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Financial stability 2004

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Contents

Introduction

Real-economic development
The international economy
The Danish economy

Financial stability analysis

The financial sector
Nordic groups and Danish banking institutions
Resilience of Nordic groups and Danish banking institutions
Mortgage credit
Pension companies

The corporate sector and the households
Corporate sector
Agriculture
Households

Financial markets
Market trends
Market impacts on banks
Financial stability and volatility in the financial markets

Issues related to financial stability

Branches of foreign credit institutions

Systemic risks in the danish market for uncollateralised overnight deposits
The uncollateralised overnight money market
Method and limitations
Results

Market-based risk measures for banks
Market-based analyses
Share-based risk measures

Glossary of financial terms

Charts

Chart

  1. GDP and employment in Denmark, Germany and the Euro area, 1991-2003
  2. Private consumption and consumer confidence, 1990-2004
  3. Solvency and core capital ratios for Nordic groups, category A, and Danish banking institutions in categories B and C, 1998-2003
  4. Percentage change in number of branches, the Danish Financial Supervisory Authority's categories 1, 2 and 3, 2000-02
  5. Corporate lending by Nordic groups, category A, and Danish banking institutions in categories B and C, 2001-04
  6. Growth in lending and losses and provisions as a ratio of loans and guarantees, all banking institutions in Denmark, 1980-2003
  7. Losses and provisions as a ratio of loans and guarantees for Nordic groups, category A, and Danish banking institutions in categories B and C, 1998-2003
  8. Net fee and commission income as a ratio of total net interest, fee and commission income, categories A, B, and C, 1998-2003
  9. Number of Nordic groups with a deficit on an increase in losses on loans and guarantees, 2002 and 2003
  10. Number of Nordic  groups with a solvency ratio below 8 on an increase in losses on loans and guarantees, 2002 and 2003
  11. Number of banking institutions in categories B and C with a deficit on an increase in losses on loans and guarantees, 2002 and 2003
  12. Number of banking institutions in categories B and C with a solvency ratio below 8 on an increase in losses on loans and guarantees, 2002 and 2003
  13. Growth in lending by banking institutions and mortgage-credit institutes, 1988-2003
  14. Development in the pension companies' investment asset structure, 1998-2003
  15. Collective bonus potential and excess capital base of the individual pension companies after a "red" scenario, 2003
  16. Incidence of compulsory liquidation in the corporate sector, 1995-2004
  17. Return on assets for the 10 per cent least profitable companies in various sectors, 1995-2003
  18. Solvency of the 10 per cent least solvent companies in various sectors, 1995-2003
  19. Estimated failure rates of the 10 per cent weakest companies, 1995-2003
  20. Dispersion of estimated failure rates, 1995-2003
  21. Estimated failure rate, return on assets and solvency for companies subject to failure in the period prior to failure, median
  22. Banking institutions' and mortgage-credit institutes' corporate lending by sector, end-2003
  23. Sector breakdown of the banking institutions' loss ratio, 2000-03
  24. Effect of an increase in interest expenditure in the 10 per cent of companies with the highest interest expenditure as a ratio of total assets, 2003
  25. Indebtedness of full-time farms, 1990-2002
  26. Registrations of late payments from credit providers and all creditors, 2002-04, index
  27. The households' debt burden in the Nordic countries, 1995-2003
  28. The households' interest burden in the Nordic countries, 1995-2003
  29. Housing wealth as a ratio of the households' disposable income, end-2002
  30. The households' debt to credit institutions as a ratio of housing wealth and disposable income, 2002-03
  31. Dispersion of annual changes in macroeconomic variables, 1990-2003
  32. Stock indices in the USA, the Euro area and Denmark, and implied volatility in the USA, 2000-04
  33. 10-year yields in the USA, Germany and Denmark, and implied volatility in the Euro area, 2000-04
  34. Credit spreads for government and corporate bonds with low ratings, 2001-04
  35. Trading volume on the Nordic stock exchanges, index, 2001-04
  36. Stock-price development for Nordic groups, category A, and Danish banking institutions category B, 2000-04
  37. Historical volatility of US stock and bond returns, 1995-2004
  38. Estimates of foreign banks' shares of the banking sector in selected countries, 2001-02
  39. Systemic effects on the 10 days with the highest turnover
  40. Sensitivity to buffer size
  41. Credit spreads for the Nordic groups, 2002-04
  42. Development in share prices for Danish banking institutions, 2000-04
  43. Average share-price gap for the Nordic groups, 1990-2004
  44. Distance to default for the Nordic groups, 1999-2003
  45. Buffers for the Nordic groups used in the risk measures distance to default and distance to insolvency as a ratio of assets, 2003
  46. Distance to insolvency for the Nordic groups, 1999-2003
  47. Buffers for Nordic groups, 1999-2003
  48. Volatility in share prices for the Nordic groups, 1999-2003

Tables

Table

  1. Official forecasts for the Danish economy, 2004 and 2005
  2. Overview of the categories applied
  3. Number of banks with a negative result before tax, 2002-03
  4. Calculated effects of the "red" risk scenario, 2003
  5. Frequency of extreme returns, 1995-2004

Boxes

Box

  1. Profits for Nordic groups, category A, and Danish banking institutions in categories B and C, 2002-03
  2. Nykredit's aquisition of Totalkredit
  3. New accounting rules for financial companies
  4. Companies' estimated failure rates broken down by banks
  5. Structure of fee and commission income in the Nordic groups, category A
  6. The smallest banking institutions, the Danish Financial Supervisory Authority's category 4
  7. Data and method for sensitivity and stress tests
  8. Structural development
  9. Insurance technical terms used
  10. The pension companies' use of interest-rate derivatives
  11. Failure-rate model
  12. Characteristics of home financing in the Nordic countries
  13. Examples of cross-border groups in the Nordic countries and the EU
  14. Evolution of the framework for financial integration in the EU
  15. The European Company
  16. Branch structures and deposit guarantee schemes
  17. Data for simulations
  18. Treatment of branches of foreign institutions in the analysis
  19. Results from other countries
  20. Other central banks' use of market-based indicators
  21. Share-based risk measures

    The small picture on the cover shows a section of the national coat of arms as redesigned in 2003 as the motif on the reverse of the 20-krone.



    Danmarks Nationalbank
    Havnegade 5
    DK-1093  Copenhagen K
    Telephone: +45 33 63 63 63
    Telefax: +45 33 63 71 15
    Web site: www.nationalbanken.dk

    Text may be copied from this publication provided that Danmarks Nationalbank is specifically stated as the source. Changes to or misrepresentation of the content are not permitted.

    Please direct any enquiries concerning Financial stability to Danmarks Nationalbank, Financial Markets, by e-mail: kma@nationalbanken.dk.

     Explanation of symbols:
    -    Magnitude nil
    0   Less than one half of unit employed
    ·    Category not applicable
    …  Numbers not available
    Details may not add due to rounding.

    This publication is based on information available up to 23 April 2004.

    Print:    Schultz Grafisk A/S
    ISSN:   1602-057X
                1602-0588 (online)


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