* Says failed to meet solvency requirement
* Agrees takeover by administrator, Financial Stability
* Depositors and creditors covered by government guarantee
(Adds further details, comment from administrator)
COPENHAGEN, Oct 1 Faroe Islands bank Eik Banki
FO-EIK.CO has agreed to be taken over by Denmark's banking
administrator, Financial Stability, after failing to meet
solvency requirements, it said on Friday.
Eik Banki, with total assets of 29.8 billion Danish crowns
($5.46 billion) at end-June, is among the dozens of small banks
in Denmark to fold or be swallowed by rivals as a result of the
financial crisis that began in late 2008.
The biggest failure to date is that of Roskilde Bank but
Denmark still has over 100 financial institutions.
Eik Banki, which got into trouble with commercial real
estate loans in Denmark, said it and its Danish subsidiary will
be taken over by Financial Stability, the Danish state company
that administers failed banks.
Danish financial regulators on Tuesday had told Eik Banki,
listed in Copenhagen and Reykjavik, to write down the value of
assets and increase capital to meet solvency requirements.
The Danish Financial Supervisory Authority (FSA) extended a
deadline for meeting the solvency requirements to Oct. 8 from
Sept. 30, Eik Banki said.
But the parent company, Eik Banki P/F, was unable to meet
its Danish subsidiary's claim for capitalisation stemming from
the solvency requirements imposed by the FSA, it said.
"Eik Banki P/F and Eik Bank Danmark A/S therefore have
entered into a conditional agreement regarding the transfer of
all the activities of the two banks respectively to a purchaser
directed by the Financial Stability Company," Eik Banki said.
Trading of Eik Banki shares and bonds was suspended until
further notice, the bank said.
Depositors and ordinary creditors will continue to be
covered by Denmark's general government guarantee scheme, the
The government's guarantee for deposits expired on Thursday,
but stays in force for banks, such as Eik Banki, that are
subject to an FSA-imposed deadline for meeting solvency
The head of Financial Stability, Henrik Bjerre-Nielsen, told
Reuters that the costs of taking over Eik Banki will be paid out
of the support scheme for Danish banks known as Bank Package I.
That means that Danish banks, which have already paid for
that package, would not be asked to put up more money for Eik.
Bjerre-Nielsen said in an e-mail to Reuters that Financial
Stability had not been in contact with potential buyers of
healthy parts of Eik Banki, but he said it was probably only a
matter of time before that would happen.
The Faroe Islands between the Norwegian Sea and the North
Atlantic are a semi-autonomous part of the Kingdom of Denmark so
the Eik Banki group is regulated by Danish law.
($1=5.456 Danish crowns)
(Reporting by John Acher and Peter Levring; Editing by Greg