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.

Financial stability and financial risks

Financial stability, 1st half 2015

Most credit institutions have put the financial crisis behind them. Loan impairment charges are decreasing, capitalisation has increased and in general the excess liquidity cover is high. Capital requirements will in-crease in the coming years and the banks should maintain a high degree of capitalisation relative to the fully phased-in capital requirements.

​In recent years, bank earnings have been under pressure due to low de-mand for new loans and low interest rates. Negative interest rates could add to this pressure.

The combination of a level of capitalisation that for many institutions ex-ceeds the current capital requirements considerably, high excess liquidity cover, very low interest rates and limited demand for new loans creates a basis for fiercer competition for customers. Competition may intensify further in the near future, and it is important that the banks do not lower their credit standards.

The markets expect interest rates in Europe and Denmark to remain low in the coming years. The combination of an upswing in the Danish econ-omy and extraordinarily low interest rates means that the conditions for a build-up of systemic risks exist. It could be brought on by e.g. excessive risk appetite among credit institutions and borrowers. The extraordinarily low interest rates could speed up this development and lead to faster build-up of systemic risk.