Update of: Agricultural Financing Saved in Denmark

Agricultural Financing

Well we are a bit closer to skip speculation. The daily newspaper JyllandPosten reports:

http://epn.dk/landbrug/article2707753.ece [Danish Piece]

It seems like they are moving directly to a common limited liability company. In “cooperation” with DLR and Finansiel Stabilitet.

The bad loans moved will have to be impaired so much that it is realistic for the farm to be run with a reasonable profit.
There are a few problems though:

  • As noted: If things swing around then the creditors (the State, mortgage banks and bank) should get their impairments or downright write offs back – some of it. But the guess that this debt is to be tied to the property with a review if it is traded again.The hitch is that with present low interest rates and grotesque property values (have dropped 40-45% since Q3 2008) – so it is unlikely that the prices ever get into sane territory again – ever.Well ever is a strong expression; but as it is in these years – nothing is traded
  • Banks are not willing to transfer even seriously distressed loans to this company that is going to be established. This is presently blocking for the participation of other banks and mortgage banks. Those known are already in Finansial Stability.
  • No banks without a credit squeeze will ever sell their loans. If they don’t have a funding need – there is no reason to give away the loan without public compensation.

There is an insight to this:

Danske Bank Pummeled By ATP

There is no end to Danske Banks hypocrisy. They tried to block FIH form a public reconstruction while they themselves wallow with the trotters in the trough.  Probably because Danske Bank has not taken the impairments that FIH has.  It should tell investors something about the credit quality in Danske Bank and Realkredit Denmark.

The other thing: Banks always claim their importance for society and business. The self serving claim must be taken with a spoon of reservation: In practice banks are more a hindrance than a facilitator.

Some peoples wild guesses are more informative than official profound insights.