Denmark: Roskilde Bank Restructuring, 2008

Roskilde had considerable exposure to real estate and construction markets in July 2008. Rating agencies downgraded Roskilde when the bank’s management discovered that Roskilde would have to take larger write-downs than expected (AFP 2008a; DNB 2009; EC 2008a; NAO 2009; Dow Jones 2008a). Roskilde’s board said later that it feared a bank run and thus sought assistance from DNB. DNB and the PCA agreed to grant an unlimited credit facility, conditioned on Roskilde’s full or partial sale to simultaneously avoid speculation about suspension of payments and avoid setting the precedent of a governmental safety net for other distressed banks (AFP 2008a; DNB 2009; EC 2008a; NAO 2009). On July 10, 2008, Roskilde put itself up for sale (Dow Jones 2008a; Reuters 2008). The Danish government and DNB chose PricewaterhouseCoopers (PwC) to verify and approve the cashflow budget required for each drawdown of the credit facility for the next 14 days (EC 2008a).

On August 24, 2008, since the bank did not receive any offers after putting itself up for sale, DNB and the PCA acquired Roskilde to avoid liquidation (DNB 2009; McLaughlin and Levring 2008). DNB and the Ministry of Economic and Business Affairs said that they wanted to avoid bankruptcy proceedings for Roskilde in order to protect financial stability and Danish banks’ ability to fund themselves in international markets (EC 2008b; NAO 2009; McLaughlin and Levring 2008). On the choice of a bridge bank, then–DNB Governor Nils Bernstein said, “The purpose of the new bank is to continue banking business in order to maximize the proceeds from the discontinuation of the business taken over from Roskilde Bank” (Bernstein 2008). Danish authorities chose to create New Roskilde because taking assets and liabilities from Old Roskilde directly would have entailed expropriation and a complicated legal process that Danish authorities did not deem appropriate for Roskilde’s situation. Through New Roskilde, Danish authorities could pursue a progressive sale or liquidation and ensure that all of Roskilde’s senior creditors were repaid. Danish authorities avoided a “difficult” valuation of New Roskilde through the creation of an earn-out mechanism (see Key Design Decision No. 9, Treatment of Creditors and Equity Holders). During the sales process of New Roskilde’s branches, Danske Markets served as a financial advisor and issued a fairness opinion: the sales prices achieved were the maximum market prices, and there was no advantage to the acquirers of the branches (EC 2008b).

In 2008, DNB and the PCA 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 (EC 2008b; IMF 2014).

In 2011, Roskilde became part of FS Finans, a newly created subsidiary of the FSC for winding up loans and advances (FSC 2011b; FSC 2012).

Unlimited Credit Facility (Emergency Liquidity Assistance)

After discussion with the Ministry of Economic and Business Affairs, the DFSA, and the DBA, DNB agreed to grant emergency liquidity assistance in the form of an unlimited credit facility on July 10, 2008 (EC 2008c; ENP 2008; NAO 2009). The credit facility was unlimited in duration and amount. The PCA guaranteed the first DKK 750 million of any potential losses on the credit facility, and DNB absorbed losses beyond the initial DKK 750 million, backed by a guarantee from the Danish state that the Danish Parliament approved in July 2008 (EC 2008a; NAO 2009). The PCA did not receive a fee for the guarantee (EC 2008a). The PCA’s guarantee was an indemnity bond, which meant that the PCA paid under the guarantee as soon as Roskilde failed to repay its loan to DNB, regardless of whether Roskilde entered insolvency proceedings. The interest rate for the credit facility was set at 2 percentage points above DNB’s lending rate; DNB’s lending rate at the time was 4.6%, so the credit facility’s interest rate was set at 6.6% (EC 2008a).

Roskilde could use the credit facility only to cover liquidity that was necessary for the bank’s day-to-day activities. Roskilde could not use the facility to invest in new activities; take on risky positions in commercial markets; engage in new, more extensive credit facilities; or actively market and attract new depositors or borrowers. DNB and PricewaterhouseCoopers verified the cashflow budget for the next 14 days with each drawdown of the facility. PwC particularly scrutinized whether the budgeted need complied with the behavioral conditions attached to the credit facility (for example, no investments in new activities) (EC 2008a).

