# Denmark allows another bank to fail



## shnaek (27 Jun 2011)

http://www.rte.ie/news/2011/0627/denmark-business.html

"'We will not be involved with state aid,' Minister for Economic and Business Affairs Brian Mikkelsen said on Danish television. 'We think that it is not reasonable to give state crowns to banks that are run badly and have got themselves involved in risky businesses and lost money on that,' Mikkelsen said. "

Ah, what must it be like to live in a country like that?


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## DB74 (27 Jun 2011)

shnaek said:


> Ah, what must it be like to live in a country like that?



Crap if you have any savings over €100K in the bank, I'd say


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## DerKaiser (27 Jun 2011)

It begs the question as to why the Danish banking system has not gone into meltdown - why is there no run on the banks?


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## Paddyman (27 Jun 2011)

Maybe they are all quietly transferring their money to Ireland!


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## ringledman (27 Jun 2011)

Will be good for their long term economic health.

Letting bad businesses fail is what is meant to occur. 

Crony capitalism where we let fraudulant bankers privatise the profits and socialise the losses is not how real capitalism works.

Let the shareholders, bondholders and crony bankers take the hit instead of the public.

Split the casino investment banking (which adds little to economic output) from retail banking. When the investment bank goes under, bye bye bankers we dont care...

The rest of the West should follow Denmark's lead.


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## DerKaiser (27 Jun 2011)

ringledman said:


> Letting bad businesses fail is what is meant to occur.
> 
> Crony capitalism where we let fraudulant bankers privatise the profits and socialise the losses is not how real capitalism works.
> 
> Let the shareholders, bondholders and crony bankers take the hit instead of the public.



Yes that all makes sense, but in the context of a single country, are they not at risk of run on their banks because of the irresponsible behaviour of other countries in guaranteeing their banks liabilities in full?


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## horusd (27 Jun 2011)

ringledman said:


> will be good for their long term economic health.
> 
> Letting bad businesses fail is what is meant to occur.
> 
> ...


 
+1


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## onq (27 Jun 2011)

DerKaiser said:


> Yes that all makes sense, but in the context of a single country, are they not at risk of run on their banks because of the irresponsible behaviour of other countries in guaranteeing their banks liabilities in full?



I'd say the average Dane is clued in enough to see where those other countries economies are going to end up if there is a major default, so "no" would be the answer there.

ONQ.


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## onq (27 Jun 2011)

ringledman said:


> Will be good for their long term economic health.
> 
> Letting bad businesses fail is what is meant to occur.
> 
> ...




I agree with the sentiments, in fact I was one of the posters on AAM who said exactly that - at the time - but now its too late.

Wishful thinking - move on.

ONQ.


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## Bronte (28 Jun 2011)

DerKaiser said:


> It begs the question as to why the Danish banking system has not gone into meltdown - why is there no run on the banks?


 

Because maybe they are smart and doing the right thing and we in Ireland were stupid and did the wrong thing.  It seems clear from the mess in Irealand that the solution Brian Lenihan chose was incorrect.  All we've done is teach bankers that they can do whatever gambles they want and nothing will ever be done to them and the tax payer will pay off their debts.


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## Sunny (28 Jun 2011)

Fjordbank had €1.8 billion of assets. It had no outstanding senior bonds that were not guaranteed by the Government so no senior bondholder will lose money. (Even then they only had outstanding debt of about €300m). There are a couple of subordinated bonds that will lose money like all the sub holders in Irish banks. Depositors with deposits over €100k will lose about 26%. So the people that will mainly lose are depositors.

Let's see what Denmark would do if one of their larger banks got in trouble. I am willing to bet you would see a different reaction. The last failure led to rating downgrades and rising costs of funding for the larger banks and that was for a small mortgage bank. Allow Danske to get in trouble and see what they do. There are already calls to extend the Government Guarantee for bonds beyond 2013. These are only going to get louder. This is like us letting a large credit union fail. It is not comparable in anyway to allowing Anglo, BOI or AIB fail back in 2008. (Going after senior debt in Anglo and Irish Nationwide now is a different story)


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## Mpsox (28 Jun 2011)

ringledman said:


> Will be good for their long term economic health.
> 
> Letting bad businesses fail is what is meant to occur.
> 
> ...


 
I don't argue with your sentiment, but in this case, the public have taken a hit in that anyone with more then €100k invested, has lost a chunk of their money.

Question now is will anyone with large sums invested in Danish banks look to move their funds elsewhere, with the corresponding erosion of their banks capital base and thus affecting the banks ability to lend.? Furthermore, will this affect the ability of the Danish Govt and Danish banks to borrow in the future? Will it become more expensive with a corresponding cost to the Danish taxpayer

Every action has a reaction . Far too early to say if this approach is right or wrong in the long term.


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## csirl (28 Jun 2011)

Mpsox said:


> Question now is will anyone with large sums invested in Danish banks look to move their funds elsewhere, with the corresponding erosion of their banks capital base and thus affecting the banks ability to lend.? Furthermore, will this affect the ability of the Danish Govt and Danish banks to borrow in the future? Will it become more expensive with a corresponding cost to the Danish taxpayer


 
Maybe this is part of the plan. Remember that if you have a total guarantee, you will attract more large deposits so the Government will be on the hook for much more if the bank fails. The Danish government realises that having less on deposit significantly reduces their exposure. And it gets worse, having loads on deposit allows the banks to borrow more and lend more wrecklessly thus exposing the Government and the economy even more.

