Virtual bank-run on Eik Bank?

Eik Bank, who in 2007 bought the Danish part of Skandiabanken and thus got me as its customer, is in trouble. The share has fallen from ~86 DKK in august to ~30 DKK today, the board has resigned, the Færoe government is wondering if they can bail it out. Apparently the 9,1 million DKK guarantee the Danish government gave is worthless, the same article notes that the security behind the bank is stock in the bank and a failed construction company, so now they’re frantically trying to sell the Danish part, the one they bought in 2007. The Danish Finance Ministery guarantees that all deposits are safe, but nowhere do I see that means that customers will actually be able to access their money/pay their bills. A similar uncertainty was in Norway when the Icelandic bank Kaupting was put under administration and people’s money were safe but unavailable. (English readers, see this summary article on Eik Banks trouble)

This is where it gets interesting: The Danish part is an Internet only bank. The customers are people who are used to using the net, and thus quickly find out what’s going out. They usually also have a second bank, so all the ~100.000 customers going online and transferring their money to another bank should be a relatively quick thing. Thus we have a virtual run on the bank. Not queues as we know them, but lots and lots of transactions. And besides the run, who is going to want to buy an server-infrastructure with ~100.000 empty accounts?

So how serious is this? Just me pulling my money? Well, two days ago an ATM refused to talk to Eik Bank anymore, the first time I have experienced that. No problem with my other cards. Then todays headlines. Quite serious, and the news in danish TV isn’t helping them either. It’ll be interesting to see how this plays out. How this plays out will probably shape internet-only banks for a very long time to come. And that’s a banking concept I’ve been very fond of since I became a Skandiabanken customer in Norway a long, long time ago.