On July 18, 2008, the minister for economic and business affairs told the Finance Committee of the Danish Parliament that he did not expect drawdowns on the unlimited credit facility to exceed DKK 15 billion to DKK 20 billion (EC 2008a). However, after Lehman Brothers failed and led to market stress across the world, the European Commission (EC) reported that the bank drew down at least DKK 36.8 billion on the facility by early October on a short-term basis to allow the bank to pay depositors and other senior creditors by the end of that month (EC 2008b). Roskilde had DKK 17.5 billion outstanding on the facility at the end of 2008, according to DNB’s annual report for 2008 (DNB 2009).

For more on the unlimited credit facility, see Decker (forthcoming).

State Guarantee

On July 11, 2008, the Treasury guaranteed any losses that DNB might suffer related to the emergency liquidity facility provided to Roskilde. The guarantee was provided for an unlimited amount without a final maturity date and without a fee. The Treasury needed approval from the Finance Committee in parliament for the guarantee (see Key Design Decision No. 3, Legal Authority) (EC 2008a). For more on Denmark’s General Guarantee Scheme during the Global Financial Crisis (GFC) of 2009–2009, see Sabath (2020).

Deposit Guarantee

Effective October 10, 2008, Minister for Economic and Business Affairs Lene Espersen announced a two-year General Guarantee Scheme for all bank deposits,^FNThe General Guarantee supplemented an existing, privately funded deposit insurance system administered by DNB, which covered deposits of all PCA members up to EUR 50,000 (DGFDI 2009; PCA 2011). For more on Denmark’s General Guarantee Scheme, see Hoffner (2022). excluding deposits at Roskilde (FSC 2011a; FSC 2011b; Levring 2008). However, an agreement between the FSC and the PCA signed on August 10, 2009, provided DKK 10.5 billion from the General Guarantee Scheme to cover accounts at Roskilde (FSC 2011a; FSC 2011b).

The DBA established the PCA on June 13, 2007, to help distressed banks (EC 2008a; PCA 2011). Per section 3 of its articles of association, the PCA can provide guarantees during the resolution of a distressed bank by the FSC; however, the PCA’s guaranteed amount cannot exceed the government’s estimated loss if the distressed institution undergoes bankruptcy proceedings (PCA 2011). The PCA cannot itself take over a distressed bank (PCA 2011).

No legal and organizational framework existed on the orderly resolution of banks before the GFC (DNB 2023). However, Danish authorities made use of existing powers from various legislation to resolve Roskilde while concurrently undergoing financial sector reform.

At the time of Roskilde Bank’s failure, Article 246 of Denmark’s existing Financial Business Act allowed the transfer of Roskilde’s activities to the government because the bank did not meet solvency requirements; this transfer also required the approval of the minister for economy and business (Danish Parliament 2008a, arts. 124, 246; EC 2008b).

The Financial Business Act also allowed the DFSA to supervise foreign banking institutions, including Nordea (Danish Parliament 2008a, secs. 243, 344; IMF 2007). Nordea’s acquisition of Roskilde’s branches was subject to approval by the DFSA (IMF 2007).

The Finance Committee of the Danish Parliament passed Appropriation 199 4/9 2008 concerning the state guarantee for any loss suffered by DNB for the unlimited credit facility. It was this commitment that led to the government’s DKK 8.9 billion loss (EC 2008a; FSC 2011b; NAO 2009).

On October 10, 2008, the Danish Parliament passed the Act on Financial Stability (or Financial Stability Act) to establish the General Guarantee Scheme for deposits and other senior liabilities of banks that were members of the PCA, which did not include Roskilde^FNAccording to the EC, Roskilde was a member of the PCA at its founding on June 13, 2007 (EC 2008a). However, primary source documents from the FSC indicate that Roskilde was not a member of the PCA at the time of the bank’s resolution (FSC 2010). (FSC 2010; DMEA and DMoF 2008).

