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The Danish Government concluded an agreement on a credit package on 18 January 2009.
Please see our presentation on the package and the press release from the Danish Ministry of Economic and Business Affairs here:
The stability package agreed upon in October 2008
The Danish state has issued a two-year guarantee. The agreement takes the form of a type of insurance policy for the financial sector in Denmark. The sector has an excess, or own risk, of DKK 10 billion (the loss guarantee) and a basic insurance premium of DKK 15 billion over two years (the guarantee commission), and the premium can be increased by an additional DKK 10 billion if necessary. In order to participate in the scheme, the banks will contribute up to DKK 35 billion, or 2% of the Danish GDP, over the next two years. The state will cover any additional losses and will retain any surplus.
The scheme extends from 6 October 2008, to 30 September 2010. It can be extended if financial instability makes this necessary.
During the period of the scheme, the participating institutions may not do the following:
- Pay dividends
- Establish new share buyback programmes
- Issue new share option programmes or extend or renew existing programmes
Who is covered by the guarantee?
The scheme covers all banks in the Kingdom of Denmark that have a banking licence and participate in the Sector Fund (Det Private Beredskab). You can see a list of participants on the Danish Bankers Association website.
What does the guarantee cover?
The guarantee covers the following:
- Deposits
- Amounts due to credit institutions (interbank liabilities)
- Issued bonds (senior debt)
What does the guarantee not cover?
The guarantee does not cover the following:
- Covered bonds
- Debt and deposits secured on government bonds or covered bonds
- Hybrid capital and subordinated debt
- Obligations at foreign branches, but for branches in countries with a similar guarantee scheme, participating banks may choose to let their branches be covered by the Danish guarantee scheme
What does it mean for Danske Bank to be covered by the guarantee?
The immediate effect of the guarantee is that the Group’s access to funding in the international capital markets and conditions for such funding will improve. We expect this to have a positive effect on net interest income.
The guarantee will increase Danske Bank’s operating expenses by around DKK 2.5 billions annually for two years, beginning on 6 October 2008. In addition, there may be additional expenses if payment under the loss guarantee falls due and if the guarantee commission is increased as explained above.
Danske Bank is expected to be liable for around one third of the amounts. The price of participation is based on the capital adequacy requirement for Danish activities covered by the guarantee.
Further information
Last updated on 6 February 2009