3 June 2025
The ongoing trade conflict has worsened the global growth outlook, while the risk of new shocks to the financial markets has become a more persistent threat due to the high level of global uncertainty regarding trade policy. As a small, open economy, Denmark will be affected by the trade conflict, and the financial sector may experience a particular impact on bank lending to export-sensitive industries.
"Uncertainty is detrimental to financial markets and the economy, and if the trade conflict escalates, it will undoubtedly weaken the global economy. A decline in Danish exports will affect Danish companies and may lead to losses on bank lending," says Peter E. Storgaard, Head of Financial Stability at Danmarks Nationalbank.
Credit institution's profits remained high in 2024, in part due to low loan impairment charges. The banks' core earnings make up the first line of defence against potential losses. Danmarks Nationalbank's biannual stress test of the financial sector shows that Danish institutions can withstand a severe recession scenario.
"In times of high uncertainty, financial stability may come under strain. The Danish financial sector is well equipped to handle challenges related to the effects of the trade conflict on the Danish economy, which our latest stress test emphasises. In the current risk environment, a robust liquidity position and capitalisation of banks is crucial," says Storgaard and continues:
Every six months, Danmarks Nationalbank publishes its Financial stability analysis, which assesses and makes recommendations regarding financial stability in Denmark.
The most recent analysis was published today at www.nationalbanken.dk.
Journalists may direct any queries Peter Levring, Communications and Press Officer, by telephone on +45 2620 1809 or by email at pnbl@nationalbanken.dk.