European Commission - Press release
State aid: Commission approves guarantee scheme on liabilities for merging banks in Denmark
Brussels, 17 February 2012 - The European Commission has authorised a Danish guarantee scheme on liabilities for merging banks. The Commission found the scheme to be in line with EU state aid rules, in particular because the measure targets a genuine market failure, is not discriminatory and requires the merged entity to be viable.
Under the scheme any bank established in Denmark, including subsidiaries of foreign banks, could receive state guarantees on their liabilities in case of a merger with another bank established in Denmark, provided that one of the merging banks is distressed or is likely to become distressed. However, the merged entity needs to have been found viable by the Danish Financial Supervisory Authority.
Furthermore, the total balance sheet of the merged entity may not exceed €3 billion. This is in line with the thresholds applied in the Danish winding-up and compensation schemes (see IP/11/1523). Mergers that exceed this threshold would need to be notified individually to the Commission for scrutiny under the state aid rules.
The Danish banking sector is highly fragmented, with many small banks which are only active at a local level. These banks have difficulties to procure funding from the international wholesale funding markets, which as a result of the financial crisis are not yet functioning properly. In this context, banks wanting to consolidate might be hindered from merging because of funding considerations.
The overall budget of the scheme is DKK 50 billion (approximately €6.7 billion). Guaranteed liabilities with a maturity of more than 3 years are capped to correspond to maximum one third of the total budget of the scheme.
The non-confidential version of the decision will be made available under the case number SA.34227 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News