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 and financial risks

Financial stability, 2nd half 2008

The international financial crisis has affected the Danish banks. Several of them are faced with the challenge of reducing their balance sheets after a number of years of extremely strong lending growth. Under the current market conditions, negative financial results may on its own critically influence the banks' ability to obtain financing. This applies especially to banks with relatively large deposit deficits. So far, the government guarantee for the banks' unsecured claims has facilitated the banks' access to liquidity. Stress tests nevertheless show that the banks may encounter problems if the financial turmoil markedly affects the real economy. Against this background, the assessment is that, like many other countries, Denmark must implement a scheme for temporary capital injection to sound, well-managed Danish bankinginstitutions on terms that are as close to market terms as possible.