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Denmark's big two prepare for battle

In the long term there will probably be room in the Danish banking market only for Den Danske Bank and Unibank. But before then they will have to adjust to the EU's single-currency system, which Denmark is unlikely to join at the outset, and to competition from consolidated banks in neighbouring states. Jules Stewart reports on their prospects

Denmark's two leading banks are gearing up for what Thorleif Krarup, chief executive officer of Unibank, describes as "the coming battle in European banking". Unibank and its main domestic rival, Den Danske Bank, are threatened by competition that will emerge as banks in Sweden and Germany consolidate. Another cause for concern is that Denmark will be left out of the first round of European economic and monetary union (Emu). Both banks have therefore embarked on ambitious diversification at home and expansion in the Nordic region to safeguard their future in what will be a euro-denominated banking market.

Denmark will join Emu only if a single European currency is approved by a national referendum. This effectively rules out adopting the euro on January 1 1999 with inner core countries such as Germany and France. Some analysts believe that even if the Danes vote to accept the euro, there could be a delay before the banks' systems are able to cope with the single currency.

Knud Sørensen, chairman of Den Danske Bank, says that if competition becomes distorted by banks operating in the Emu system obtaining better funding terms, his bank may have to consider moving part of its activities abroad.

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