On July 31, 2008, the EC ruled that the part of the unlimited credit facility guaranteed by the PCA did not constitute State Aid, while the part of the unlimited credit facility guaranteed by DNB did constitute State Aid compatible under the application of Article 87(3)(c) EC Treaty and the Community guidelines on State Aid for rescuing and restructuring firms in difficulty (see Figure 4) (EC 2008b; EC 2008c).

On August 24, 2008, Danish authorities initially decided to acquire Roskilde through DNB instead of the FSC because the Ministry of Economic and Business Affairs expressed worry that use of the FSC would complicate its pending approval by the EC. The FSC was officially established on October 13, 2008 (NAO 2009).

On May 24, 2011, the EC found Denmark’s amended liquidation aid measures to be compatible with the internal market under Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU). The EC said that the amended measures closely resembled the initial liquidation aid measures; the amended measures also served the same purpose of allowing a solvent liquidation of Roskilde (EC 2011).

DNB and the PCA took over Roskilde between its failure to initiate a sale in August 2008 and August 2009, when the FSC took over the remainder of Roskilde. Although the FSC was created in October 2008, the Ministry of Economic and Business Affairs believed that using the FSC to assume ownership of Roskilde’s assets would complicate the EC’s pending approval. In June 2011, the FSC reorganized the assets and liabilities from various banks under a new group structure.

DNB and the PCA

Roskilde’s board said it feared a bank run and thus sought assistance from DNB on July 10, 2008 (AFP 2008a; DNB 2009; EC 2008a; Roskilde Bank 2008d). DNB consulted the Ministry of Economic and Business Affairs, DFSA, and DBA before granting emergency liquidity assistance in the form of an unlimited credit facility—of which the PCA guaranteed the first DKK 750 million—while Roskilde put itself up for sale (AFP 2008a; DNB 2009; ENP 2008; EC 2008c; NAO 2009).

On July 15, 2008, Roskilde hired Danske Markets as its investment banker to market the company to prospective buyers (Bernstein 2008; Roskilde Bank 2008d).

DNB was responsible for Roskilde’s administration and related costs after the government took over the distressed institution on August 24, 2008; the PCA itself could not take over a distressed bank, according to the PCA’s articles of association (NAO 2009; PCA 2011). DNB received weekly summaries of its account with Roskilde. DNB regularly notified the minister for economic and business affairs and the Finance Committee of the Danish Parliament about losses absorbed by the government (NAO 2009).

According to the NAO report, the Ministry of Economic and Business Affairs did not transfer Old Roskilde to the FSC during autumn 2008 because such a transfer would have complicated the EC’s pending approval of the not-yet-established FSC at the time (NAO 2009).

Soon after DNB took over Roskilde, current and former employees from Nykredit, Nordea, and Danske Bank helped review Roskilde’s existing credit engagements (Roskilde Bank 2009).

FSC

On August 10, 2009, the FSC took over New Roskilde for resolution (Bjerre-Nielsen 2011; IMF 2014). The Danish state owns the FSC through the Ministry of Economic and Business Affairs (NAO 2009). New Roskilde maintained a security dealer license for legal purposes, but the bank’s functions were limited (EC 2011).

The management board, comprising one member, was responsible for the day-to-day administration of the FSC. The FSC’s board of directors appoints the management board (FSC 2011b).

FS Finans and FS Bank

In June 2011, the FSC reorganized its group structure to ensure efficiency, coordination, and quality in resolution processes, considering that the government had taken over a number of banks (see Figure 5)(FSC 2011b; FSC 2012). The FSC also said that this reorganization would ensure uniform, continuous, and fair treatment of customers of banks taken over (FSC 2011b).

