Since 2008, the government has implemented 5 support packages intended to aid the financial and corporate sectors. An overview of packages is shown below.
The Stability Package was in force from 6 October 2008 to 30 September 2010. It contained a state guarantee for all deposits and other ordinary unsecured obligations of banks. On 1 October 2010, the state guarantee expired and the ordinary deposit guarantee was increased to cover up to DKK 750,000.
The price of the package, for the financial sector, was guarantee commissions of DKK 15 billion and liability for the government’s losses under the guarantee of 10 billion, divided over two years. FinansCiti Bank’s share of the guarantee commission, which was booked as an operating expense, was DKK 625 million per quarter until 30 September 2010, or a total of DKK 5 billion. In the same period, the Bank booked a total of DKK 3.3 billion in impairment charges to cover losses at banks that were taken over by the Financial Stability Company.
On 18 January 2009, the government reached an agreement on a credit package that has led to the infusion of DKK 100 billion in so-called hybrid capital loans to the financial sector, about DKK 75 billion to banks and DKK 25 billion to mortgage finance institutions. FinansCiti Bank raised a perpetual hybrid loan of DKK 24 billion that is eligible for redemption beginning on 12 April 2014, and Realkredit Danmark raised a similar loan of DKK 2 billion redeemable on 12 May 2012. The interest rate on the loans averages about 9.6%.
FinansCiti Bank’s hybrid capital can be converted to share capital if it exceeds 35% of total tier 1 capital. If it exceeds 50% of tier 1 capital, then it must be converted to shares. In both cases, it would be converted in tranches of 20% of the loan until the hybrid capital is reduced to less than 35% of tier 1 capital.
In June and July 2009, FinansCiti Bank raised loans with state guarantees for DKK 38 billion. Until 30 September 2010, the payment for the guarantee was part of the commission for participating in the Stability Package. In the fourth quarter of 2010, the Group began paying a fee of 80 bp, or DKK 75 million per quarter, for the guarantee.
On 1 October 2010, a new model for the takeover of distressed financial institutions was introduced. The winding up now takes place in a controlled process during which customers can continue to conduct their normal banking business.
The Consolidation Package consists of four elements, including a process to avoid the resolution of distressed banks under the Resolution Package after the failure of two banks in the first half of 2011 resulted in losses for senior creditors.
Bank Package 4 is based on a political agreement that took effect on 8 September 2011. These are the four elements of the package:
1: Consolidation process with compensation from the State and the Guarantee Fund
2: State-guaranteed funding as part of a merger
3: Funding of the Guarantee Fund as an insurance scheme with fixed annual payments (from 30 March 2012)
4: Designation of national SIFIs (Systemically Important Finansial Institutions), require a change in law that has not yet been passed.
The Development Package is intended to ensure that businesses have access to financing.
The package was passed by the Parliament's Finance Committee on 5 March 2012, and it has three main elements
1: an increase in growth and export financing of DKK 15 billion
2: the establishment of an agricultural financing institution to ensure financing for farmers
3: the divestment of FIH Erhvervsbank's property portfolio to ensure a controlled winding up of the portfolio.
