COPENHAGEN Denmark's central bank unveiled a
4.5 billion crowns ($896.8 million) bailout of Roskilde Bank
ROSK.CO acting to confine the negative effect of the
struggling bank on the Danish financial system.
The central bank, Nationalbanken, stepped in after
Roskilde, Denmark's eighth-largest retail bank by customer
market share, failed to receive any offers after putting itself
up for sale in the face of bigger-than-expected writedowns on
real estate project loans.
"We believe the situation around Roskilde Bank now
constitutes a significant threat to the financial stability in
Denmark," Denmark's Central Bank Governor Nils Bernstein said
Bernstein added that other Danish banks' ability to access
international capital could have been compromised if the
central bank had not stepped in to guarantee Roskilde's debt.
Bernstein told Reuters Roskilde was extraordinary in that
it was heavily exposed to the property sector and that other
Danish banks in general were well prepared in a deteriorating
Danish economic situation.
"We have no expectations of any other banks suffering
similarly, but we can't make any guarantees," he said.
Roskilde, with 24 branches and about 100,000 customers, is
the second small Danish bank to face a liquidity crunch.
Earlier this year, Trelleborg was forced to sell itself to
In July, Roskilde secured a bailout of 750 million crowns
from the central bank and put itself up for sale.
Bjarne Jensen, an independent bank analyst at BJ Consult,
said Roskilde had gambled heavily in the real estate market
since 2003, but said other Danish banks were not as focused on
property development. "They've had enormous growth since 2003,
but the growth was financed by loans and not deposits."
In a separate statement, Roskilde said an uncompleted audit
had revealed a further 1 billion crowns in likely writedowns on
loan provisions that would hit six-month pretax earnings. This
is in addition to the expected loss of 520 million to 540
million it forecast in July, when the bank blamed global
financial turmoil and a downturn in the Danish real estate
market for its problems.
SLIPSHOD CREDIT CULTURE
Bernstein said Roskilde's exposure to real estate together
with a "slipshod" credit culture had affected the bank, which
was not "fit to survive," although he gave no examples.
Nationalbanken said it would set up a new bank to buy all
assets and take over all debt and other liabilities in
Roskilde, except hybrid core capital and subordinated loan
capital in a government-backed bailout.
The central bank intends to continue Roskilde's banking
business with the aim of disposing of the company in an orderly
Bernstein said shareholders and holders of hybrid core
capital and subordinated loan capital had most likely lost
Shares in Denmark's three largest banks, Danske Bank
DANSKE.CO>, Jyske Bank (JYSK.CO) and Sydbank (SYDB.CO), were
all marginally lower on Monday. Trading in Roskilde's shares
Nationalbanken and the Danish financial sector will
contribute about 4.5 billion crowns in capital base for
Roskilde. Losses will initially be covered by 750 million
crowns in capital contributed by the financial sector through a
Denmark's financial sector is represented in the rescue by
a private association set up by the Danish Bankers' Association
which has received funds from its members and from mortgage
Nationalbanken said since July, auditing of Roskilde's
interim report had revealed additional losses in the bank to
the extent that it no longer met solvency requirements.
(Additional reporting by Rasmus Nord Jorgensen; Editing by
Sue Thomas and Erica Billingham)