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Financial Stability


      Financial stability, 2nd half 2013

Overall, Danmarks Nationalbank finds that the banks are currently resilient to severe macroeconomic shocks. Since 2008, the banks have focused on strengthening their capital base. It is important that the banks maintain sound excess capital adequacy. According to Danmarks Nationalbank's stress test of the banks' capitalisation, the five systemic banks comply with the capital requirements in all scenarios and their Common Equity Tier 1 capital remains above 8 per cent as will be required in the coming assessment of credit institutions that will be subject to direct supervision by the European Central Bank. The Danish credit institutions are generally well positioned to meet the new capital requirements under the EU Capital Requirements Directive and Regulation, CRD IV/CRR, which will enter into force on 1 January 2014. Furthermore, in Danmarks Nationalbank's assessment, most credit institutions already have sufficient equity capital to meet the fully phased-in EU capital requirements in 2019. However, many credit institutions will need to replace all or part of their subordinated capital with new issuances meeting the new criteria under CRD IV/CRR.

Date: 13-12-2013


      Financial stability 2013

Overall, Danmarks Nationalbank finds that the banks are resilient to severe macroeconomic shocks. But they are still facing substantial challenges. Most banks have a low return on equity and high loan impairment charges. Moreover, earnings are under pressure from falling lending volumes. Since 2008, the banks have focused on strengthening their capital base. Most banks today hold sufficient equity to meet the forthcoming EU requirements for Common Equity Tier 1 capital. But there will also be a need for sufficient excess capital adequacy consisting of Common Equity Tier 1, and many banks will need to replace existing issuance of Additional Tier 1 capital and Tier 2 capital with issuances meeting the new requirements for subordinated capital. The banks' liquidity has also improved in recent years. The liquidity situation of the systemic banks is good, and they use short-term issuance only to a limited extent. Almost all government-guaranteed bonds issued in 2009-10 have been redeemed. The phasing-out has been satisfactory. Most non-systemic banks that faced challenges in connection with the expiry of government-guaranteed bonds have succeeded in adjusting their balance sheets and reducing the customer funding gap.

Date: 12-06-2013


      Stress tests, 2nd half 2012

Overall, the liquidity situation of the largest Danish banks is good. Several small and medium-sized banks are preparing for the expiry of the individual government guarantees and have come far in adjusting their business models towards relying less on short-term funding. Danmarks Nationalbank's stress test of the banks' capitalisation shows that the largest Danish banks are robust. The excess capital adequacy of the four banks included in the European Banking Authority's, EBA's, capital exercise via Danish credit groups remains positive in all Danmarks Nationalbank's stress test scenarios, and Common Equity Tier 1 capital remains higher than 9 per cent, which was the requirement in the EBA's capital exercise – even if government capital injecttions are not included. Three of the small banks included in the stress test will need to strengthen their capitalisation in the baseline scenario of the stress test, and one bank is close to the threshold. The assessment is that any problems arising among the small banks can be solved via business adjustments or within the current framework for mergers and resolution without significantly influencing financial stability in Denmark.

Date: 25-10-2012


      Financial stability 2012

Generally, the large banks strengthened their capital bases in 2011, while several medium-sized banks reduced their excess capital adequacy. For many banks, a key task in the coming years will be to prepare for the forthcoming strengthened capital requirements. Higher profits are an important element in this context. Danmarks Nationalbank's stress test model provides a basis for assessing the capitalisation of the 13 largest Danish banks in various macroeconomic scenarios. The stress test shows that the largest banks are robust. Among the smaller banks included in the stress test, a few will need to strengthen their capitalisation. The assessment is that any problems among small banks can be solved within the existing framework for mergers and resolution. Most of the small and medium-sized banks with customer funding gaps at the start of the crisis have narrowed these gaps in recent years or turned them into surpluses. It is important for the small and medium-sized banks to continue their adjustment to a business model that is viable in the longer run. The opportunities to borrow from Danmarks Nationalbank have been increased, which will provide flexibility in this respect.

