Amendments were also made to the banking law, enabling the government under certain conditions to write down a banks shares to zero. This ensured that share capital really was written down to the extent that capital was lost.It was soon realised that Christiania Bank and Fokus Bank had lost their entire share capital. The share capital in Den norske Bank was written down by 90% according to losses. The banks needed more capital, but private investors were unwilling to invest. All three banks thus received a substantial capital infusion from the GBIF [which was an independent but government owned bank manager] at the end of 1991. Conditions were established regarding balance sheet restructuring/downsizing, cost cuts and other measures to improve results. Share capital was written down to cover estimated losses. In both Christiania Bank and Fokus Bank the share capital was written down to zero by government decision (after shareholders had refused to do so). The existing shareholders thus did not receive anything for their shares, and the GBIF became the sole owner of the two banks. The boards and the top management were replaced. The banks received further capital support from the GBIF in 1992.
Friday, January 23, 2009
Scandinavian bank nationalisation and due process
The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.