Danish position on the communication
An EU Framework for Cross-Border Crisis
Management in the Banking Sector
Higher and better capital requirements, reformed EU supervisory infrastructure and other initiatives to
enhance crisis prevention on a daily basis must be followed by a better EU Framework for Cross-Border
Crisis prevention and resolution in order to further reduce the potential public cost of possible future
financial crisis.
Denmark shares the two objectives presented in the communication, i.e.
1. “to ensure that all national supervisors have adequate tools to identify problems in banks at a
sufficiently early stage and to intervene to restore the health of the institution or group, or
prevent further decline” and
2. “to make it possible for cross-border banks to fail without serious disruption to vital banking
services or contagion to the financial system as a whole.”
1. Early intervention
Denmark agrees on the need to harmonize the powers of supervisors in relation to
intervention tools.
In
relation to the so called "living wills" – detailing how an institution and its business might be dismantled
and wound up rapidly and in an orderly manner – there is a need to elaborate further, including
evaluating costs and benefits.
Denmark believes that there are merits in further work on common indicators or thresholds, and an
agreed terminology between EU supervisors, which could define when and how intervention in a cross-
border bank should take place. However such indicators or thresholds should not be binding in nature
but be part of guidelines. Denmark believes it to be necessary that supervisors retain an adequate degree
of discretion in considering how to make use of intervention tools and it should not be based on only
hard triggers.
Denmark supports further work on a European framework on asset transfers to support financial
stability and to prevent and mitigate financial crisis situations while at the same time assuring legal
certainty and minimizing contagion risk between companies in a group. As part of this there is a need to
look into best practices in relation to how to regulate intra-group exposures and transactions.
2. Resolution
Denmark supports the development of an EU resolution framework and finds that it should
ultimately cover all types of regulated financial institutions. Deposit-taking banks can be a starting
point. It should apply to both cross-border banking groups and single entities which only operate
cross-border through branches.
Denmark finds that the resolution framework should cover a broad range of tools in order to enable
member states to address a specific crisis most appropriately. Private sector tools have priority and
the tools must be in compliance with the Treaty and State aid rules. Furthermore, guidelines
regarding when the use of these tools could be considered as being in compliance with the Treaty
and State aid rules would be valuable.
In relation to the right of shareholders, creditors and counterparties there is a need to limit the rights
of shareholders in a resolution situation, but not creditors and counterparties. A set of common
indicators and thresholds for the limitations of the rights of shareholders should be developed.