Date: 06-06-2012


     Stress tests, 2nd half 2011

Overall, the liquidity of the Danish banks is good, but with a considerable spread between banks. The banks should continue to prepare for a situation without government guarantees. It is important that banks make sure their business models are sustainable in the long term. Danmarks Nationalbank's expansion of its credit facilities to include, inter alia, 3-year loans and of the collateral basis to include credit claims of good quality will increase the banks' access to liquidity in the short term and ease the transition when the individual government guarantees expire. The stress test of capitalisation shows that the large and medium-sized Danish banks are able to withstand economic scenarios that are considerably more adverse than the one that is expected. One bank will need additional capital. In view of the general uncertainty and the more stringent capital re­quire­ments that are underway, the banks should continue to consolidate and strengthen their capitalisation.

Date: 11-01-2012


     Financial stability 2011

The Danish banking institutions generally strengthened their capital bases in 2010. Overall the banking institutions' earnings improved a little, which is at­trib­ut­able to lower loan impairment charges, but the level remains high. The institutions should already now begin to prepare for the expiry of the government guarantees in 2012 and 2013. Danmarks Nationalbank's stress test shows that the Danish banking institutions overall and under the current capital requirements are capitalised to meet a more negative development than expected. Under the coming requirements, parts of the sec­tor are insufficiently capitalised to withstand negative shocks to the economy. The mortgage-credit institutes' need to be able to issue bonds on an ongoing basis has increased substantially in recent years. Basel III and macroprudential regulation are addressed in two special-topic chapters. Basel III stipulates stronger capital and liquidity requirements. The transitional period will give the institutions time to make the necessary adjustments, but they should already now plan how to do so. Macroprudential regulation is intended to address systemic risks in the financial system in order to promote financial stability for the benefit of economic growth and welfare.

Date: 26-05-2011


      Stress tests, 2nd half 2010

The Danish financial sector as a whole is assessed to have sufficient capital and liquidity to meet the expected economic scenario. It is, however, important to have strong capital buffers as a provision against unforeseen events. The banks should continue to consolidate and strengthen their capitalisation, while also preparing for forthcoming regulation and for repaying government capital injections, if any, from 2012 onwards. At the same time, the banks should strengthen their liquidity so that they are prepared for the expiry of issuances based on individual government guarantees in 2012-13.

Date: 18-11-2010


      Financial stability 2010

The banking institutions' earnings in 2009 were affected by the Danish and interna-tional economic slowdown, and write-downs on loans were generally substantial. The banking institutions improved their capital bases during the year. According to Danmarks Nationalbank's stress test, the major Danish banking institutions gener-ally have sufficient capital buffers to weather the expected economic development until 2012. The banking institutions' write-downs in 2010 are expected to be slightly lower than in 2009, but will remain relatively high. A few institutions may find it diffi-cult to meet the statutory solvency requirement. Liquidity has improved over the past year for the banking institutions overall, although there is pronounced dispersion between the institutions. The institutions need to be prepared for the expiry of the general government guarantee on 30 September 2010. This includes exploiting the opportunity of buying individual government guarantees if required.

Date: 11-05-2010


      Stress tests, 2nd half 2009

Content:The Banks' Resilience; Top-Down Stress Test; Bottom-Up Stress Test; Stress Testing in Cooperation between Danmarks Nationalbank and Large Danish Banks

Date: 08-02-2010


      Financial stability, 1st half 2009

2008 and the first half of 2009 have been dominated by the international financial crisis. After a number of years with high profits, Danish banks have had to make large write-downs on loans, and several banks had negative earnings in 2008. Looking ahead, the banks are faced with considerable challenges in terms of restoring confidence and making the necessary adjustments. The global economy is set to slow down further and credit risk is rising, so substantial write-downs can also be expected in the coming quarters. Stress tests of the largest 14 banks show that if the opportunities for capital injections under Bank Rescue Package II are utilised, these banks will be relatively robust. Danmarks Nationalbank finds it positive that most large and medium-sized Danish banks have indicated that they will apply for government capital injections. Due to the economic uncertainty, the banks should carefully consider the option of being able to convert such capital injections into share capital. In an uncertain world it is an advantage for the banks to have extra buffers against any future losses.

