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Document Type

Case Study

Case Series

Resolution and Restructuring

JEL Codes

G01, G29

Abstract

Andelskassen J.A.K. Slagelse was a small Danish cooperative bank with fewer than 4,000 depositors in 2015. Late that year, owing to years of corporate misgovernance and concentrated exposures to large borrowers, Andelskassen found itself on the brink of insolvency. On October 5, 2015, the Danish Financial Supervisory Authority (DFSA) notified the country’s resolution authority, the Financial Stability Company (FSC), that Andelskassen could not meet its solvency requirement and that its resolution was in the public interest. Consequently, the FSC took over the bank, wrote down all relevant capital instruments to zero, imposed losses on uninsured depositors and other creditors, and injected capital into a new bridge bank. Andelskassen was the first bank in Denmark to be resolved using principles of the European Union’s Bank Recovery and Resolution Directive (BRRD), which went into effect in Denmark in June 2015. The FSC's Depositor and Investor Guarantee Scheme, through its Guarantee Fund, participated in losses to protect depositors. The Guarantee Fund provided 74.9 million Danish kroner (DKK) to the bridge bank in the form of an unfunded commitment on which it ultimately paid DKK 49 million. Creditors and uninsured depositors experienced losses of DKK 21.6 million from the bail-in. Equity shareholders, with book value estimated at DKK 12 million, were wiped out. After the proposed sale of Andelskassen to Swedish financial services firm Netfonds Holding AB fell through, the FSC initiated liquidation of the bank in October 2016. The liquidation is ongoing as of the writing of this case. The FSC still reported book value of equity of DKK 29.1 million in the bank at the end of 2022, versus DKK 37.5 million initially invested.

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