Fears grow over Danish central bank bailout

27 August 2008

Denmark's central bank has been forced to bail out a struggling financial firm, it has announced.

The Roskilde Bank has now been bought out in a deal worth $149.5 million, after being forced to write down more loans than it had previously expected.

Its balance sheet had already been hammered by the credit crunch, due to the firm's high exposure to real estate.

Effectively, this made the bank insolvent - meaning that the Nationalbanken had to intervene in order to prevent its collapse and avoid "contagion" spreading to other Danish financial firms.

Trading in Roskilde Bank shares has now suspended on the Copenhagen Stock Exchange.

The central bank has now indicated that the nationalised firm will continue running as normal.

Nils Bernstein, governor of Nationalbanken, said: "We wanted to secure financial stability in Denmark…the alternative would have been that Roskilde went bankrupt and that would have resulted in a considerable contagion throughout the financial sector."

Roskilde Bank retains around 100,000 customers.

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