Denmark\'s Max Bank avoids bankruptcy

Denmark\'s failed Max Bank avoided bankruptcy late Sunday, as banking authorities approved the sale of its healthy part to local bank Sparekassen Sjaelland. As such, Max Bank\'s financially sound customers can continue normal transactions through Sparekassen Sjaelland as of Monday morning, with their savings secured. Financially unsound customers come under control of Finansiel Stabilitet, Denmark\'s state-run facility for handling failed banks. Moreover, the bank\'s 23,000 shareholders have lost out, as their shares are now worthless. According to Danish finance website Finanswatch, Sparekassen Sjaelland itself is a \"wealthy\" bank, which has become increasingly dominant as a local financial institute in recent years. Max Bank\'s sale took place under the Danish government\'s new Bank Pack 4 agreement, which makes it easier for healthy Danish banks to take over the unhealthy parts of ailing banks. The state also pays a financial reward to the purchaser bank. The agreement minimizes loss to the Danish state, which has previously bailed out failed banks with taxpayers\' money. The earlier Bank Pack 3 also meant that ordinary customers with over 750,000 Danish kroner (around 137,000 U.S. dollars) deposits, lost a part of their savings in the event of a bankruptcy. Max Bank becomes the 10th Danish bank to fail since the 2008 financial crisis. These developments have made it hard for all but the biggest Danish banks to raise capital from international financial markets in recent months. Bank Pack 4 is in part meant to reassure markets and ensure liquidity to Danish banks. Max Bank came under state control Saturday, saying it was unable to meet the demand for further write downs, and an increased solvency requirement as demanded by Finansiel Stabilitet. Analysts say the bank incurred large losses on many loans and was too expansive in its operations prior to the 2008 financial crisis. In fact, it registered a net loss of 60.3 million Danish kroner (10.8 million dollars) in the first half of 2011 following 79.3 million Danish kroner (14.2 million dollars) in write downs. With the sale, Max Bank no longer functions as an independent financial institute. In addition, around 85 of its employees are expected to lose their jobs.