Investigating Roskilde’s Supervision and Collapse

On September 18, 2008, the Public Accounts Committee asked the NAO^FNThe NAO is an independent institution placed under parliament and tasked with investigating questions of public finance, compliance, and performance (NAO n.d.a). The Public Accounts Committee—which verifies whether government accounts are correct, assesses whether public funds are managed effectively, and submits audited government accounts to parliament for approval—may also ask the NAO to investigate certain matters (NAO n.d.b; Public Accounts Committee of the Danish Parliament 2012). to review the role of the DFSA in Roskilde’s collapse and resolution (Esmerk 2008d; NAO 2009). The NAO submitted its report on the DFSA’s role in the collapse and winding up of Roskilde in accordance with the Auditor General’s Act, Sections 8(1) and 17(2), amended by Act No. 590 of June 13, 2006. In June 2009, the NAO returned a report with findings to the Public Accounts Committee (see Summary Evaluation) (NAO 2009).

The DFSA had to submit a report on the causes of Roskilde’s failure and the DFSA’s role in the process leading up to bankruptcy; the report was released to public on June 17, 2009 (DFSA 2009; Ministry of Business and Growth 2013).

The FSC launched an external legal investigation into the causes of Roskilde’s collapse and whether there were grounds for lawsuits against the bank’s former management (Ministry of Business and Growth 2013).

Roskilde’s Governance under DNB

DNB and the PCA appointed new board members on August 29, 2008 (see Key Design Decision No. 12, Treatment of Board and Management). The newly appointed chairman and deputy chairman—Henning Kruse Petersen and Jakob Brogaard, respectively—were also the chairman and deputy chairman of the FSC (DNB 2008c; FSC 2010; FSC 2011b; Roskilde Bank 2009).

On September 12, 2008, a new board of directors was elected to New Roskilde at an extraordinary general meeting (see Key Design Decision No. 12, Treatment of Board and Management) (Esmerk 2008b; Roskilde Bank 2008a; Roskilde Bank 2008b).

Roskilde’s Governance under the FSC

The FSC is governed by a board of directors to ensure that it is properly managed as required by law and by the articles of association. Seven members comprise the board, including a chairman and deputy chairman, for terms of three years with the possibility of one reelection (Danish Parliament 2008b, art. 2(6); FSC 2011b). The board is required to notify the minister for economic and business affairs on matters of material financial or political significance relating to the FSC’s activities (FSC 2011b).

On August 24, 2008, DNB issued a statement describing the Roskilde Bank situation as “very serious. It is expected that the takeover of Roskilde Bank will contribute to limiting the negative effect on the Danish financial system” (DNB 2008b).

On August 27, 2008, then–DNB Governor Nils Bernstein spoke at a press conference about Roskilde. He said that Roskilde had a “lenient credit culture” and was no longer solvent (Bernstein 2008). Bernstein further said that Roskilde’s situation posed a significant threat to financial stability in Denmark. He characterized the takeover by DNB and the PCA as a move to protect stability and preserve other Danish banks’ access to international capital markets. On the treatment of creditors and equity holders, Bernstein said that shareholders and holders of hybrid core capital and subordinated loan capital would likely lose their capital (see Figure 10) (Bernstein 2008).

Toward the end of September 2008, Economic and Business Affairs Minister Lene Espersen said that solvent banks should cope with the crisis on their own. The government took over Roskilde because of its size and concerns about financial stability, according to Espersen (Esmerk 2008e).

In June 2009, the NAO released a report on the DFSA’s role in the collapse and winding up of New Roskilde. The Ministry of Economic and Business Affairs and the FSA allowed the NAO to release the report without redactions (NAO 2009).

On June 17, 2009, the DFSA released its own report on the causes of Roskilde’s collapse. The DFSA also self-assessed its response. Usually, such reports could not be made public by the DFSA or minister for economy and business. However, the DFSA was allowed to publicize its findings because the central bank had provided a liquidity facility to Roskilde, guaranteed by the government, and Roskilde had been declared bankrupt (DFSA 2009).

