EC Approves Prolongation of Danish Resolution Scheme for Small Banks
EC authorized, under EU State aid rules, the prolongation of a Danish resolution scheme for small banks with total assets below EUR 3 billion. The objective of the scheme is to facilitate the work of the Danish resolution authorities to wind up a small bank, should a concrete case and need arise for it. The scheme is open to banks that would be found to be in distress by the competent national authorities. The scheme is being prolonged until September 30, 2020. The scheme was initially approved in September 2010 and has been prolonged and amended several times since then, most recently in August 2018.
The objective of the scheme is to safeguard financial stability and minimize economic losses, when a bank becomes unable to meet the conditions set for its operation by the Danish Financial Supervisory Authority. The scheme provides for an orderly winding up of the failing bank, transferring its assets and part of its liabilities to a bridge bank to be set up under the aegis of the Danish Financial Stability Company. The Authority would provide capital, and, if necessary, liquidity to the bridge bank. EC found the scheme to be in line with the EU State aid rules, in particular the 2013 Banking Communication on crisis rules for banks and the EU banking rules. EC found the scheme to be in line with its Guidance Communications on state aid to overcome the financial crisis. In particular, the aid is limited to the minimum necessary to ensure an orderly winding-up.
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Keywords: Europe, EU, Denmark, Banking, Financial Stability, Resolution, Small Banks, EC, DFSA
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