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No new stock options in Danish banks

January 2009 - Finance. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

More articles by this firm.

08-10-2008 - The new agreement for stability in the financial sector bans new stock option plans and renewal of existing plans

Political agreement to secure financial stability

Jens Lund Mosbek

The new agreement for stability in the financial sector bans new stock option plans and renewal of existing plans

'The international financial crisis has arrived in Denmark as well and frozen the money markets, making it extremely difficult for many banks to raise the necessary cash'. This is the introduction to the agreement, which was made by all major parties in the Danish Parliament on 5 October 2008.

The agreement means that through the Danish banking sector's contingency association ‚ÄėDet Private Beredskab', the Danish financial sector and the Danish government have put together a safety net for the sector. The overall purpose is to ensure that all unsecured creditors in the banks will be paid in full. The arrangement will run until at least 30 September 2010. In return, the sector must show restraint and spend two years consolidating their business.

Participation is optional. But participating banks are not allowed to implement ‚Äėnew stock option plans, while existing plans may not be renewed or extended'. This restriction will apply for as long as the arrangement runs.

Also, the political parties agree that there is a need to work in dialogue with the sector to determine the future permanent regulation of and framework for the financial sector. In future, there will be a ‚Äėtightening of the use of stock option plans in the financial sector in order to reduce the use of variable pay elements'.

Norrbom Vinding notes:

  • that, looking forward, the arrangement may affect how pay in the financial sector is composed - particularly its variable elements. However, there will still be other ways to make employees' pay performance-based.

Norrbom Vinding will follow up on the situation to the extent that any further agreements are made or any legislation enacted in this area.

This information does not constitute legal advice and should not be relied upon as such

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