ANNOUNCED AS TEMPORARYNo
Capital injection and equity stakes (including bailouts)
On 21 September 2010 Denmark notified the EC about its intention to set up a winding-up scheme for financial institutions in distress.
The scheme aims at supporting failing banks and allow for a controlled winding-up 'instead of those banks being subject to regular bankruptcy proceedings.'(para. 3, letter from the EC to Denmark, Brussels 30.9.2010)
All credit institutions on the Danish market are eligible to participate in the scheme. When a bank decides to participate, a new bank is created and all assets are transferred to the new bank. Any loss arising in the new bank will then be covered via a loss guarantee from the state (para. 15)
The EC concludes that: 'The Winding-up Scheme introduced by Denmark allows for a controlled winding-up of banks under the FSC by creating a "bridge bank", i.e. New Bank, which will obtain capital and liquidity from the FSC in a time when the distressed bank was unable to find private funds on the market. That offer of capital and liquidity may give an economic advantage to New Bank as far as it continues to operate in the market, albeit in a limited way. It must therefore be regarded as potentially distorting competition and affecting trade between Member States.' (para. 27)
Under the scheme, the new bank will cease activities within a period of five years (para. 37), therefore the distortions are limited in time.
Update: Prolongation and Amendments to the initial scheme:
On 13 February 2015, the European Commission approved the reintroduction of the Danish winding-up scheme for insolvent banks. After its reintroduction, the scheme was supposed to run until 30 June 2015.
On 18 September 2015, the scheme was prolonged until 31 December 2015.
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