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Document Type

Case Study

Case Series

Ad hoc Emergency Liquidity Programs

Abstract

Roskilde Bank A/S (Roskilde) was the eighth-largest bank in Denmark at the time of the Global Financial Crisis, with approximately 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 firms, prompting ratings downgrades and larger write-downs than expected in July 2008. On July 10, 2008, Roskilde asked for liquidity assistance from the Danish central bank, Danmarks Nationalbank (DNB). Later that day, DNB and the banking sector’s self-insurance group, the Private Contingency Association (PCA), announced emergency liquidity assistance to Roskilde in the form of an unlimited credit facility, 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, and created a bridge bank. Danish authorities transferred most of the assets and liabilities from Roskilde (Old Roskilde) into a new bridge bank, New Roskilde. The PCA converted its guarantee to an equity stake in the bridge bank. The outstanding DKK 14.5 billion on the credit facility was transferred to New Roskilde; DNB also used the credit facility to repay all the senior liabilities of New Roskilde. A new resolution authority, the Financial Stability Company (FSC), took over New Roskilde and the credit facility from DNB in August 2009. New Roskilde continued to borrow emergency liquidity from the FSC until the FSC merged New Roskilde’s assets into a liquidation vehicle in 2011. DNB and the FSC ultimately converted DKK 8.7 billion of debt from the credit facility into equity capital. At the end of 2010, the Danish state’s total investment in Roskilde Bank’s equity and subordinated debt reached DKK 12.4 billion and the state’s outstanding loss on the restructuring of Roskilde, from the credit facility and direct equity injections, stood at DKK 8.9 billion. It is unclear if asset sales allowed the FSC to recoup some losses or whether the state’s remaining loans to the bank were fully repaid, because the FSC has consolidated the financial reporting for the multiple banks that it acquired.

Date Revised

2025-04-15

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