Wed, Feb 01, 2017 - Page 5 News List

Roll back bank rules: Denmark

DEREGULATION:Danish Minister of Economic and Business Affairs Brian Mikkelsen regrets a lot of regulation, saying it needs to be curtailed to boost economic growth

Bloomberg

Denmark wants the EU to roll back some financial regulations, arguing the existing framework hits big and small banks indiscriminately.

Danish Minister of Economic and Business Affairs Brian Mikkelsen has ordered a probe into how other EU countries implement rules to see whether there is any leeway to take a more relaxed approach within the current framework.

He also wants a broader discussion “at the European level” to explore whether any existing rules can be reversed, he said in an interview in Copenhagen.

Mikkelsen last ran the Danish Ministry of Economic and Business Affairs when Denmark in 2011 became the first EU nation to force losses on senior bank creditors. The country’s bail-in package became a model for Europe as the bloc worked toward its Bank Recovery and Resolution Directive designed to shield taxpayers from losses.

A lot of financial regulation, such as Denmark’s bail-in package, was put together quickly and its sudden implementation is something 51-year-old Mikkelsen said he regrets.

His goal is now deregulation, which he said would be needed to support economic growth.

Denmark is likely to get a sympathetic ear in Europe. EU Commissioner for Financial Stability, Financial Services and Capital Markets Union Valdis Dombrovskis has already signaled he was in favor of simplifying the regulatory environment for smaller banks.

However, Mikkelsen is even more ambitious.

He said he wants to “pamper Danish businesses. That also goes for the financial sector. And I want to investigate whether we can cut demands on Danish financial institutions.”

Denmark has a patchy history when it comes to its experiences since the financial crisis.

Before 2008, the country had more than 140 lenders. Fewer than 80 survived, following a property market crash and an agricultural crisis across rural Denmark, with many farmers unable to repay their loans.

The government passed a series of packages designed to support the banks through the turmoil.

In 2010, lawmakers signed a bill that allowed bail-ins. Although the package itself got little attention when it was made into law, it shocked markets when it was tested in February 2011, as Amagerbanken A/S became the first EU lender to renege on obligations to senior creditors.

The fallout was severe. Most Danish lenders were shut out of wholesale funding markets. Even Danske Bank A/S, the country’s biggest lender, saw investor confidence sink, with credit default swaps surging to about 70 times their level in 2006.

Since then, Denmark’s biggest banks have built their capital positions, turning investor sentiment around, and Danske is now among Europe’s best-performing banks. Its default swaps again trade around pre-crisis levels and its shares last year trounced Bloomberg’s benchmark index for European financial stocks.

Mikkelsen said he was aware that scaling back regulation is unpopular with the public, “but if you only have defenders in your football team, you’ll never score a goal.”

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