Unlike Other Developed Countries, Denmark Refuses to Rescue Banks

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Since the start of the global financial crisis of 2008, most of the developed countries have bailed out distressed banks with taxpayer funds. The U.S. government allows the failure of small and tiny banks but bails out large and TBTF banks by pouring billions in bailout funds with programs such as the now-forgotten TARP program.

The small country of Denmark has been plagued by bank failures in the past three years due to their over exposure to the real estate industry and inability to obtain funding from foreign investors. However the Danish government refuses to rescue the distressed banks. Instead it has followed procedures to encourage consolidation in the industry with the restructuring of the troubled banks. Only the largest creditors and depositors have been forced to take the losses when banks failed. Ordinary depositors are protected by a deposit-guarantee fund created by the industry. The Danish banking sector is set for consolidation by 2013 according to a Bloomberg report.

Denmark has about 130 banks and so far 12 banks have failed. The failed banks are listed below:

Click to enlarge

 

Courtesy: Zero Hedge

In a report titled “Further Bank Failures Likely In Denmark”, S&P stated last month that 15 more Danish banks could fail this year.

Due to the current policies of the state, the Danish banking industry will suffer in the short-term , but in the long-run it should become healthier as consolidation leads to fewer and stronger banks and the weaker banks are eliminated. This is a smart strategy compared to the ones followed in other developed countries where “zombie” banks are allowed to survive.

In the U.S. three of the large Danish banks – Danske Bank(DNSKY), Jyske  Bank(JYSKY) and Sydbank A/S (SYANY) trade on the OTC market as unsponsored ADRs.

Source: CEIC Macro Watch, Europe and Central Asia

Disclosure: Long DNSKY

Knowledge is Power: Gold Standard, Taxes, Eurozone Edition

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Is it time to restore the gold standard?

Return of the Gold Standard as world order unravels

Why the US Should Raise Taxes

Most Americans don’t have $1,000 saved for emergency

The bonds that turned to dust

Can the eurozone be saved?

The end of buy-and-hold investing?

Is There A Safe Savings Rate?

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Catherine Palace, St.Petersburg, Russia

How Long Will the Global Oil and Natural Gas Reserves Last

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The world’s proven oil reserves of 1,383.2 billion barrels will last for only 46 years if oil production and consumption are to remain at current levels, according to BP Statistical Review of World Energy. The world’s natural gas reserves will also last for just 59 years if production is to continue at the 2010 rate.

Note: Graphic quality shown as in the original source.

Source: Itar-Tass

The top 5 countries with proven oil reserves: Saudi Arabia, Venezuela, Iran, Iraq and Kuwait.

The top 5 countries with proven natural gas reserves: Russia, Iran, Qatar, Turkmenistan and Saudi Arabia.

The U.S. is the world’s largest consumer of crude oil using 19,148,000 barrels/day or 378 million gallons/day for motor gasoline. Canada is the largest supplier of crude oil to the US at 1,972,000 barrels/day. (Source: U.S. EIA)

 

The U.S. Ratings Industry Monopoly

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On August 5th, the ratings agency Standard & Poors downgraded U.S. debt from AAA to AA+ for the first time in 70 years. This is the same agency that rated worthless junk such as sub-prime paper as AAA before the credit crisis began in 2008. In a way the standard followed by Standard & Poors is poor to say the least.

Long before this S&P downgrade, in July of last year China’s leading rating agency Dagong stripped the USA, Britain, France and Germany of their AAA ratings. However not many in the west paid any attention to this.

From an article in The Telegraph:

Dagong Global Credit Rating Co used its first foray into sovereign debt to paint a revolutionary picture of creditworthiness around the world, giving much greater weight to “wealth creating capacity” and foreign reserves than Fitch, Standard & Poor’s, or Moody’s.

The US falls to AA, while Britain and France slither down to AA-. Belgium, Spain, Italy are ranked at A- along with Malaysia.

Meanwhile, China rises to AA+ with Germany, the Netherlands and Canada, reflecting its €2.4 trillion (£2 trillion) reserves and a blistering growth rate of 8pc to 10pc a year.

Dagong rates Norway, Denmark, Switzerland, and Singapore at AAA, along with the commodity twins Australia and New Zealand.

In late July of this year, Egan-Jones Ratings Co, a rating Company based in Haverford, Pa downgraded U.S. debt but nobody attention either according to an article in The Wall Street Journal. In fact, there are 10 rating agencies in the U.S. as shown in the graphic below:

But Standard & Poors, Moody’s and Fitch have a 95% U.S. market share. These three firms effectively operate as a monopoly due to years of consistent support by Uncle Sam. Hence when the other little guys issue ratings they are pretty much ignored by the media and others. Just like telecom, airlines, media, rail, auto manufacturing, credit reporting agencies (on individuals) and other industries a handful of companies in the rating industry have a formed a oligopoly. While U.S. oligopolies in other sectors do not have much influence on foreign countries, the three rating agencies have tremendous power over countries and companies around the world making them both feared and respected at the same time.

In addition to slapping AAA rating on questionable paper, the rating agencies have fared poorly in predicting default rates on government debt. From a Journal article titled Raters Fail to See Defaults Coming:

Source: The Wall Street Journal