Lengthy period of increasing risk appetite in parts of the banking sector

Analysis - May 2018 - No. 6

Authors Danmarks Nationalbank
Subject Financial stability; Financial risks; Financial regulation; Macroprudential policy; Denmarks Nationalbank´s analyses of financial stability
Type Analysis
Year 2018
Published 31 May 2018
The times are good for the financial sector and the risk appetite is high. Credit standards are under pressure and have been eased for quite a while. Especially the medium-sized banks have been easing credit standards and have started gaining market shares. It is essential that the competitive pressure does not ultimately affect the risk appetite of the banking system overall. This development underscores the importance of having well-capitalised banks and of building up the countercyclical capital buffer so that the institutions have funds to mitigate the effects when the economy reverses.