COPENHAGEN: Moody's on Wednesday downgraded the long-term rating of five Danish banks, including the country's largest, Danske Bank, after the bankruptcy last week of the Amagerbanken regional bank.
The ratings agency downgraded Danske Bank, Spar Nord Bank, FIF Erhversbank, Ringjoebing Landbobank et BankNordik, it said in a statement.
It also said it may further bring down the ratings Danske Bank, FIF Erhversbankn et BankNordik.
"These actions follow the bankruptcy and transfer of Amagerbanken to a government-backed entity," the ratings agency said.
It pointed out that the Danish government's decision to allow the country's eighth largest bank to fail on February 6 before taking it over demonstrated Copenhagen's "willingness and ability ... to impose losses on depositors and senior creditors in a bankruptcy."
On October 1, 2010, an unlimited state-backed bank guarantee put in place at the height of the global financial crisis in 2008 came to an end, and bank accounts are currently only guaranteed up to 750,000 kroner (around 100,000 euros, $136,000), with that entire amount covered by the banking sector.
"As a consequence, Moody's has reduced the systemic support assumptions it uses for Danish banks, downgrading the senior debt and deposit ratings of five banks by between one and two notches and removing systemic support from all but the four largest banks in Denmark," it added.
Amagerbanken, Denmark's eighth largest in terms of deposit volume, said on February 6 that it had run out of liquidity due to the high-risk real estate loans it made, aggravated by the financial crisis, and speculation on the currency market.
The Danish state, via an organisation called Financial Stability, took control of the bank, which has continued its activities.
Since the start of the financial crisis, some 11 Danish financial establishments have been taken over by the organisation.
Comments
Comments are closed.