MOODY’S cut the long-term ratings of five Danish banks, saying yesterday that the government had become less willing to bail out depositors and creditors in the event of a bankruptcy.
The move came after small bank Amagerbanken earlier this month became the tenth lender to fall into state hands in the wake of the global financial crisis.
“We now maintain negative outlooks on all Danish banks’ standalone bank financial strength ratings, and will evaluate these additional pressures as they unfold over the coming months,” Moody’s said.
The rating agency said the state’s takeover of Amagerbanken showed the government’s willingness and ability to impose losses on depositors and senior creditors in a bankruptcy.
Moody’s said a state aid package for banks -- “Bank Package III” -- in October provided a framework for allocating ailing banks’ losses to senior debt and deposits instead of only to core equity, hybrid capital and subordinated debt.
“Combined with its implementation with respect to Amagerbanken in February 2011, this law implies that the Danish government is now far less willing to continue to support bank creditors at the expense of taxpayers than it was only a few months ago,” Moody’s said.
The ratings agency also said that Danish banks’ funding will now be more vulnerable to investor and depositor transfers.