Denmark’s five biggest banks will need to raise as much as $15bn in new capital under proposed changes to global banking rules, according to an expert panel created by the government.
Danske Bank, the country’s biggest financial group, and others will together see their capital requirements rise 27-39%, equivalent to 64-92bn kroner ($15bn), the panel said.
In the same report, the expert panel rejected the need for the additional capital burden. And the government underscored its commitment to fighting the requirement.
The Basel Committee on Banking Supervision is considering imposing a lower limit on regulatory buffers after studies indicated banks were designing their own risk-measurement models to cut their capital requirements. Opposition, particularly from Europe, has delayed a final decision.
The Danish expert panel, convened in February, said the Basel proposal failed to account for low mortgage lending risks in Denmark and warned a floor would increase incentives for banks to engage in riskier activities. That would stoke, rather than reduce, financial instability, it said.
Finance Minister Kristian Jensen said the centre-right government is keen to do what it can to reduce regulatory pressure on the country’s banks.
“There’s a lot more we can do to alleviate the pain for Danish financial institutions,” he said in an interview on Friday in the Danish city of Aalborg. The administration is working to ensure that, if the Basel proposal passes in its current form, the European Union will work with Denmark to “take into consideration the low risk weighting of Danish mortgage bonds,” he said.
“We’re trying everything we possibly can to reduce capital requirements for the Danish mortgage industry,” Jensen said.
Denmark’s biggest banks had 229.3bn kroner in common equity Tier 1 capital at the end of last year, according to the country’s Financial Supervisory Authority. That was up 2.3% from a year earlier amid industry efforts to build loss-absorbing buffers.
Danske Bank had a CET1 of 16.2% of its risk-weighted assets at the end of June, according to its second-quarter report.
Danske Bank and others will together see their capital requirements rise 27-39%, equivalent to 64-92bn kroner ($15bn), the government panel says.
