The Danish Financial Supervisory Authority (Danish FSA) conducted a study on the impact of COVID-19 on the Danish mortgage market, issued clarifications on requirements for internal ratings-based (IRB) models, and proposed guidelines on assessment of money laundering risks. Additionally, the Central Bank of Denmark (Danmarks Nationalbank) has published results of lending survey and set out recommendations on use of artificial intelligence by banks.
Below are the key highlights of the recent updates:
- Danish FSA has investigated the impact of COVID-19 pandemic on the Danish mortgage market and the analysis contains a review of conditions and mechanisms in the market, including the actions of key players, and sets out a number of experiences from this. The analysis notes that there is no evidence that the credit institutions capital or liquidity positions were challenged to such an extent that they became binding and thus limited the credit institutions' ability to be market makers.
- Danish FSA published clarification on requirements for risk-weight of exposures in Norway for institutions that use the internal ratings-based method for calculating credit risk. Danish FSA mentioned that the requirements should apply to all institutions that have exposures in Norway. For Danish internal ratings-based institutions that have exposures in Norway, the Danish FSA will, therefore, apply the same interpretations that will apply to the Norwegian banks.
- Danish FSA is consulting on a draft guideline on risk assessment of associations in connection with the implementation of customer due diligence procedures pursuant to the Money Laundering Act. The purpose of the guide is to provide companies with a tool that they use in their risk assessment of associations when they have to carry out customer due diligence procedures according to the money laundering rules. Comments are requested until April 20, 2022.
- The Central Bank of Denmark published lending survey results, which show, for first quarter of 2022, six large and medium-size banks, out of the 16 entities surveyed, report that they expect to tighten credit standards for private customers. Apart from the banks’ expectation of their overall credit standards, banks also report how they expect a number of factors to affect their credit standards in the following quarter. Almost half of the banks expect that changes in, among other things, perception of risk and appetite for risk will move credit standards in a tighter direction in the second quarter, which is related to the private customers’ increasing expenses.
- The Central Bank of Denmark's data expert recommend that financial companies should live up to ethical and regulatory standards as they increase their use of artificial intelligence. The recommendations include preparing and maintaining an overview or catalog of various artificial intelligence models that the organization uses, evaluating the models, setting aside resources to evaluate the models, and creating a forum with other participants from the financial sector to share experiences and best practices in the field.
- Study on Mortgage Market
- Internal Model Requirements
- Proposed Guidance on Money Laundering Risks
- Lending Survey Results
- Recommendations on Artificial Intelligence
Keywords: Europe, Denmark, Banking, Basel, Regulatory Capital, Covid-19, Credit Risk, IRB Model, Lending, Artificial Intelligence, Regtech, AML, ML Risk, IRB Approach, Central Bank of Denmark, Danish FSA
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.