Broad agreement on new requirements for banks

A broad majority of the Danish political parties today agreed to strengthen the regulation of Danish banks and mortgage-credit institutions, in particular in relation to large systemic institutions (SIFIs), and agreed on establishing a governing board in the Danish Financial Supervisory Authority (FSA).
Thursday, October 10, 2013

Today, the Danish Minister for Business and Growth, Henrik Sass Larsen, concluded a political agreement with broad political support, which tightens requirements for Danish banks and mortgage-credit institutions and establishes a governing board in the Danish FSA. The agreement is concluded between the Danish Government and the political parties which have supported the previous bank packages (Venstre, Dansk Folkeparti, Liberal Alliance and Det Konservative Folkeparti).

Minister of Business and Growth, Henrik Sass Larsen:

I am very pleased that we now introduce the strictest requirements for banks and mortgage-credit institutions, and especially for the SIFIs, since the introduction of the Basel-system. It is essential that we strengthen the soundness of banks and mortgage-credit institutions in order to better withstand future financial crises.
By concluding this agreement, we are sending a clear message that Denmark has a strong sector of banks- and mortgage-credit institutions.
Stability and confidence in our banks and mortgage-credit institutions will promote growth and employment in Denmark. The agreement is therefore a further step towards bringing the Danish economy back on track. 

The agreement consists of three main elements. Firstly, special requirements for SIFIs are introduced. These institutions are so large that, if they encounter difficulty, this could have far-reaching negative consequences for households, enterprises and the national economy in general. In the future these institutions must therefore be better capitalised than other institutions in order to reduce the risk that they get into difficulties.

Secondly, requirements for Danish banks and mortgage-credit institutions are tightened, among other things in the form of stricter requirements to the institutions’ capital and liquidity so that they can better resist future crises.

Thirdly, the Danish FSA’s supervisory efforts are strengthened by establishing a governing board. The board will take over the present tasks of the Financial Council and will also be providing technical, organisational and managerial assistance to the management team of the Danish FSA. In this way, the management of the organization of supervisory activities is strengthened.

With the agreement – and based on the most recent financial statements – seven institutions are expected to be identified as SIFIs: Danske Bank, Nykredit, Nordea Bank Danmark, Jyske Bank, BRFkredit, Sydbank and DLR Kredit.

To follow up on the agreement, the Government will as soon as possible introduce the legislation required to amend Denmark’s financial regulations. The SIFI regulations will take effect from 1 January 2015. The legislation transposing CRD4, etc., into Danish law is expected to come into force in the first quarter of 2014.