February 6, 2011 / 9:27 PM / 8 years ago

UPDATE 2-Danish bank Amagerbanken falls into state hands

* Bank agrees to be taken over by gov’t administrators

* Says no longer meets solvency requirements

* Says to open doors for business Monday, shares suspended (Adds central bank chief’s remarks)

COPENHAGEN, Feb 6 (Reuters) - Small Danish bank Amagerbanken AMBA.CO said on Sunday that it failed to meet solvency requirements and had agreed to be taken over by state administrators who will wind up the bank’s remaining activities.

Amagerbanken, the 10th small Danish bank to fall into the state’s hands due to the effects of the 2008-09 financial crisis, said in a statement that fourth-quarter writedowns had wiped out its equity.

It said it had agreed to transfer its assets to Finansiel Stabilitet A/S, the state company that administers failed banks, and the administrators would close the bank.

“Acknowledging that it is unable to meet statutory solvency requirements, Amagerbanken A/S has entered into a transfer agreement with Finansiel Stabilitet,” the bank said.

“Effective Feb. 6, 2011, Amagerbanken transfers all of its assets to a newly formed subsidiary bank under Finansiel Stabilitet, it added.

The subsidiary will get capital and liquidity from the bank administration company to fulfill the capital and liquidity requirements under the Financial Business Act, it said.

Central bank governor Nils Bernstein said in a statement that the failure of Amagerbanken did not alter his assessment that Danish banks generally have adequate capital and liquidity.

“The protracted vulnerable situation of Amagerbanken and its termination as a independent bank does not change the Nationalbank’s general assessment of the strength of the financial system,” central bank Governor Nils Bernstein said.

“The Danish financial sector as a whole is assessed to have sufficient capital and liquidity to meet the outlook for the Danish economy,” Bernstein said in a statement.

The bank decided to book fourth-quarter writedowns of 3.14 billion Danish crowns ($571.8 million), including 381 million announced in late November, Amagerbanken said.

As a result, the bank’s equity, which stood at about 2.44 billion crowns ($444.3 million) on Sept. 30, 2010, was negative 654 million as of Jan. 1, it said.

The bank said it had concluded that such writedowns were necessary after a review that comprised 80 percent of its total commitments and 95 percent of its corporate commitments.

Amagerbanken said its continuing operations would be open for business on Monday morning, but trading of its shares and bonds on the Copenhagen bourse is suspended.

“The bank’s shareholders will have to acknowledge that their investment is lost, as will the owners of the subordinate liabilities,” Amagerbanken said.

According to its most recent annual report, Amagerbanken has about 100,000 private customers and about 10,000 corporate clients.

After the expiry last year of a general state guarantee on deposits, deposits in Danish financial institutions are no longer secured beyond the coverage provided by a guarantee fund for depositors and investors.

“Creditors, including depositors whose deposits with Amagerbanken are in excess of 100,000 euros, therefore must anticipate losses of app. 41 percent as the bank closes,” Amagerbanken said.

The central bank chief Bernstein said that Denmark’s contingency mechanism for taking care of a bank in distress offered the least possible disruption for ordinary banking customers. ($1=5.491 Danish Crown) (Reporting by John Acher; editing by Gunna Dickson)

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