On Thursday, the European Commission approved, under EU State Aid rules, a scheme for the resolution of distressed Danish banks. the scheme "provides for an orderly winding up of the failing bank, transferring its assets and part of its liabilities to a bridge bank to be set up under the aegis of the Danish Financial Stability Company. The latter would provide capital, and, if necessary, liquidity to the bridge bank." The EC concluded that the Danish resolution scheme was consistent with the EC's Guidance Communication on state aid to address the financial crisis, noting that it "is limited to the minimum necessary to ensure an orderly winding-up," "burden-sharing is ensured by excluding shareholders and subordinated debt holders of the failed bank from any benefit from the aid," and "strong limitations on the activities and the lifespan of the bridge bank [that] will minimise distortions of competition."
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EC approves Danish bank resolution scheme
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