The Danish Financial Supervisory Authority (FSA) published the results for the Danish participants of the EU-wide stress test 2021. Danske Bank, Nykredit, Jyske Bank, and Sydbank are the four Danish banks that participated in the stress test. The results showed that the capital situation in the Danish institutions is significantly affected by the severe economic downturn in the adverse scenario. Danish FSA also published the individual stress test results for these banks.
Danish FSA notes that this is a very severe stress test, which leads to significant decreases in the capital ratios of the institutions. For Danske Bank, the decrease is of such a magnitude that the institution has to make use of the capital conservation buffer over the three-year projection. Jyske Bank fulfils its capital requirements, though with modest excess capital. The results show that the capitalization of some of the largest Danish institutions does come under pressure in the EU-wide stress test. However, all Danish institutions retain capital that is comfortably above their solvency need. The results reflect a very severe adverse scenario, which is assumed to build on an already stressed macroeconomic starting point as a result of the COVID-19 crisis. The results underline the need for institutions to maintain a robust capitalization going forward. The results of the EU-wide stress test will be included in the Danish FSA considerations regarding the setting of the Pillar 2 Guidance, or P2G, for the participating Danish institutions. The Pillar 2 Guidance can be interpreted as a prudential add-on to the solvency need. The ongoing dialog of Danish FSA with the institutions, on capital targets and distribution policy, will continue to be based on stress tests based on scenarios and assumptions laid down by the Danish FSA.
Keywords: Europe, Denmark, Banking, Stress Testing, COVID-19, Regulatory Capital, Pillar 2, Pillar 2 Guidance, SREP, Danish FSA
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