Review and results

Finansiel Stabilitet was established during the financial crisis with the objective of contributing to ensuring financial stability in Denmark. Although the financial situation in Denmark is markedly different today than it was some 15 years ago, the objective remains to ensure that customers have access to the critical financial infrastructure even if their bank or mortgage credit institution is taken over for crisis management by Finansiel Stabilitet due to incurring financial problems.

This entails that the customers must be able to make payments and have access to a significant part of their liquid assets. In this connection, Finansiel Stabilitet also handles the task under the deposit guarantee scheme of ensuring access to deposits, which are covered up to approximately DKK 745 thousand.

As opposed to other EU countries, where small banks often enter into bankruptcy proceedings when they become distressed, the approach taken in Denmark is that banks are taken over by Finansiel Stabilitet for crisis management rather than being left to enter into bankruptcy proceedings.

In order to be able to handle Finansiel Stabilitet’s primary objective of ensuring efficient crisis management, the institutions that have an obligation to pay contributions have made payments to two funds: the Resolution Fund and the Deposit Guarantee Fund. These funds are to contribute to supporting financial stability in a crisis situation. Finansiel Stabilitet manages these funds by investing in low-risk securities and by holding cash deposits with Danmarks Nationalbank.

Finansiel Stabilitet also has as its objective to initiate resolution of the remaining activities taken over from previously failing institutions. A substantial part thereof has previously been divested, but a small portfolio of exposures remains in the form of claims from estates in bankruptcy, small loans and guarantees and unsold plots of land and securities. These activities are mainly related to banks taken over during the financial crisis. The results of these resolution activities are included in the surplus generated by the government from Bank Package activities.

In recent years, Finansiel Stabilitet has taken on a number of new tasks on behalf of the government. These tasks include the issue of guarantees for loans to buy property in rural districts and maintenance of a debt counselling scheme for former mink farmers who remain insolvent after having received compensation from the government.

The objectives of Finansiel Stabilitet may be summarised as follows:

Finansiel Stabilitet is an independent public company owned by the Danish State through the Danish Ministry of Industry, Business and Financial Affairs.

Finansiel Stabilitet posted a surplus of DKK 403 million in 2022 (2021: DKK 1,051 million).

The sharp increases in the global fixed income markets in 2022 led to a negative return on the managed portfolios linked to the Deposit Guarantee Fund and Resolution Fund in a total amount of DKK 749 million, comprising interest income of DKK 114 million and unrealised capital losses of DKK 863 million. Interest rates have remained highly volatile in 2023. Until 28 February 2023, Finansiel Stabilitet generated a small positive return on assets under management.

In general, Finansiel Stabilitet’s financial results can be broken down into the three funds handled by Finansiel Stabilitet, i.e. the Resolution Fund, the Deposit Guarantee Fund and government funds held under the Bank Package activities.

The Resolution Fund generated a surplus of DKK 907 million in 2022. The surplus was predominantly attributable to payment of DKK 1,124 million in contributions to the Resolution Fund. The negative return on the securities portfolio amounted to DKK 203 million for this fund. As a result of the sharp increase in interest rates in 2022, the surplus fell approximately DKK 100 million short of the expected level.

The Deposit Guarantee Fund reported a negative return of DKK 516 million as a result of a negative return on securities management activities of DKK 546 million in 2022. As a result of the sharp increase in interest rates in 2022, the surplus fell approximately DKK 500 million short of the expected level.

Bank Package activities generated a surplus of DKK 12 million for the period, which was slightly better than expected. The surplus was attributable to payments from settled lawsuits and reversed impairment losses.

The Group’s total assets at 31 December 2022 amounted to DKK 23.9 billion (2021: DKK 23.5 billion). Of this amount, the Resolution Fund accounted for DKK 6.0 billion, the Deposit Guarantee Fund accounted for DKK 11.9 billion and the government funds under the Bank Package activities accounted for DKK 6.5 billion, while a negative amount of DKK 0.5 billion related to an intra-group balance.

Total equity stood at DKK 23.2 billion, of which DKK 6.0 billion was attributable to the Resolution Fund, DKK 11.9 billion to the Deposit Guarantee Fund, and DKK 5.3 billion to the Bank Package activities. For a specification of the three funds’ income statement items, see the following sections and notes 2 and 3 to the financial statements for a more detailed account.

At 31 December 2022, the remaining net loans and guarantees amounted to DKK 0.1 billion (2021: DKK 0.2 billion), while the portfolio of financial assets amounted to DKK 10.3 billion (2021: DKK 11.6 billion) and properties amounted to DKK 12 million (2021: DKK 10 million).

The rest of the assets mainly consisted of DKK 9.9 billion held on deposit with Danmarks Nationalbank (2021: DKK 8.1 billion) and commitments made by banks, etc. in relation to the Deposit Guarantee Fund amounting to DKK 3.2 billion, which was unchanged from 2021.

Amounts held on deposit with Danmarks Nationalbank grew by DKK 1.8 billion in 2022, attributable in part to a DKK 0.7 billion reduction of the portfolio of financial assets and in part to contributions for the year to the Resolution Fund of DKK 1.1 billion.

The majority of the remaining loans and guarantees related to the segment Bank Package activities, while a minor portion of loans related to FS Finans V A/S (formerly Andelskassen J.A.K. Slagelse) and FS Finans VI A/S (formerly Københavns Andelskasse), which are wound up under the Resolution Fund. DKK 18 million of total loans and guarantees related to FS Finans V A/S and FS Finans VI A/S.

Other remaining exposures mainly consisted of receivables from estates in bankruptcy and guarantees. How fast the remaining loans will be wound up depends largely on external factors such as the progress of trustees’ estate administration and the debt recovery process. Guarantees will be gradually phased out as they mature. Finansiel Stabilitet furthermore has the ongoing task of recovering previously written-off claims, which amounted to approximately DKK 9.7 billion at 31 December 2022. In 2022, this resulted in the recognition of income of approximately DKK 31 million.