Henrik Bjerre-Nielsen, CEO of the Danish Financial Stability Company, was the keynote speaker at PA Consulting Group’s Executive Seminar in Copenhagen on 12 April 2012, where he spoke about the future of Denmark’s banks.
Henrik Bjerre-Nielsen says: “Banks suffering during a financial crisis is inevitable, and statistically, it is likely to happen from time to time. One might ask oneself whether it is caused by a structural problem or if bank managers have done a bad job. Each time we take over a bank, we consider the answer to these questions. Actually we have brought legal action against about half the banks.”
Confident about the future of bank sector
Henrik Bjerre-Nielsen is now more confident about the future of Danish banks: “The financial sector is normally a stabilising factor in society but its extension of credit during the boom has contributed to economic instability. And now, during the downturn, banks intensify this instability by being too meagre with credit. Authorities have attempted to increase stability by regulating the financial sector, and that has proved to be a prerequisite for creating trust. And one should bear in mind that trust in the financial sector is also a prerequisite for a positive future – both for the sector and for Denmark’s ability to compete in general.”
He adds: “Seen in an economic context, it is not an issue that companies in a poor state fall apart or that costs are handled by professional investors, but when it comes to larger systemic financial crises like the one that began in September 2008, the state has to get involved.”
Denmark handled the banking crisis by creating the Danish Financial Stability Company, as part of an agreement between the state and finance industry, to take control of failing banks.
Henrik Bjerre-Nielsen says: “It is important to bear in mind that Denmark’s creditworthiness is quite high (Triple A), so people trust the government’s financial help, which makes the financial sector credible. This means that Denmark has prevented the crisis from becoming even more widespread, and now the sector is in a healing process. We are very aware that we are not attempting to rescue banks in the short run, which would have collapsed anyway in the long run.”
Since The Financial Stability Company was established in 2009, the company has taken-over 422,000 individual bank customers, of which only 9,000 are left.
“The state’s involvement in the banking sector has been decreasing since 2010, and this is the way it is supposed to be. The increasing demands for capital, liquidity and management have been effective. A consolidation is about to happen in the sector, creating more competitive companies,” says Henrik Bjerre-Nielsen.
The Financial Stability Company is state-owned through the Danish Ministry of Business Affairs and was established in October 2008 as part of an agreement between the Danish State and the Danish financial sector (the Private Contingency Association) on a scheme to secure financial stability in Denmark.