The Danish Financial Supervisory Authority's current overview of risks and vulnerabilities

The uncertain macroeconomic environment surrounding us could have a negative impact on financial stability, says the Danish Financial Supervisory Authority (FSA) in its updated overview of risks and vulnerabilities.

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Director, Communications

Søren Møller Christensen
+45 33 55 82 99
smc@ftnet.dk

Continued low interest rates squeeze the ability of financial undertakings to generate returns for their customers and investors, and low interest rates induce companies to take on more risk to offset the low expected returns. On the other hand, a sudden rate increase could lead to declining property prices and share prices, which could affect homeowners and pension savers with market-rate pensions.

"Obviously, the two scenarios can't create problems at the same time. But individually, they pose a risk in terms of a gradual normalisation of interest rates, "says FSA Director General Jesper Berg.

 

"Low interest rates could prove to be a persistent phenomenon, and could induce the financial sector and its customers to plunge into riskier investments. This applies to both shares which are currently priced high, and, for example, alternative investment funds where retail investors may find it difficult to understand the risk, "says Jesper Berg.

 

Brexit, IT risks and money laundering

In the updated overview of risks and vulnerabilities, the FSA also points to the risks associated with Brexit, IT security and money laundering.

 

If the UK leaves the EU without an agreement (a 'no-deal' Brexit), the financial sector should be prepared to address a number of legal and practical issues. In the IT area, operations that are not adequately secure and stable may affect financial stability. In its supervision, the FSA has identified a number of weaknesses in the companies' IT security management and will therefore continue to increase dialogue with the companies in the IT area.

 

In the coming period, in the area of money laundering, the FSA will focus on implementing the initiatives of the political agreement of March this year on strengthening efforts against financial crime. 

 

About the overview of risks and vulnerabilities

The FSA prepares an updated overview of risks and vulnerabilities every six months. This overview is based on participation in national and international forums, including DSRR (The Systemic Risk Council), ESRB (The European Systemic Risk Board), colleges of supervisors and the European supervisory authorities EBA, EIOPA and ESMA. The overview is also based on observations and information from inspection activities, investigations and the FSA's own analyses. The overview contributes to the ongoing prioritisation of the FSA's supervisory activities.

 

Read the memo on the overview of risks and vulnerabilities (pdf)