Danish banks 'robust' says central bank

The National Bank of Denmark on June 6 published its Financial Stability Report 2012. In it, the central bank described the largest banks as "robust" and discussed the declining number of financial institutions in the country.

The report delivered an overview of stress testing that had been carried out on financial institutions in Denmark, which concluded that crucially, the 13 largest banks in the country are considered to be "robust".

Furthermore, the report said that for the four banks that in the autumn of 2011 participated in the capital test performed by the European Banking Authority, excess capital adequacy also remained positive in all the central bank's stress test scenarios, with common equity tier 1 capital above 9% – even when government capital injections were not included.

Generally, the central bank found that large banks had strengthened their capital bases in 2011. However, the report stressed it was "important for banks with low excess capital adequacy to continue their efforts to strengthen their capital bases".

The trend of declining numbers of banks in Denmark was noted, with the central bank explaining that during the crisis, some had been acquired by the national winding-up company, the Financial Stability Company, while others had merged. "Looking ahead, the downward trend in the number of banks is likely to continue," the central bank said.

The Danish stress tests also revealed that a few smaller banks in the country needed to strengthen their capitalisation, especially from 2014. However, the central bank was confident any problems among small banks could be solved within the existing framework for mergers and resolution.