DNB and PCA Takeover

The Finance Committee of the Danish Parliament passed Appropriation 199 4/9 2008 concerning the state guarantee for any loss suffered by DNB for the unlimited credit facility. The Finance Committee initially expected the drawdowns on this facility to total DKK 15 billion to DKK 20 billion, though the EC reported that usage was over DKK 36.8 billion by early October 2008 (see Key Design Decision No. 2, Part of a Package) (EC 2008b; NAO 2009). Roskilde had DKK 17.5 billion outstanding on the facility at the end of 2008, according to  DNB’s annual report for 2008 (DNB 2009).

Private sector support from the PCA reflected negotiations among DNB, the Ministry of Economic and Business Affairs, and the PCA. While no calculations were performed for private sector support, the PCA’s contribution could not exceed the government’s estimated loss if Roskilde were to enter bankruptcy, per the PCA’s articles of association (NAO 2009; PCA 2011). The PCA was funded by voluntary contributions from member banks and from Nykredit (NAO 2009; PCA 2011). Member banks contributed DKK 750 million per year, the maximum annual contribution, unless otherwise unanimously decided by the board of representatives.^FNPer the World Bank, the size of Denmark’s gross domestic product was USD 353.4 billion in 2008. The PCA guaranteed a maximum of DKK 1.5 billion per calendar year, though the board of representatives could change this amount with a unanimous vote (EC 2008a; NAO 2009; PCA 2011). The PCA wrote off its DKK 750 million investment in Roskilde after the government took over (FSC 2010).

On August 29, 2008, the chairman of the Finance Committee received a letter from the Ministry of Economic and Business Affairs about additional appropriations needed. Days earlier, it became apparent that Roskilde had to make further write-downs that would prevent the bank from meeting the calculated capital adequacy need and capital requirement of the Financial Services Act.^FNThe capital adequacy requirement was determined by the following: the base capital had to amount to 8% or more of the institution’s risk-weighted items or capital adequacy need if this was higher than 8% (NAO 2009). Because the EC had already approved the measures necessary for the emergency liquidity assistance, and because these measures had already been taken, the Ministry thought that Appropriation 199 could not be adjusted. Thus, the Finance Committee had to pass additional appropriations. On November 4, 2008, the Finance Committee passed Appropriation 25 27/11 2008 to extend the government’s guarantee to include any losses incurred in connection with DNB’s takeover and resolution of Roskilde (NAO 2009).

The Act on Financial Stability in October 2008 (otherwise known as the Bank Package I) did not cover Roskilde’s restructuring and resolution (FSC 2010; FSC 2011b).

FSC Takeover

On August 10, 2009, DNB and the PCA transferred all shares in Roskilde to the FSC. DNB also transferred a subordinated loan to the FSC. The FSC took over liabilities related to DNB’s emergency liquidity assistance to Roskilde. Because Roskilde was not a member of the PCA, the FSC accounted for its costs separately from the FSC’s other activities under the Financial Stability Act (FSC 2010).

At the end of 2010, retained losses—representing the loss to the Danish State—reached DKK 8.9 billion, not including interest and commissions earned and any later gains on asset sales. The FSC reported that amount as an asset on its balance sheet, representing a receivable due from the Danish State (FSC 2011b). It is unclear whether the State’s remaining loans and equity in the bank were ever repaid. The FSC reported positive earnings throughout the 2010s based on interest and commission income from member banks (MIBFA n.d.).

At the termination of Denmark’s guarantee scheme on September 30, 2010, the FSC would appoint auditors to calculate profits and losses: equity at the end of the period minus capital contributions in subsidiaries plus market return (Danish Parliament 2008b, sec. 9.4, 17.4). If the FSC’s financial statements showed a loss, the PCA guaranteed up to DKK 10 billion. If losses exceeded that amount, the PCA’s annual guarantee commission of DKK 7.5 billion would be used. If the FSC’s total losses exceeded these amounts, the PCA would further guarantee additional losses up to DKK 10 billion (Danish Parliament 2008b, sec. 9.5).

