Danish Bank Crisis Claims Two Lenders in Takeover Wave

Denmark’s regional banking crisis claimed another two lenders over the weekend, adding to three failures last year, as local lenders stepped in to buy up their insolvent peers.

Sparekassen Kronjylland A/S will take over the healthy parts of Sparekassen Oestjylland A/S, the government said yesterday. The merger will come under Denmark’s consolidation package, protecting creditors from losses. Separately, Den Jyske Sparekasse will take over all of Spar Salling Sparekasse, the Business and Growth Ministry said late yesterday. While depositors will be protected, subordinate guarantee capital and the state’s hybrid holdings will suffer losses, it said.

“The fact that two banks have collapsed doesn’t mean that there in general are problems with Denmark’s regional banks,” Business and Growth Minister Ole Sohn said in the statement. “It continues to be my view that Denmark’s financial institutions are in general sound.”

Denmark’s bank industry is still struggling to emerge from the fallout of its 2010 bail-in package, a resolution framework that required senior creditors to share losses. A merger bill was passed last year in an effort to avoid a repeat of the creditor losses that followed the February 2011 collapse of Amagerbanken A/S. That credit event sent Danish bank funding costs soaring, and prompted lenders including Spar Nord Bank A/S to shelve debt sales.

‘Sensible Solution’

“Even though it’s always sad when a bank is in dire straits, it’s satisfying that it’s once again been demonstrated that it’s possible to find a sensible solution,” Joergen A. Horwitz, the director of the Bankers Association, said in an e- mailed statement late yesterday.

Sparekassen Kronjylland, based in the Danish city of Randers, will take over deposits worth 3.9 billion kroner ($690 million) and loans worth 3.4 billion kroner, Financial Stability Co. said yesterday. Denmark’s state resolution agency, the Financial Stability Co., will absorb the unhealthy remnants of Sparekassen Oestjylland’s business.

Hammel, Denmark-based Sparekassen Oestjylland had state- backed loans and guarantees of more than 1 billion kroner, according to Financial Stability Co.

Denmark is struggling to emerge from a burst housing bubble that sent loan losses surging among many of its regional lenders. House prices will have slumped 25 percent by next year since the crisis started in 2007, the government-backed Economic Council estimated in November.

To contact the reporter on this story: Gelu Sulugiuc in Copenhagen at gsulugiuc@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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