence of the rescue aid.

The aid is in the form of a credit facility of up to €685m and a €134m capital injection to bring the level of solvency up to a constant 11.5%.

The measure constitutes an adequate means to remedy a serious disturbance in the Danish economy while avoiding undue distortions of competition, said the Commission.

Competition Commissioner Neelie Kroes said: ‘The rescue aid was necessary to avoid the insolvency of Fionia Bank which would have entailed a risk for the stability of the Danish financial markets. The Commission is satisfied that the rescue aid is proportionate and does not give rise to undue distortions of competition.’

In the wake of the financial crisis, Fionia Bank experienced problems in late 2008 and was ordered by the Danish Financial Supervisory Authority to increase capital ratios. It also had liquidity problems. Under the terms of the rescue aid, all assets and liabilities (except subordinate debt and equity) will be transferred to a new entity with a view to restructuring Fionia Bank and making it viable again.

The measures taken by the Danish authorities should remedy the bank’s solvency problems and restore confidence in the Danish financial markets, said the Commission.