Analysis focuses on current issues of particular relevance to Danmarks Nationalbank’s objectives. The analyses may also contain Danmarks Nationalbank’s recommendations. They include our outlook for the Danish economy and our assessment of financial stability. The series is targeted at people with a broad interest in economic and financial matters.
Financial stability, 1st half 2009
2008 and the first half of 2009 have been dominated by the international financial crisis. After a number of years with high profits, Danish banks have had to make large write-downs on loans, and several banks had negative earnings in 2008. Looking ahead, the banks are faced with considerable challenges in terms of restoring confidence and making the necessary adjustments. The global economy is set to slow down further and credit risk is rising, so substantial write-downs can also be expected in the coming quarters. Stress tests of the largest 14 banks show that if the opportunities for capital injections under Bank Rescue Package II are utilised, these banks will be relatively robust. Danmarks Nationalbank finds it positive that most large and medium-sized Danish banks have indicated that they will apply for government capital injections. Due to the economic uncertainty, the banks should carefully consider the option of being able to convert such capital injections into share capital. In an uncertain world it is an advantage for the banks to have extra buffers against any future losses.