Credible and practically applicable resolution plans for systemically important financial groups, SIFIs, are essential to maintaining financial stability in a crisis situation without the use of government funds.
"During the financial crisis, the Danish government had to step in and use taxpayer funds for the resolution of distressed financial enterprises. If we are to avoid a similar situation in the future, it is necessary to adjust legislation so that the losses are born first and foremost by shareholders and creditors when a distressed financial group is resolved or restructured," says Governor Lars Rohde, Danmarks Nationalbank.
The Danish Financial Supervisory Authority is expected to lay down principles for resolution of SIFIs in crisis situations in the near future.
Today, Danmarks Nationalbank has issued a recommendation to apply a single point of entry, SPE, strategy for SIFI groups due to their deeply integrated financial and technical structures. This requires that a consolidated minimum requirement for own funds and eligible liabilities, MREL, for absorbing losses and recapitalisation in a resolution situation is set for the group.
It is necessary that the special Danish provisions exempting mortgage banks from MREL are abolished so that the mortgage banks can be included in the group strategies.
Enquiries can be directed to Ole Mikkelsen on tel. +45 3363 6027.