ANNOUNCEMENT 28 Feb 2012In February 2012, the government of Denmark announced a change in private-sector financial support.
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On 28 February 2012 Denmark informed the European Commission about a planned merger of two Danish banks, Vestjysk Bank A/S and Aarhus Lokalbank A/S due to the increased risk of becoming distressed banks.
Vestjysk bank is one of Denmark's largest regional banks with a balance sheet of EUR 3.94 billion. (para. 5, letter from the EC to Denmark, Brussels 25.04.2012)Aarhus Lokalbank is has a balance sheet of EUR 600 million. The increased risk both banks are facing is not further specified in the text of the decision.
The merger strengthens the position of Vestjysk Bank (name after the merger) and the continuing bank will mainly focus on 'corporate and retail banking operations' (para. 11)
Under the Danish guarantee scheme for merging banks (related measures), guarantees can be provided for merged entities with a balance sheet of up to EUR 3 billion. (para. 16) Therefore this measure is considered an individual case and not only an application of the scheme.
Related to the merger, Vestjysk Bankincreases will increase the capital by EUR 34-40 million. This increase is accompanied by state guarantees for new bonds for up to EUR 1.2 billion. Furthermore, Vestjysk sells a minority share (in Dansk Landbrus Realkreditfond DLR) to the Danish Central bank. This purchase of the Central bank allows Vestjysk Bank to improve its capital position by reducing the risk in the portfolio.
The EC finds that: 'The advantage procured by the measures will strengthen the positions of the continuing bank as regards capital and liquidity compared to those of its competitors who will not benefit from similar measures. The measures will furthermore facilitate the merger of Vestjysk Bank and Aarhus Lokalbank and therefore enable the merged entity to improve its market position. The measures therefore can lead to a distortion of competition.' (para. 57)
The EC concludes that:' Given the integration of the banking market at European level, the advantage provided to the continuing bank 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 affecting trade between Member States.
With respect to the duration of the measure: 'A new individual State guarantee on new debt issued in connection with a merger may have a term of up to five years, but shall not last longer than until 31 December 2016...' (para. 34 (i))
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