Credit Package

On 3 February 2009, the Danish Government and a majority of the other parliamentary parties adopted Act on Credit Package. The credit package is to counteract a credit squeeze for individuals and businesses, and help ensure they can obtain loans for viable projects.

The credit package means that solvent Danish banks and mortgage-credit institutions can strengthen their capital base by state-funded capital injections. The loans will be granted as hybrid core capital on the basis of individual applications and on individual terms of interest which reflect the State’s risk in the specific loan. The average annual interest rate is expected to be about 10 per cent. The State’s maximum capital injection will amount to about DKK 100 bn. (approx. EUR 12.5 bn.).

Banks and mortgage-credit institutions choosing to exploit the offer concerning state-funded capital injections will be subject to a number of specific requirements, including that they must disclose developments in their lending. Furthermore, there will be a number of restrictions on executive pay.

Part of the credit package means that in future all banks and mortgage-credit institutions will have to disclose their individual solvency requirement. Danish FSA resources will be reinforced in order to enhance supervision of banks and mortgage-credit institutions. At least once a year the Danish FSA will have to review the solvency requirements of all credit institutions, except for the smallest ones. 

Finally, the credit package includes a transitional scheme for the state guarantee described in the Danish Act on Financial Stability (adopted in October 2008), phasing out the guarantee over three years. For ordinary deposits, the depositor guarantee will be increased to EUR 100,000 (approx. DKK 750,000) from 30 September 2010.

Read more about the credit package and see the entire agreement (in Danish) on the Ministry of Economic and Business Affairs' website: www.oem.dk/sw24105.asp

Application for capital injection is handled by the Ministry of Economic and Business Affairs. See more about the application process at the Ministry's website: www.oem.dk/sw24351.asp