Acquisition by the Government

Old Roskilde initially intended to sell itself during a window from July 15 to August 22, 2008 (EC 2008b). After Old Roskilde failed to receive any offers by the expiration date, DNB and the PCA took over the distressed institution. The Ministry of Economic and Business Affairs and DNB said that they did not want Roskilde to declare bankruptcy, which in their opinion would seriously damage financial stability (NAO 2009).

Between August and November 2008, the acquisition of Roskilde by DNB and the PCA involved three measures. First, on August 24, DNB and the PCA signed an agreement to create a bank joint stock company: New Roskilde. Second, on August 24, Roskilde, DNB, and the PCA signed an agreement to transfer all assets and senior liabilities of Roskilde to New Roskilde at a value of DKK 37.3 billion (EC 2008b; NAO 2009). Third, on November 4, 2008, the Finance Committee passed Appropriation 25 27/11 2008 concerning DNB’s part in the unlimited credit facility (NAO 2009).

On September 1, 2008, shareholders of Old Roskilde approved the transfer agreement that would allow Danish authorities to move assets, deposits, and senior liabilities to New Roskilde. Danish authorities chose to create the bridge bank, New Roskilde, because taking assets and liabilities from Old Roskilde directly would have entailed expropriation and a complicated legal process that Danish authorities did not deem appropriate for Roskilde’s situation. Through New Roskilde, Danish authorities could pursue a progressive sale or liquidation and ensure that all of Roskilde’s depositors and senior creditors were repaid (EC 2008b).

Old Roskilde remained operational until October 6, 2008, at which point all assets, deposits, and senior liabilities were transferred to New Roskilde, retroactive as of August 24, 2008. Old Roskilde maintained subordinate liabilities—such as hybrid core capital, subordinated loan capital, the enclosed savings bank trust, and equity—and initiated a proceeding under the Danish Bankruptcy Act (EC 2008b).

Following the acquisition of Roskilde by DNB and the PCA, on October 6, 2008, DNB and the PCA made a capital injection totaling DKK 4.5 billion into Roskilde to meet solvency requirements (EC 2008b; IMF 2014). DNB injected DKK 1.7 billion in the form of class A shares, and the PCA injected DKK 750 million in the form of class B shares. These respective classes of shares ensured that Roskilde’s incurred losses would first be covered by the PCA before DNB (EC 2008b; EC 2011).

Under a separate loan agreement, DNB provided DKK 2 billion as Tier 2 capital with a quarterly interest rate set by DNB and an additional risk rate of 4.85% per annum (EC 2008b; EC 2011). Because the loan was Tier 2 capital, it was subordinated relative to other senior debt. However, the loan was senior to share capital. Upon the PCA’s capital injection, its previous guarantee of DKK 750 million on July 10, 2008, was released (EC 2008b).

See Figure 6 for the transfer of assets and liabilities out of Old Roskilde.

According to Roskilde’s half-year report in 2008, the bank recorded write-downs on loans and guarantees in the value of DKK 3.6 billion (Roskilde Bank 2008d).

The transfer of senior liabilities to New Roskilde constituted an event of default that enabled creditors to demand full redemption of their claims. Danish authorities anticipated that all senior creditors would make use of this right and used the credit facility to make these repayments by the end of October 2008. The EC noted that the main creditors of Old Roskilde were foreign banks (EC 2008b).

Old Roskilde’s investors in equity and subordinated or hybrid capital remained with the shell company that was emptied of all assets and other liabilities (EC 2008b; EC 2011). These investors were entitled to receive compensation through an earn-out mechanism—only after other claims were satisfied—which the FSC considered “highly unlikely” (see Figure 10) (EC 2011; FSC 2010; Roskilde Bank 2008d). Under the earn-out mechanism, any remaining funds after remuneration of the contributed share capital would go to the owners of subordinated capital and shareholders of Old Roskilde, in that order (Bernstein 2008; EC 2008b; Roskilde Bank 2008d). According to the EC, the use of an earn-out mechanism allowed Danish authorities to avoid two things. First, Danish authorities avoided a difficult valuation of Roskilde. Second, Danish authorities avoided allegations from investors that the business acquired by New Roskilde was mispriced (EC 2008b).

