The Danish financial sector


In Denmark, banks and mortgage banks are the major credit providers. The banking and mortgage banking sector is characterised by a high degree of concentration and is among the largest in Europe, measured as a ratio of GDP.

Banks and mortgage banks are of great significance to the Danish economy, accounting for the major share of credit intermediation in society. Banks contribute to the economy by , inter alia, converting short-term deposits to long-term loans (maturity transformation), spreading risks and ensuring that payments between counterparties are effected. Mortgage banks exclusively provide loans secured on real property. The loans are solely financed by issuing bonds - mortgage banks do not accept deposits - and for that reason the mortgage banks are the largest bond issuers in Denmark. Households can only obtain mortgage loans of up to 80 per cent of the value of properties used as permanent residences.

Banking and mortgage banking sector characteristics

The sector is characterised by a few large international groups and many small institutions. The large groups account for the majority of total lending, and the sector is among the largest and most concentrated in Europe, measured as a ratio of GDP. At end-2013, lending by banks and mortgage banks to households and the corporate sector in Denmark accounted for approximately 180 per cent of GDP.

Banks and mortgage banks are grouped into systemically important financial institutions (SIFIs) and non-systemically important financial institutions, cf. the box on the identification of SIFIs in Denmark. SIFIs are characterised by undertaking activities that are of significance to the overall economy.

Regulation of the sector

Given the significance of the financial sector to the overall economy, financial institutions are subject to more comprehensive regulations than other firms. The financial crisis put renewed focus on the regulation of the financial sector and, inter alia, tightened the requirements for the financial institutions' capital and liquidity. The purpose of the new tightened regulations is to make the financial sector more resilient to future financial crises. The regulation also comprises rules for the handling of distressed financial institutions.

Danmarks Nationalbank states its views on new financial legislation by way of e.g. consultation responses. The Danish Financial Supervisory Authority monitors the financial institutions' compliance with Danish financial regulations.

CRITERIA FOR IDENTIFICATION OF SIFIS

In Denmark, systemically important financial institutions (SIFIs) are identified at group level once a year. An institution is identified as a SIFI if at least one of the following quantitative criteria is met for two consecutive years:

  • Balance sheet as a percentage of GDP > 6.5 per cent.
  • Lending as a percentage of total sector lending > 5 per cent.
  • Deposits as a percentage of total sector deposits > 5 per cent.

SIFIs are subject to a SIFI capital buffer requirement of 1-3 per cent of their risk-weighted assets depending on their systemic importance.

In June 2014, the following groups met the SIFI criteria: Danske Bank, Nykredit Realkredit, Nordea Bank Danmark, Jyske Bank, Sydbank and DLR Kredit.​