UPDATE 1-Joining EU banking union would improve oversight, Danish report says

(Adds detail, minister quote)

COPENHAGEN, Dec 19 (Reuters) - Denmark would benefit from joining the EU’s banking union as it would strengthen oversight of Danish financial institutions’ cross-border activities among other things, a report commissioned by a former government showed on Thursday.

Participation in the banking union would bring Denmark, an EU member since 1973 but which holds opt-outs from EU policies on security, police and the euro, into closer alignment with the bloc.

If the current government were to recommend such a move the country would have to vote on it in a referendum.

“With Danish participation, there will be more eyes on the biggest Danish credit banks,” the report said.

Business minister Simon Kollerup said a number of issues such as uncertainty over Brexit and the impact of new Basel capital-requirement rules needed to be seen before a final decision could be made.

The banking union was conceived in the wake of the 2007-08 financial crisis to prevent any repeat of the debt problems that followed. It is designed to integrate the industry more closely within a single bloc-wide regulatory and supervisory framework.

Kollerup also pointed to the fact that work on additional elements of the banking union is still ongoing.

The first two pillars of the banking union, making the European Central Bank supervisor and setting up an agency and fund to close ailing banks, are in place. But the third critical element, a single deposit guarantee scheme, has been blocked by Germany.

Danish lawmakers concluded in 2015 that it would be in the country’s interests to participate in the banking union but the Danes postponed making a decision then, pending clarification of certain matters and established a working group, which published its findings in the report on Thursday.

The banking union covers all countries in the euro zone, but European Union countries outside the currency area such as Denmark can also join. (Reporting by Stine Jacobsen; Editing by Alison Williams, Jon Boyle and Hugh Lawson)