Date: 04-06-2009


     Financial stability, 2nd half 2008

The international financial crisis has affected the Danish banks. Several of them are faced with the challenge of reducing their balance sheets after a number of years of extremely strong lending growth. Under the current market conditions, negative financial results may on its own critically influence the banks' ability to obtain financing. This applies especially to banks with relatively large deposit deficits. So far, the government guarantee for the banks' unsecured claims has facilitated the banks' access to liquidity. Stress tests nevertheless show that the banks may encounter problems if the financial turmoil markedly affects the real economy. Against this background, the assessment is that, like many other countries, Denmark must implement a scheme for temporary capital injection to sound, well-managed Danish bankinginstitutions on terms that are as close to market terms as possible.

Date: 12-01-2009


      Financial stability 2008

The international financial markets have been characterised by turmoil since the summer of 2007. This is reflected in Danish banks' financial statements for 2007. Earnings rose in the 1st half of the year, but the 2nd half marked a turning point for many banks after a prolonged period of earnings growth. Looking ahead, the banking sector will continue to be affected by the financial turmoil and the less favourable outlook for the Danish economy. Risks to financial stability have become more pronounced recently. The banks have become more exposed in the light of their growing lending portfolios and the reduction of their capital buffers in recent years. The Danish financial sector is deemed to be sufficiently resilient to withstand major economic shocks.

Date: 15-05-2008


      Financial stability 2007

The report begins with Danmarks Nationalbanks assessment of the financial stability in Denmark. This is followed by the analysis of financial stability, with emphasis on the development in the financial sector. Finally the report consists of topical issues of relevance to financial stability. This year it contains: Danmarks Nationalbank's policy for oversight of the Danish financial infrastructure, effects of new accounting and capital-adequacy rules, macro stress testing of Danish households, macro stress testing of the financial system and Danmarks Nationalbank's failure-rate model, KIM.

Date: 23-05-2007


      Financial stability 2006

The annual report Financial stability assesses financial stability in Denmark, with emphasis on financial institutions, markets and payment systems. The report consists of two parts. The first part starts with an analysis of the development in the financial sector, with emphasis on the banking institutions. This is followed by a chapter on the development in the corporate sector and the households. Next the developments in the financial markets are reviewed and finally follow a chapter about the framework for Financial stability. The second part of the report consists of topical issues of relevance to Financial stability. This year it contains tree issues: Advanced approaches to calculation of capital requirements under Basel II, Banks' liquidity and finally protection of settlement in Danish payment systems.

Date: 02-06-2006


      Financial stability 2005

The annual report Financial stability assesses financial stability in Denmark, with emphasis on financial institutions, markets and payment systems. The report includes analyses of Danish banks, corporates and households. Topical issues of relevance to financial stability are also discussed

Date: 31-05-2005


      Financial stability 2004

The two-part report first analyses the development in financial stability, with emphasis on the banking institutions. The second part of the report considers three current topics: branches of foreign credit institutions, systemic risks in the Danish market for uncollateralised overnight deposits, and market-based risk measures for banks

Date: 28-05-2004


      Financial stability 2003

The report is in two parts. The first part starts with an analysis of the development in the financial sector, with emphasis on the banking institutions. This is followed by a chapter on the development in the corporate sector and the households, and finally the developments in the financial markets are reviewed.

Date: 19-05-2003


      Financial stability 2002

Danmarks Nationalbank publishes an annual financial-stability report for Denmark. The purpose of analysing financial stability is to assess whether the financial sector is sufficiently robust to withstand problems in this sector impeding the functioning of the financial markets as efficient providers of capital for companies and households.

Date: 31-05-2002


 
 


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