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ANNOUNCED AS TEMPORARYNo
Capital injection and equity stakes (including bailouts)
On 18 November 2010, Denmark notified measures adopted with a view to winding-up Eik Banki P/F and Eik Bank Danmark A/S. The measures were put into effect on 30 September 2010, under the Guarantee scheme for banks in Denmark.
Eik Banki P/F is a Danish bank based in the Faroe Islands, with a subsidiary, Eik Bank Danmark A/S, based in Copenhagen. The total balance sheet of Eik Banki P/F was EUR 4 billion on 30 June 2010. It is the largest bank in the Faroe Islands. Its fully-owned subsidiary in Copenhagen, Eik Bank Danmark A/S, had a total balance sheet of EUR1.7 billion on 30 June 2010.
During the summer 2010, both Eik Banki P/F and Eik Bank Danmark A/S faced severe liquidity and solvency problems due to excessive lending in highly risky real estate projects. On 27 September 2010, the Danish Financial Supervisory Authority (FSA) increased the Bank's solvency requirements. The FSA gave the banks until the 30 September 2010 to raise the additional capital needed to meet those new solvency requirements. On 30 September 2010, since the banks had not been able to raise the necessary capital, they entered into a winding-up agreement with the Danish Financial Stability Company (FSC). Under the winding-up agreement, the FSC transferred both banks' assets and liabilities, except for equity and subordinated debt, to two newlyestablished subsidiary companies of the FSC: Eik Banki Fřroya P/F and Eik Bank Danmark 2010 A/S, respectively. The transfer was completed on 14 October 2010 and an open and transparent sale process of both banks was initiated. Under the Guarantee Scheme for banks, assets that cannot be sold are wound down in the FSC.
The transfer agreement was accompanied by the following measures granted to both banks by the Danish government, through the FSC:
- Liquidity facility agreements for Eik Banki P/F and Eik Bank Danmark A/S in the period from the conclusion of the transfer agreement (30 September 2010) until the transfer is completed (14 October 2010), for a maximum amount of DKK 2 billion (EUR 268 million) for each bank;
- Credit facilities made available for Eik Banki Fřroya P/F (up to DKK 7.85 billion - EUR 1.1 billion) and Eik Bank Danmark 2010 A/S (up to DKK 5.5 billion - EUR 738 million); those credit facilities replace the liquidity agreements as of 14 October 2010;
- Capital injections necessary to meet the capital requirements set by the FSA: DKK 2 billion (EUR 268 million) for Eik Banki Fřroya P/F and DKK 1.48 bn (EUR 198 million) for Eik Bank Danmark 2010 A/S;
- A loss guarantee granted to Eik Bank Danmark 2010 A/S of DKK 328.4 million (EUR 44.0 million) to cover losses on the bank's largest exposure on BRF Kredit, a Danish mortgage lender.
In addition to the measures mentioned above, both Banks had previously benefitted from capital injections and State guarantees under the Danish bank recapitalisation scheme and guarantee scheme on new debt for a total amount of EUR1'229.5 million.
The commission found that the measure constitutes State aid within themeaning of Article 107(1) TFEU and gave the followingassessment:
"Given that Eik Banki P/F and Eik Bank Danmark A/S were both active in the financial sector, which is open to intense international competition, any advantage from State resources would have the potential to affect intra-Union trade and to distort competition. Although it is located in the Faroe Islands, which are not part of the Union, Eik Banki P/F has activities within the Union through its subsidiary Eik Bank Danmark A/S and competes with Union financial institutions on the Faroe Islands banking market. Therefore, the measures granted to the whole Eik bank group have the potential to affect intra-Union trade and distort competition." (par. 19 of the letter from the EC to Denmark - Brussels, 6.6.2011 C(2011) 3911 final)
Regarding the compatibility of the measure with the internal market, the EC came to the following conclusion:
"The liquidation including the sale of the biggest part possible of the former Eik Banki P/F and Eik Bank Danmark A/S allows for an orderly winding-up in order to maximize the value of the remaining assets and to minimize the amount of necessary State aid.
The Commission notes that Denmark has put the foregoing State aid into effect in breach of Article 108(3) TFEU. However, on the basis of the foregoing assessment, the aid measures are found compatible with the internal market pursuant to Article 107(3)(b) TFEU. The Commission therefore does not raise any objection against the state aid." (par. 63-64 of the letter)
A state measure in the GTA database is assessed solely in terms of theextent to which its implementation affects the extent of discriminationagainst foreign commercial interests. On this metric, the state aidproposed here is discriminatory.
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