Sted Dato Emne v

1

• The Danish Competition Authority
• The Danish
• Approach to state Aid and
• the financial and economic crisis
• CREDIT Package I and II
• and rescuing /restructuring of
• Financial institutions

2
The Danish Approach to State Aid

• Less and better targetted aid
• Horizontal purposes Community interest
• Market failure
• Necessary and proportional
• Temporary
• Objective and non discriminatory
• Transparent
• Strict State Aid control

3
State Aid - the Financial and economic crisis

• Focus on financial stability systemic
  difficulties
• Common coordinated approach
• Commission state aid control
• Common rules
• Prevent distortion of markets and trade

4
Credit package I October 2008

• Lehman Brothers Roskilde bank ?
• Funding Crisis lack of confidence no
  interbank lending
• Depositors and creditors
• Unlimited guarantee for depositors and creditors
  until 2010
• The Banks finance 35 billion top up by the
  state (3600)
• Only healthy solvent banks Private Contingency
  Association
• Not solvent banks taken over by the Winding up
  company
• Behaviour requirements
• The Financial Stability Act

5
Credit package IIThe financial market - the
financial and economic crisis

• The Credit squeeze and Crunch
• Access to credit for undertakings and citizens
• Credit to the real economy
• Systemic problem for healthy institutions /
  companies
• Solvency requirements tier one capital /RWA
• Increase solvency tier one capital
• Increase tier one capital 100 billion DKK
• Gearing 17 credit amount to 700 billion DKK
• Percentage of tier one capital increased to 12
• Tier one equity hybrid capital

6
Credit package IIAct on state capital injections
in Credit institutionsAmendment of ACT on
financial stability

• Capital injection banks 75 BDKK Mortgage 25
  BDKK
• Hybrid tier one capital Average interest 10
  percent (rating)
• Only healthy solvent institutions ECB rating
• Risk evaluation
• Exit clause Exit very important
• Percent of tier one capital up to 12 percent
• Behaviour restraints cap on salaries and
  upsides / options
• Individual loan guarantees maturity after 31.
  12. 2010
• Cash grant payment to take over banks in default
• Export loans on 20 billion DKK
• Export credit guarantee to short term export
  markets

7
State Aid Rules

• Covered by State Aid provisions 87 (1) 88 (3)
• State capital injection guarantees
• Systemic failure 87 (3) b Aid to remedy a
  serious disturbance in the economy of a member
  state.
• Commission Communication of 13 October and 5
  December 2008.
• Specific rules for guarantees, capital injection,
  liquidity
• Definition of healthy and not healthy financial
  institutions

8
Key questions

• Definition healthy versus - unhealthy credit
  institutions
• Individual notification of unhealthy banks -
  restructuring
• Capitalisation vs. overcapitalisation the 12
  pct.
• Arguments for necessity and systemic failure
• AID the minimum necessary
• The premium on hybrid tier 1 capital rating
  categories
• The premium on individual guaranties EBC rules
• No cherry picking between two types of
  guaranties
• Individual guarantee scheme approved for 6 months
  
• Individual notification of cash for take over
• Export loans notified through OECD channels
• Short term export credit approved

9
The Process Credit package II 14 January 3
February 2009

• Task force structure
• Objective the package in conformity and approved
• Interactive multi level game DK EU
• Notified 22 January 2009 approved 3 February 2009
• 4 batches of questions, one meeting, 25 mails
• 120 hours 16 days 10 days

10
Learning?

• Difficult rules difficult to lift burden of
  proof
• Task force structure - all competences on board
• Keep very close contact to Commission services
• Multilevel game flexible flow
• Coeur, crâne et courage

11
Roskilde bank, EBH bank, Fionia bank

• Roskilde bank Being winded up by the winding up
  company
• Guarantee to depositors and creditors
• First Danish bank in default
• State Aid to rescue and restructuring
• EBH bank been taken over by Winding up company
• Fionia bank
• Solvency requirement 13 percent of RWA risk
  profile
• Capital injection liquidity Winding up
  company
• Call options
• Rescue and Restructuring Rules
• Arguments for necessity systemic default
  proportionality (minimum necessary aid), adequate
  instruments and behavioural restraints
• Long term viability plan after 6 months

12
Questions?