Analyses focus on current issues of particular relevance to Danmarks Nationalbank’s objectives. The analyses may also contain Danmarks Nationalbank’s recommendations. They include our projections for the Danish economy and our assessment of financial stability. Analyses are targeted at people with a broad interest in economic and financial matters.
Global uncertainty affects the financial sector
Financial markets have shown considerable fluctuations as a result of higher US tariffs and uncertainty associated with the global economic outlook. A downturn in global trade and economic growth will also affect Danish businesses and households. The banks are in a good position to deal with potential losses associated with the trade conflict’s effects on the Danish economy. This is partly due to the current high profits and to financial regulation since the financial crisis which has strengthened the resilience of banks. The geopolitical situation continues to affect the cyberthreat and emphasises the importance of continuing to work on strengthening cyberresilience in the financial sector.
Key messages
Why is it important?
Financial stability is a prerequisite for the financial sector to fulfil its socially critical tasks. Even during a crisis, customers should still be able to borrow money for sound and creditworthy projects and be able to make and receive payments. This requires the financial sector to be resilient enough to withstand economic and financial crises, helping to ensure Denmark has a resilient economy.
Danmarks Nationalbank publishes its Financial stability analysis biannually, which summarises the bank’s assessments of and recommendations for financial stability in Denmark. The analysis sheds light on whether vulnerabilities in the financial system can arise due to the lending, liquidity management or capital planning of credit institutions. It also presents the results of Danmarks Nationalbank’s biannual stress test, which helps to assess whether the largest credit institutions have sufficient capital to handle a sharp economic downturn. The analysis can also cover other issues relevant to financial stability. Examples include pension and life insurance companies, working with cyber risks, digitalisation or the impact of climate change on the financial sector.
Main chart
Geopolitical tensions and trade conflict characterise the risk outlook
Note:
Index of geopolitical risk and trade policy uncertainty. The index is based on automated text searches and is calculated by the number of articles on the topic as a proportion of the total number of articles from a range of US newspapers. The volatility index is indicated by the VIX index, which measures expected price fluctuations in the US Standard & Poor’s 500 stock index. Latest observation is 30 April 2025 for trade policy uncertainty and geopolitical risk, and 23 May 2025 for volatility index.
Source:
Dario Caldara and Matteo Iacoviello, Measuring Geopolitical Risk, American Economic Review, April, 112(4), 2022, pages 1194-1225. Dario Caldara, Matteo Iacoviello, Patrick Molligo, Andrea Prestipino and Andrea Raffo, The economic effects of trade policy uncertainty, Journal of Monetary Economics, no. 109, 2020, pages 38-59. Macrobond.