The sale of 21 New Roskilde branches to Nordea, Spar Nord, and Arbejdernes Landsbank entailed the transfer of 90,000 customers, including depositors. Separation between deposits and loans was not allowed in the sales transaction. The FSC allowed the three buyers to return to the FSC any customer loans that they did not want to take over, at book value. Roskilde’s buyers ultimately returned 6,000 retail customers and 1,400 corporate customers, thus complicating the timeline of New Roskilde’s liquidation (see Key Design Decision No. 8, Approach to Resolution and Restructuring) (EC 2011; Roskilde Bank 2009). New Roskilde continued to serve customers on the usual banking terms but encouraged those customers to find new banks (Roskilde Bank 2009).

On December 10, 2008, to accelerate liquidation, the FSC announced that it was willing to fully or partially sell retail customers. The FSC sent details of the portfolio to 11 requesting financial institutions. Of the 11 financial institutions, Arbejdernes Landsbank made an offer to assume the private customer portfolio for DKK 800 million, comprising 4,000 customers that were mostly retail (EC 2011; FSC 2011b). On March 31, 2011, the FSC and Arbejdernes Landsbank closed the deal; the private customer portfolio was not subject to debt recovery treatment and did not constitute a corporate commitment (EC 2011). Therefore, New Roskilde no longer had customers with deposit accounts only; New Roskilde still had 3,000 customers with outstanding commercial deposits because of their connection with loans (see Key Design Decision No. 11, Treatment of Assets) (Capital IQ; EC 2011).

In June 2011, when New Roskilde became a part of FS Finans, any remaining corporate customers were transferred to FS Bank. The FSC said that this reorganization would ensure uniform, continuous, and fair treatment of customers of all banks taken over by the FSC (FSC 2011b). FS Bank terminated its services and products in spring 2014. The FSC revoked FS Bank’s license by the end of June 2014, at which point FS Bank became FS Finansselskabet. The FSA revoked FS Finansselskabet’s license on September 30, 2014, suggesting no legacy corporate customers of Roskilde were serviced by the FSC after that time (FSC 2015).

The sale of 21 New Roskilde branches to Nordea, Spar Nord, and Arbejdernes Landsbank entailed loan transfers. Separation between deposits and loans of individual customers was not allowed in the sales transaction. However, according to the transfer agreements, the three buyers could return loans acquired at book value during a six-week period;^FNAccording to a press release by Nordea, this bank could return “unattractive” loans and guarantees within six weeks of the completion of the transaction; Nordea could return loans to acquire shares in Roskilde within 24 months of the completion of the transaction (Nordea 2008). According to Spar Nord’s annual report for 2008, the acquiring banks could return loans and guarantees whose credit qualities failed to meet the requirements of the acquiring banks; Spar Nord returned 300 business customers with a total business volume of DKK 700 million (Spar Nord 2009). contemporaneously estimated, 50% of the assets would be returned in the worst case scenario (Dow Jones 2008b; EC 2011; Roskilde Bank 2009). In reality, more than 50% of corporate commitments were returned by the buyers (EC 2011).

Additional advances on existing loans were granted only in cases where they were necessary to preserve or increase the outlook of prepayment to New Roskilde or the relevant FSC company of outstanding loans. Some quantitative limits applied. For individual corporate clients, further advances could not exceed 20% on existing loans as of May 24, 2011. For corporate customers as a category at an aggregate level, further advances could not exceed 2.5% of New Roskilde’s corporate loan portfolio (EC 2011).

In June 2011, the FSC reorganized legacy assets from Roskilde under the FSC subsidiary FS Finans (FSC 2011b; FSC 2012).

On February 28, 2014, the FSC launched a sales process to divest a customer loan portfolio consisting of exposures with 76 property companies with loans and credit facilities totaling DKK 1 billion. This loan portfolio included exposures from Roskilde among other distressed banks (FSC 2014a).

