Low interest rates and ample lending capacity put pressure on credit standards

Authors Danmarks Nationalbank
Subject Press releases from Danmarks Nationalbank
Type Press Releases  
Year 2018
Published 30 November 2018
​Following a long period of low interest rates and accommodative financial conditions, there is a basis for banks to assume greater risks when granting loans. That is the conclusion in Danmarks Nationalbank's Financial Stability analysis.

30 November 2018

Growth in bank lending is weak, but with substantial divergence within the sector. And bank lending remains at a high level relative to the size of the Danish economy.

Following a long period of low interest rates and accommodative financial conditions, there is a basis for banks to assume greater risks when granting loans.

That is the conclusion in Danmarks Nationalbank's Financial Stability analysis.

Viewed in isolation, bank lending to households has declined in recent years. Data shows that the largest banks have reduced their lending to households, but the medium-sized banks have increased their lending.

The medium-sized banks are increasing their lending by opening branches outside their traditional bases. The number of bank branches has been falling for several years, but the medium-sized banks have added 19 new branches in Aarhus and Copenhagen, among other places.

"While competition between banks is healthy, it is important that the banks maintain high credit standards to ensure that they do not advance in new markets on the basis of excessive risk-taking," says Governor Lars Rohde, Danmarks Nationalbank.

The medium-sized banks based outside Copenhagen have increased their lending by 65 per cent in the growth areas over the last two and a half years.

See the full Financial Stability analysis at Danmarks Nationalbank's website.

Enquiries can be directed to press advicer Ole Mikkelsen on tel. +45 3363 6027.