DANSKE BANK and four other Danish lenders have had their credit ratings cut by Moody’s after a bank collapse revealed the country’s government was willing to impose losses on depositors and senior creditors in failed banks.

The rating agency said last week’s bankruptcy of Amagerbanken, a small Danish lender, showed that Copenhagen “is now far less willing to continue to support bank creditors at the expense of taxpayers” than just a few months ago.

Senior creditors and some depositors face losing about 41 per cent of assets after Amagerbanken was taken over by Finansiel Stabilitet, the government agency responsible for handling failed banks.

The case has been touted by some analysts as a precedent for Ireland and other European countries with crisis-hit banking sectors as governments agonise over whether to impose “haircuts” on senior creditors.

“Last week’s bankruptcy of Amagerbanken demonstrated the willingness and ability of the government to allow depositors and senior creditors of Danish banks to take losses in bankruptcy, where bank operations are continued as a going concern,” Oscar Heemskerk, Moody’s analyst, said.

Amagerbanken was the 11th Danish bank to fail since the country’s housing market crashed in the early stages of the global financial crisis. However, it was the first since the expiry last September of a Danish bank guarantee scheme that had previously protected depositors and senior creditors from losses.

While deposits up to €100,000 are still safeguarded under Denmark’s normal deposit insurance rules, any sums above that are no longer guaranteed.

According to the preliminary official valuation, Amagerbanken’s assets amounted to DKr15.2 billion when it failed, equivalent to about 59 per cent of senior liabilities.

Moody’s said it had downgraded the senior debt and deposit ratings of Danske, Denmark’s biggest bank, and four other lenders, by between one and two notches because of reduced systemic support from the government.

The agency downgraded its rating for Danske’s long-term, senior unsecured debt by one notch to “A1” and put it on review for a further possible downgrade.

There were downgrades for Spar Nord Bank, FIH Erhvervsbank, BankNordik and Ringkjøbing Landbobank.

The ratings of Sydbank, Jyske Bank and Nordea Bank Danmark were put on review for a possible downgrade. – (Copyright The Financial Times Ltd 2011)