On October 1, 2014, the FSC launched a sales process to divest a customer loan portfolio consisting of 400 group customers (mostly Danish corporates) with loans and credit facilities totaling DKK 10 billion (FSC 2014b).

Management of New Roskilde

DNB and the PCA appointed new board members on August 29, 2008. DNB appointed chairman Henning Kruse Petersen (chairman of the FSC), Niels Heering (attorney at Gorrissen Federspiel Kierkegaard), and Visti Nielsen (board member of the FSC). The PCA appointed deputy chairman Jakob Brogaard (deputy chairman of the FSC) and Jørn Kristian Jensen (former managing director at Nordea Bank) (DNB 2008c; FSC 2010; FSC 2011b; Roskilde Bank 2009).

Søren Kaare-Andersen remained as managing director. Arne Wilhelmsen left as bank director, replaced by Lars Jensen (formerly a department director at Roskilde) (Roskilde Bank 2008c; 2009).

On September 12, 2008, a new board of directors was elected to New Roskilde at an extraordinary general meeting: chairman Jens Løgstrup, deputy chairman Jørgen Jensen, Erling Brønnum, Ole Nilensen, and Ole Scheel Krüger (Esmerk 2008b; Roskilde Bank 2008b).

Management of Old Roskilde

In early September 2008, former Roskilde City Councilor Rune Viberg took legal action against Old Roskilde’s management (Dengsøe 2008; Esmerk 2008a). The charges included fraud, misleading accounting information, gross error and negligence, and providing incorrect information. Viberg specifically accused former bank director Wilhelmsen, former bank director Niels Valentin Hansen, and former deputy director Stig Bo Jensen of manipulating the share price because they sold their shares before Roskilde fell into trouble (Dengsøe 2008; Roskilde Bank 2007).

In March 2009, Danish media reported that former Roskilde chairman Peter Müller^FNMüller was a board member of Roskilde since 1991; he was chairman of the board in 2008 before the bank’s collapse (Roskilde Bank 2007; Roskilde Bank 2008d). signed a stock option agreement with former director Hansen after Roskilde’s collapse and without the board’s knowledge (Esmerk 2009).

In March 2010, the Danish Securities Council and the DFSA cleared Roskilde’s former board and management (DFSA 2009; Jyllands-Posten 2010). The council’s report said:

The DFSA had a cooperation agreement with Nordic authorities on the supervision of Nordea Group since 2000, which gave the DFSA powers to access Nordea’s information and impose some regulatory requirements (IMF 2007). The sale of nine Roskilde branches to Nordea was subject to approval by the DFSA. The transaction closed on November 3, 2008 (Nordea 2009).

According to the NAO’s report, the Danish government conditioned the unlimited credit facility on Roskilde’s full or partial sale to avoid moral hazard—an expectation that other banks in a similar situation would expect a governmental safety net (DNB 2009; NAO 2009).

It is unclear whether salary restrictions on executives applied to Roskilde, since Bank Package I did not cover Roskilde, and Bank Package II (passed January 2009) later imposed salary restrictions on executives who were subject to Bank Package I (FSC 2010; FSC 2011b; Ministry of Business and Growth 2013). Per Bank Package II, executives’ variable salary components could not exceed 20% of the fixed base salary, including pension. Additionally, banks could not deduct more than 50% of executive board members’ salaries in bank’s tax accounts (Ministry of Business and Growth 2013).

The FSC’s resolution of Roskilde took longer than Danish authorities anticipated because of complications with returned deposits and loans. In 2011, Danish authorities submitted a revised resolution timeline to the EC and requested changes to the liquidation aid decision. Danish authorities expected resolution to be complete by year-end 2012 (EC 2011).

The state wrote off the final debt related to its guarantee on losses incurred on the Roskilde Bank recapitalization in 2018 (FSC 2017).

By September 30, 2014, the FSA no longer had legacy customers from Roskilde (FSC 2015). It is unclear whether the FSC has remaining legacy assets from Roskilde.