Document Type

Case Study

Case Series

Resolution and Restructuring

JEL Codes

G01, G29


Roskilde Bank A/S was the eighth-largest bank in Denmark at the time of the Global Financial Crisis, with 43 billion Danish kroner (DKK; USD 9.1 billion) in consolidated assets as of March 2008. Roskilde had considerable exposure to real estate and construction markets, prompting ratings downgrades and larger write-downs than expected. On July 10, 2008, Roskilde asked for liquidity assistance from the Danish central bank, Danmarks Nationalbank (DNB). DNB and the banking sector group, Private Contingency Association (PCA), announced emergency liquidity assistance in the form of an unlimited credit facility to Roskilde on July 10, 2008, conditioned on Roskilde’s full or partial sale. When a private buyer did not emerge, DNB and the PCA took over Roskilde on August 24, 2008. Danish authorities transferred most of the assets and liabilities from Roskilde (Old Roskilde), including DKK 14.5 billion outstanding debt on the emergency loan, into a new entity: New Roskilde. DNB and the PCA then made a capital injection of DKK 4.5 billion into New Roskilde to meet regulatory solvency requirements and to protect existing depositors and other senior creditors from losses. Existing shareholders and subordinated debt holders lost an estimated DKK 5.2 billion, compensated by an “earn-out” provision that was unlikely to generate any benefit to them. On August 10, 2009, the newly created Financial Stability Company (FSC) took over New Roskilde for resolution. The resolution process took longer than Danish authorities expected when buyers of New Roskilde’s assets returned a large number of loans and accompanying deposits. Through further debt-for-equity swaps, the Danish state’s investment in Roskilde Bank’s equity and subordinated debt reached DKK 12.4 billion at the end of 2010. At the time, its outstanding loss on the restructuring of Roskilde Bank stood at DKK 8.9 billion, not including interest and commissions earned and any later gains on asset sales. It is unclear whether the state’s remaining loans and equity in the bank were ever repaid or whether FSC has remaining legacy assets from Roskilde.