The lower deposit rate doesnt really impact on day to day banking for citizens/businesses. I do agree that it could seriously impair a banks ability to provide significant sums of money to large scale projects, but is this a bad thing? And this type of service trades across borders, so the absence of a local bank with the ability to invest €100ms or €Bns has zero impact - companies seeking such investments usually hold funding competitions that are open to anyone worldwide and they'll take the investment from any bank.


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## DerKaiser (28 Jun 2011)

Bronte said:


> Because maybe they are smart and doing the right thing and we in Ireland were stupid and did the wrong thing..


 
I'm not sure I can get my head around that the average Dane will not panic in the same way and Irish person will if their savings are threatened.

I'm also not sure that large corporate depositors will not be spooked - though that depends on the ratings agencies to a large extent.



Bronte said:


> It seems clear from the mess in Ireland that the solution Brian Lenihan chose was incorrect.


 
There probably was a more correct solution at the time, but would Europe have allowed it?



Bronte said:


> All we've done is teach bankers that they can do whatever gambles they want and nothing will ever be done to them and the tax payer will pay off their debts.


 
True to an extent. 

Who are the bankers though? 

If you mean the shareholders, then they have lost big on their gambles - the only way they could lose bigger is the repealing of the limited liability laws.

If you mean the employees, then the issue is not about the taxpayer covering the losses, the issue is getting rid of them.

The people who may not have learned are the depositors,the bondholders and the ECB i.e. the capital providers. Their crime was in not realising they were gambling. 

But then again, could an ordinary depositor in one of the high street banks or a credit union member whose deposits were being invested in bonds of those banks ever even have understood they were taking a gamble?  The answer is "no".  They were only gambling because the state had not regulated properly.  

What's the solution? The capital providers and the state have to take co-responsibility and share the losses. Which is a lot closer to capitalism and a lot better for the state/taxpayer than the current unfair situation.

Is Denmark the same?  Not necessarily, a few fringe banks failing do not prove the state was negligent. Sadly that's not the case here and that is why the state has some burden (not the entire burden!) to bear.


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## Purple (28 Jun 2011)

Sunny said:


> Fjordbank had €1.8 billion of assets. It had no outstanding senior bonds that were not guaranteed by the Government so no senior bondholder will lose money. (Even then they only had outstanding debt of about €300m). There are a couple of subordinated bonds that will lose money like all the sub holders in Irish banks. Depositors with deposits over €100k will lose about 26%. So the people that will mainly lose are depositors.
> 
> Let's see what Denmark would do if one of their larger banks got in trouble. I am willing to bet you would see a different reaction. The last failure led to rating downgrades and rising costs of funding for the larger banks and that was for a small mortgage bank. Allow Danske to get in trouble and see what they do. There are already calls to extend the Government Guarantee for bonds beyond 2013. These are only going to get louder. This is like us letting a large credit union fail. It is not comparable in anyway to allowing Anglo, BOI or AIB fail back in 2008. (Going after senior debt in Anglo and Irish Nationwide now is a different story)


Dousing the fires of hyperbole and wishful thinking  with the cold waters of logic


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## Jim2007 (28 Jun 2011)

shnaek said:


> Ah, what must it be like to live in a country like that?



Really!!! Be careful what you wish for because you just might get it: Highest taxes in the world - 44% of population pays taxes at the rate of 63%, Standard VAT rate 25%, Highest mortgage debt in the world!, almost 90% of GDP,  30% of the workforce are in the public sector...... need I go on

Most Danes I know have very little savings as a result of the above, so a run on Danish bank is almost a joke....

Jim.


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## marksa (28 Jun 2011)

DerKaiser said:


> why is there no run on the banks?


 because it is the smaller, badly run, mono-product banks that are going to the wall. i.e. the equivalent of our Anglo Irish, which should never have been get as big as it did.


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## DerKaiser (28 Jun 2011)

Jim2007 said:


> Really!!! Be careful what you wish for because you just might get it: Highest taxes in the world - 44% of population pays taxes at the rate of 63%, Standard VAT rate 25%, Highest mortgage debt in the world!, almost 90% of GDP,  30% of the workforce are in the public sector...... need I go on
> 
> Most Danes I know have very little savings as a result of the above, so a run on Danish bank is almost a joke....
> 
> Jim.



Interesting stuff - add that to the outrageous cost of beer there and the place doesn't sound so good at all!!!


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## marksa (28 Jun 2011)

yet the Danes are rated one of the happiest nations in the world


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## Complainer (28 Jun 2011)

DB74 said:


> Crap if you have any savings over €100K in the bank, I'd say



As opposed to Ireland, where it is crap for those who don't have €100k in savings, and those who don't have €100 in savings.


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## ringledman (28 Jun 2011)

marksa said:


> yet the Danes are rated one of the happiest nations in the world


 
Seen their women ;-)

Tried their bacon?!


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## Complainer (28 Jun 2011)

ringledman said:


> Seen their women ;-)
> 
> Tried their bacon?!



No, but I've seen the bacon, and ...


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