Analyses and recommendations


Danmarks Nationalbank monitors and assesses financial stability in Denmark by performing financial sector and systemic risk analyses. The purpose of the analyses is to assess whether the financial system is robust overall and whether systemic risks are escalating.

Financial sector analyses

Danmarks Nationalbank's analyses of the Danish financial sector are primarily based on large and medium-sized banks, which account for the largest part of the Danish banking sector's total balance sheet, as well as on mortgage banks. The main focus of the analyses is to assess whether the banks are robust overall. Credit risk is a key risk factor, i.e. the risk of suffering a loss due to borrowers not fulfilling their obligations. As a result, Danmarks Nationalbank's analyses also focus on the large debt of Danish households and the financial situation in the corporate sector. Further, Danmarks Nationalbank analyses current financial stability topics such as the European banking union, encumbrance of assets and new regulations.

Danmarks Nationalbank's stress test model provides the basis for a general assessment of the robustness of the banks' capital adequacy in various scenarios in which economic developments are significantly more negative than expected due to e.g. a global crisis. Danmarks Nationalbank also analyses the banks' liquidity situation, including their resilience under various liquidity stress scenarios.

In order to monitor systemic risks, Danmarks Nationalbank follows the development using indicators and analyses. The aim is to detect escalating systemic risks at a sufficiently early stage to enable intervention before they materialise. For example, it is relevant to monitor the total lending volume, which typically grows excessively ahead of financial crises. Analyses may also relate to structural problems, such as the interconnection in the financial system. The financial institutions are closely interconnected, entailing that problems in one bank may spread to the rest of the financial system.

The international financial crisis put focus on macroprudential policy at a national as well as international level. Macroprudential policy should contribute to preventing systemic risks in the financial system, cf. the box. Experience in the use of macroprudential instruments is still limited as the instruments are typically still under development. Danmarks Nationalbank contributes to this work by developing macroprudential instruments such as the countercyclical capital buffer.

Recommendations and views

Danmarks Nationalbank's assessment of financial stability is published in the publication series Financial stability. In addition to analyses the publications contain specific recommendations for relevant parties. The recommendations are updated regularly. Danmarks Nationalbank's current recommendations can be found in the menu to the left. Danmarks Nationalbank also states its views on issues of relevance to financial stability, including new financial legislation, in speeches, consultation responses etc.

PUBLICATIONS ON FINANCIAL STABILITY

Danmarks Nationalbank publishes a number of analyses where the financial stability in Denmark is assessed :

Financial stability and stress test
Articles from the Monetary Review
Working Papers
 

Add to this the following international analyses that are relevant in respect of financial stability in Denmark:

IMF reports
 

MACROPRUDENTIAL POLICY

Macroprudential policy is a term for measures taken to prevent systemic risks in the financial system overall. Macroprudential policy aims to reduce the risk of periods of financial instability when the financial system fails to provide the financial services that are vital to the overall economy. Focus is on the overall financial system and its interaction with the economy. It is impacted, among other factors, by the structure, framework conditions and behaviour of the financial sector as well as the interaction between the individual market participants.