ANNOUNCEMENT 06 Mar 2009In March 2009, the government of Denmark announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
1) the letter from the EC to Denmark - Brussels, 20.5.2009 C (2009) 4027 final. Available at < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_NN23_2009 >
The letter from the EC to Denmark - Brussels, 25.10.2010
C(2010) 7427 final. Available from: < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N560_2009 >
2) source for the identification of affected trading partners (http://www.finanstilsynet.dk/en/Tal-og-fakta/Virksomheder-under-tilsyn/VUT.aspx)
Denmark notified the measures on 6 March 2009.
Fionia Bank is a regional, full-service bank with a market base on the island of Funen and neighbouring islands in central Denmark. Fionia Bank's headquarters are located in Odense. In total, Fionia Bank has 34 branches with fund management centres in Odense and Copenhagen. It is currently the 9th largest bank in Denmark with assets of DKK 32.786.7million as per 31.12.2008. Fionia Bank has 84 000 private customers and 7 500 corporate customers.
On 22 February 2009, an agreement was reached between FSC and Fionia Bank ( 'the Framework Agreement'). The aim of the Framework Agreement is to establish the basis for a restructuring of Fionia Bank's business operations. Under the Framework Agreement, Fionia Bank will change its name to Fionia Bank Holding A/S ( 'the Old Bank'), and establish a subsidiary, to be named Fionia Bank A/S ("New Fionia")
New Fionia will receive funding in the form of two distinct measures:
(a) the provision of a credit facility (Credit Facility Loan Agreement) which is nominally unlimited. Denmark has however notified a limit of DKK 5.1 billion (corresponding to the sum of senior liabilities in the bank, which is the maximum needed to effectuate timely repayment of creditors) and undertaken to re-notify any plans to extend the facility above that amount; and
(b) an injection of capital (Hybrid Capital Loan Agreements) to bring the level of solvency up to a constant level of 11.5 % for the rescue aid period (i.e. until 15 October 2009). In terms of amount, the need for a capital injection is currently estimated at DKK 1 billion.
Denmark considered that the credit facility and the capital injection constitute State aid within the meaning of Article 87(1) EC.
The Commission agreed with the position of Denmark that the support measures constitute State aid to Fionia Bank pursuant to Article 87 (1) of the EC Treaty and gave the following assessment:
"Given that Fionia Bank is active in the financial sector, which is open to intense international competition, any advantage from state resources to the New Fionia would have the potential to affect intra-Community trade and to distort competition. The notified measures would be provided to New Fionia through the Financial Stability Corporation which is a key component of the existing State aid scheme for banks in Denmark as a vehicle set up to provide aid for the orderly winding up of insolvent banks. The support measures allow New Fionia to get financing in a situation where it would have been unable to find adequate funding on the market, especially in view of the present financial and economic crisis situation. This gives an economic advantage to Fionia Bank and strengthens its position compared to that of its competitors in Denmark and other Member States that are not benefitting from public support. The measure must therefore be regarded as distorting competition and affecting trade between Member States. The advantage is provided through State resources and is selective since it only benefits one bank." (par. 34-36 of the letter from the EC to Denmark - Brussels, 20.5.2009 C (2009) 4027 final).
The Commission finds that the State aid in favor of Fionia Bank, consisting in a credit facility and an injection of capital, is compatible with the common market pursuant to Article 87(3)(b) of the EC Treaty. Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State.
Aid for the liquidation of Fionia Bank- State Aid N 560/2009
Denmark notified the liquidation aid measures on 15 October 2009. Due to the negative market conditions primarily in the real estate sector, the need for write-downs in the first half year of 2009 was much greater than anticipated and Fiona Bank could no longer be restructured. Denmark consequently decided to proceed with a controlled liquidation of the bank by selling off whatever would find a buyer and winding-up the remainder in an orderly fashion. The Bank's healthy activities and customers have been transfered to Nordea Bank while its most risk-exposed activities have been transferred to a Rump bank under State control.
In order to meet regulatory requirements, the FSC has capitalised the Rump Bank with EUR 174 million (DKK 1.3 billion) and will thus finance its continued operation until the controlled winding-up process has been completed. Liquidation of all assets should be achieved within five years. The liquidation aid measures include 1) capital injection in the amount of EUR 174 million (DKK 1.3 billion). 2) transfer of the credit facility of EUR 684 million stemming from the rescue decision including the outstanding amount of EUR 147.5 million (in total DKK 5.1 billion) 3) increase of the credit facility from EUR 684 million to EUR 1.14 billion (DKK 8.5 billion). (par. 18-46 of the letter from the EC to Denmark - Brussels, 25.10.2010 C(2010) 7427 final).
Denmark expects that the FSC will be able to shut down the Rump Bank in 2014 or 2015. Any remaining capital will be returned to the FSC once the liquidation is completed.
The Comission gave the following assessment:
"Given that Fionia was 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." (par. 53 of the letter from the EC to Denmark - Brussels, 25.10.2010 C(2010) 7427 final).
The Commission concludes that the measures described above constitute State aid that can be considered compatible with Article 107(3)(b) TFEU in light of the Restructuring Communication. (par. 106 of the letter from the EC to Denmark - Brussels, 25.10.2010 C(2010) 7427 final).
Aid for liquidation - revised commitmentsSA.33117
On 25 May 2011, Denmark notified amended commitments. In the revised version, the Rump bank commits to a transfer of clients to other banks until 31 December 2013. (para. 22, letter from the EC to Denmark, Brussels 18.7.2011)
From this point, the winding down process does not longer affect trade between member states.
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.