The Fionia Bank Board is in trouble and to avoid further problems has entered into an agreement with the national Financial Stability company.

The agreement means that the banking activities in the current Fionia Bank are to be transferred to a new company which has been established and owned by Fionia Bank, but which is controlled by Financial Stability.

"The agreement requires approval of the Financial Supervisory Authority, the EU and competition authorities. At its annual general meeting on 10 March 2009 the Board will explain the contents of the agreement. There are proposals to change the name of the current bank to Fionia Bank Holding A/S and give the new company the name Fionia Bank A/S," the company says in a news release.

The bank’s board and management will continue in the new company. Jørn Kristian Jensen, a former member of the Executive Board of Nordea, has been proposed to the board.

“This is not a liquidation but a strengthening of our ability to operate the bank,” says Fionia Bank CEO Jørgen Bast.

"The solution reached with the Financial Stability means that the bank's shareholders for a period lose control of the company, but retain ownership. The control can be retained after the agreement, if the bank succeeds in creating enough positive results to return and repay the capital," Bast says.

In the pledge period, voting rights are transferred to Financial Stability.

Annual accounts
Fionia Bank is to release its 2008 annual accounts on Tuesday. The Executive Board says that preliminary key figures are in line with previous forecasts, including depreciaition of DKK 1,218 million.

"The bank has a satisfactory core earning at 348 million. The Bank's profit before tax shows a deficit of 960 million, and the bank's solvency is before the agreed strengthening of the capital base 8.3 per cent of which the core capital is 4.2 per cent," the bank says.

It adds that after discussions with the Supervisory Authority, Fionia Bank set the bank's needs above 8.3 percent.

"With the capital increase of approx. one billion DKK the solvency of the bank will be around 13 per cent," the bank says.