Politiken wrote on Monday that foreign investors are speculating in credit default swaps (the Danish media was a little confused about this, claiming short-selling cds, as opposed to taking a short position via cds) that Denmark will not be able to withstand escalating housing crisis. Their view is that if Danske Bank gets in trouble, Denmark does not have the finances to bail it out.
Other experts quickly and steadfastly took issue with Danske Bank being included in such news. Swedish investment firm Cevian Capital recently flagged over 5% ownership share, saying that it feels that Danske, one of the strongest Nordic banks, is not properly valued. American hedge fund Luxor Capital is in the center of this debate. The firm wrote in its Q3 report, that the combination of high Danish household debt and Danish banks reliance on foreign financing can lead to big problems as European financial crisis blows up.
Wall Street Journal wrote that reminiscent of US housing crisis blowing up, European banks have mainly sold CDS instruments protecting against defaulting European countries to other European banks. Bloomberg’s article stated that the inevitable higher capital requirements for European banks may trigger a vicious cycle of declining sovereign-debt prices and thus again coming back to haunt banks in further losses.
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