Foreword and Structure of the Report

Danmarks Nationalbank defines financial stability as a condition whereby the overall financial system is robust enough for any problems within the sector not to spread and prevent the financial markets from functioning as providers of capital and financial services.

In the annual publication Financial stability, Danmarks Nationalbank assesses financial stability in Denmark, with emphasis on financial institutions, financial markets and payment systems. The analyses are based on banks in the Danish Financial Supervisory Authority's groups 1 and 2.

Significant risks to the financial system are identified, including situations that are very unlikely to arise, but which might have major consequences for the economy. On the basis of earnings and buffers in the financial sector, the sector's resilience to such events is assessed.

The chapter Financial Institutions and Financial and Economic Developments primarily describes the development in Danish banks and the financial, macroeconomic and structural framework for the banks' operations.

The chapter The Risk Scenario gives an account of significant risks to the financial sector. These are risks associated with financial market developments, macroeconomic risks of both international and Danish origin and the vulnerabilities characterising the financial sector in Denmark.

In the chapter Testing the Banks' Resilience risks are translated into quantitative, static and dynamic stress test scenarios, and the resilience of Danish banks to these scenarios is tested. This chapter also includes a section on the market's assessment of the Nordic groups.

In addition, the report contains a chapter outlining the development in the financial statements of a wide range of banks, a special chapter on payment systems, a chapter on measures to enhance stability and a topical chapter on Danmarks Nationalbank's stress test model.