Danish banks risk losses on export-sensitive companies, but are well equipped to handle possible losses as a result of a global tariff war. This is the assessment from the Nationalbank in the latest semi-annual assessment of financial stability in Denmark, which was published on Tuesday.
It is prepared on the basis of a so-called stress test, which simulates how an economic crisis could affect Danish banks. In this connection, the bank's economists note that uncertainty about the global economy has grown over the past six months, and that this has also spread to the financial markets.
However, thanks to healthy liquidity and high equity, Danish banks will be quite resilient to new shocks.
- The financial sector in Denmark is well equipped to handle the current challenges associated with the effects of the trade conflict on the Danish economy, which our latest stress test underlines. In the current risk environment, a healthy liquidity position and capitalization in the banks are crucial, is the assessment of Peter E. Storgaard, Head of Financial Stability at the Nationalbank.
One of the reasons for the banks' healthy finances is the high earnings that the banks have had in recent years as a result of high interest rates. At the same time, losses on distressed customers have been limited.
However, the Nationalbank also notes that there is a risk that things will turn around. Both because interest rates and earnings are falling, but also because some export companies - which are also bank customers - could get into trouble if world trade comes to a standstill.
In the report, the Nationalbank therefore warns, among other things, against relaxing the regulation of the banks too much. In connection with the discussion of how the EU can improve its competitiveness, there has been talk of reducing and simplifying the many requirements for banks that arose in the wake of the financial crisis.
But it is important that the simplification does not come at the expense of financial stability, emphasizes the Nationalbank.
/ritzau/
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