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On 9 January 2012, Denmark notified the EC about its intention to give guarantees to merging banks. While Denmark already has two schemes (see related measures) that aim at supporting distressed banks, this scheme is meant to provide a market-based solution for failing banks (para. 5, letter from the EC to Denmark, Brussels 17.2.2012).
The Danish banking sector is highly fragmented with many small banks (para. 6). The state therefore considers supporting mergers to decrease the risk for small banks.
All banks in Denmark, including subsidiaries of foreign banks, are eligible for the scheme. One of the merging banks must be distressed to be eligible for the scheme. The maximum total balance sheet of both banks combined should not exceed EUR 3 billion. (para. 9)
Denmark provides guarantees of EUR 5.4 billion. Additionally, if the merger triggers senior debt payments, an additional guarantee of EUR 1.3 billion may be used. The maximum term of the guarantees is 5 years.
The EC finds that: The advantage procured by the measures would strengthen the beneficiaries' position compared to that of their competitors. Given the integration of the banking market at European level, that effect is felt by competitors both in Denmark (where banks from other Member States operate) and in other Member States. The measures must therefore be regarded as potentially distorting competition and affecting trade between Member States. (para. 31)
Updates and Prolongations:
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.
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