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 Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.