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.
Migration of risky corporate customers between banks
When banks grant credit, they often do not know the payment history of customers from their previous banks. This lack of information can lead to a build-up of risk in the sector, as credit-impaired customers switch between banks and thereby obtain additional credit. Between 2022 and 2025, lending to corporate customers previously listed as credit-impaired in the Credit Register was limited. Currently, the migration of risky corporate customers between banks does not in itself constitute a risk to financial stability. However, it is important to be aware that the migration of risky customers can lead to increased risk in the sector at times when lending to these customers accounts for a larger share of total lending.
Key messages
Why is it important?
When banks grant a new loan, they must consider the probability that the customer will not be able to repay it. In this context, the customer’s previous payment history is important, but banks generally do not know new customers’ histories from previous banking relationships. This may imply that customers who have been credit-impaired in one bank subsequently take on new debt in another bank on terms that do not reflect the true credit risk. If individual banks systematically accept such customers, it could lead to a build-up of risk at those banks and to increased risk-taking in the sector more generally if other banks lower their credit standards in order to compete. Developments in the migration of risky corporate customers between banks are therefore included in Danmarks Nationalbank’s ongoing assessment of risks in the financial sector. Historically, corporate customers have been a source of significant losses for banks, especially during periods of economic crisis, and it is therefore important that they continuously ensure a solid credit quality.
Main chart
Medium-sized banks extend a higher share of their new loans to corporate customers who have previously been credit-impaired in other banks, compared with large banks.
Note:
The chart shows large and medium-sized banks’ share of new lending to new corporate customers who have previously been credit-impaired in other banks. New customers are corporate customers who either switch banks or become a customer of an additional bank. Market share indicates new lending to new corporate customers by large and medium-sized banks as a share of total new lending to new corporate customers. Large banks consist of Danske Bank, Nordea, Spar Nord, Sydbank, Jyske Bank, Nykredit Bank and Arbejdernes Landsbank. Medium-sized banks consist of Santander, Sparekassen Danmark, Ringkjøbing Landbobank, Sparekassen Kronjylland, Sparekassen Sjælland-Fyn, Middelfart Sparekasse and Lån & Spar Bank. Based on quarterly data for 2022-25.
Source:
Credit Register.