September 13, 2011 / 2:25 PM / 7 years ago

Danish banks could face tougher rules after vote

* Social Democrats say to explore dividing bank activities

* Willing to discuss Glass-Steagall Act-style regulation

* PM candidate says banks should contribute more to society

By Mette Fraende

COPENHAGEN, Sept 13 (Reuters) - Denmark’s banks could face tougher regulation if the centre-right government is ousted by Social Democrat Helle Thorning-Schmidt in parliamentary elections on Thursday.

Thorning-Schmidt, whose “Red bloc” coalition leads in opinion polls with just one campaign day left, said she would be willing to discuss Glass-Steagall-style regulation, referring to the U.S. Act put in place after the 1929 stock market collapse, separating investment and commercial banking.

“This is basically an idea which we would very happily discuss,” Thorning-Schmidt said in a briefing for international media on Tuesday. “Should we have more divisions in terms of what they do?

“We have come up with a number of proposals to regulate the banks, and one ... is to discuss these big financial supermarkets, and maybe make some divisions,” she said, a day after Britain backed bank reform proposals including the creation of a ring-fence around retail lending activities.

Thorning-Schmidt also said banks which received state aid during the crisis would be asked to give more back to society, such as helping finance improvements to schools.

“Banks that got a lot of help from us when they needed it, we are asking them to participate in helping with that change,” she said.

Last month, the Danish government said it had political support for a plan to avoid more bank failures and help the country’s smaller banks regain access to international funding markets.


The plan came in response to worries that more small banks could fail after small local bank Fjordbank Mors fell into the hands of administrators in June, the ninth Danish bank to be taken over by the state since the start of the crisis in 2008.

Thorning-Schmidt dismissed an idea aired earlier in the day by the Red-Green Alliance to set up a state-owned bank to compete with the likes of Danske , Nordea , Jyske Bank and Sydbank .

“We have suggested that some of the large pension companies will have the possibility to enter the lending market, and we would like to proceed on that. But we should not have a state bank,” Thorning-Schmidt said.

If Thorning-Schmidt wins on Thursday, she would probably need to agree with the Red-Green Alliance, partners with Thorning-Schmidt’s Social Democrat party in the Red bloc, to secure parliamentary support for a new government.

Opinion polls show the Red-Green Alliance is likely to roughly triple its 2007 election score with between 5.8 percent and 8.2 percent of the vote.

The Red bloc, also consisting of the Socialist People’s Party and the Social-Liberals, has led in opinion polls for months, ahead of Prime Minister Lars Lokke Rasmussen’s “Blue bloc”.

A Megafon survey on Tuesday gave the Red bloc 51.3 percent to 48.1 percent for the Blue bloc.

If Thorning-Schmidt wins and forms a government, she would be the country’s first female prime minister. (Additional reporting by Jakob Vesterager; Editing by David Holmes)

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