AMAGERBANKEN - $2.8 Billion Bank Failure In Denmark: Senior Bondholders Whacked 41%

Flashback.  What should have happened in Cyprus.

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Whack the bondholders who made risky bets, not depositors

It may turn out to be the most important bank you've never heard of.

Amagerbanken was taken over by the Danish government today.  As with the Irish banks, Amagerbanken suffered huge losses on loans to property developers and investors in commercial real estate.  But the rescue comes under new regulations which stipulate steep losses for bondholders.  According to Bloomberg, senior bondholders and depositors over the insured limit will face losses of approximately 41%.

Some bondholders, however, still fall under a government guarantee, but expect Amagerbanken to be held up as an example by those who favor haircuts for bondholders rather than bailouts.  In particular, we can expect Ireland's Fine Gael party (pronounced feena gail) to point to Denmark when they make their own case for unilaterally restructuring Ireland's bank debt.  And when they do, the cat will be out of the bag.

For two years, central bankers and government finance ministers (who know next to nothing) have been claiming that the sky will fall and there will be tanks in the streets if bondholders are forced to take losses.  Clearly that is not the case.  First Iceland, then Denmark, then Ireland.  After that, the race is on. 

From Reuters

COPENHAGEN, Feb 7 (Reuters) - Denmark was lumbered with a $2.8 bln bill on Monday as Amagerbanken (AMBA.CO) became the country's tenth bank to fall into the state's hands in the wake of the global financial crisis.

Amagerbanken said on Sunday it would transfer its assets to Finansiel Stabilitet A/S, the state company that administers failed banks, and administrators would close the bank.

Amagerbanken, which was Denmark's eighth biggest bank in terms of lending, said fourth-quarter writedowns wiped out its equity, attributing a large part to failed property investors. [ID:nLDE7150JC]

The failure of Amagerbanken was roughly the same size as the mid-2008 collapse of Roskilde Bank, previously the biggest Danish bank failure.

The bill to the government for taking over Amagerbanken is 15.2 billion Danish crowns ($2.8 billion), which is the price that the state administrating company Finansiel Stabilitet will pay for the remaining assets.

The Danish banking industry will cover 2.2 billion crowns of that cost through the country's depositary guarantee scheme, Amagerbanken Chairman Niels Heering told a news conference.

If total losses from Amagerbanken rise above 15.2 billion crowns, Danish financial institutions would have to bear a larger burden than 2.2 billion, Heering said.

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This clip is worth the 40 seconds...

Video of the Tsar Bomb -- the 50 Mega-Ton monster in the photo for this story.

Comments

[jack nichols]

"Something's rotten in the state of Denmark"

[S. Gompers]

This is America, our government would never expect the wealthy to take haircuts for the crimes they commit. The burden of loss is expected to be carried on the backs of the middle class.


The executive branch has grown too strong, the judicial branch too arrogant and the legislative branch too stupid.

Lyn Nofziger

[GSB]

Next, let's go after the assets of the bank executives! If the U.S. government does not do so, we will have our own Tunisia eventually.

[G Street]

Haircuts, then clawbacks, then jail for those who committed systemic frauds instead of upholding the fiduciary duties of their privileged offices. Until organized crime is afraid of the law again, the institutionalized frauds will continue, for the same culture that brought mortgage fraud is busy working other venues like healthcare. So long as Congress aides and abets instead of regulating and prosecuting, it is open season on the formerly most prosperous country in the world.

[Dr. Pitchfork]

Well said, G Street.

[de Vulcan]

We should not forget, though, that Danmarks National Bank is ,by proxy, owned, like all opther,save 7, National and central banks in the world, by ROTSCHILD .As long a that is the case the tax-payers are still being scammed and will pay the casino-bankers stupidities.

[Aok]

No problemo. See, that's not so hard.

[john]

Danish Banks Face Consolidation Wave After Bondholder Losses

http://www.bloomberg.com/news/2011-02-07/danish-banks-face-consolidation-as-amagerbanken-leaves-investors-in-lurch.html

Amagerbanken failed to meet a Feb. 4 deadline to prove it was solvent after losing money on property investments, currency speculation and some wind-energy projects, the Financial Supervisory Authority said.

[Dr. Pitchfork]

Thanks for that link, john. By "consolidation" they mean bank failures. Bondholder losses at Amagerbanken apparently have bond investors contemplating, for the first time, apparently, RISK! Crazy, huh?

Amagerbanken could turn out, as we predicted, to be the most important bank you've never heard of.

[michael mazur]

If a State owned bank charged interest on loans the mathematical effect of that extra bit of money not having been issued is the same had the bank been privately owned, that is to say either bank has always to keep finding new borrowers, some of whose spending percolates into the hands of the earlier borrowers, who then can pay the interest.

So, regardless of whether the restructured banking system is State owned or privately owned, if interest is charged there will be another debacle some years down the track because there is the mathematical imperative to lend, failure to means to shrivel both the economy and the bank.

As a consequence, imprudent lending is a ever present temptation, with the inevitable lapses into recklessness when new managers replace the retiring seasoned ones.

What does the above all mean ? The charging of interest inevitably means cycles of upheaval and collapse, with the issue finally clarifying itself to the question of whether interest should be charged, rather than whether a banking system should be privately or publicly owned.

It follows then that as a privately owned banking system has to be, by its very reason for existing - making a profit, hostile to the public interest, there is therefore no more debate left in the issue of whether a banking system is to be either private or State owned.

[mikael]

The Danes have always been covards, and drunk.
No wounder they dont manage to think.

This is a partial bailout, and its still a bailout, no matter how its been explained, Norway did the only thing, to nationalise it totaly, and gave the f... that selpt on their own watch, and the captian drunk, and party all the day, and when they realised the problem it was to late, they lost in their own game.
If you play casino, high risk, and dont even bother to follow their own invetments, why the f.... should we Pay for their looses.

The "value" is still there, but the Bank can be taken away, anytime, by the gov. if its brooke.
Thats done by many countrys up to this days.

Intress, is whats creates inflation/deflation, remove it, and we have a compleatly different world, where our welth stays in it original walue for decades, not diminished to shittpaper, by private groups and inst. aka Banks, and with even more lunacy comited by Federal(private) banks.

Wack them and start with a new one, under a different regime.
If not, well, the time to a new Bobble is the only variable in this equation, the f..up is a universall contsant, since the monetary system is based on debth.

peace