”The new results show that the capitalisation of the largest Danish credit institutions come under pressure in the EU-wide stress test and some institutions have to make use of their capital conservation buffer. The results reflect a very severe stress test both in terms of a very severe adverse scenario and a conservative methodology for projection results. Although this is a very severe stress test, the results underline the need for institutions to maintain a robust capitalisation going forward", says acting Director General Kristian Vie Madsen.
The results of the EU-wide stress test will be included in the Danish FSA's assessment regarding the setting of a so-called ”Pillar II Guidance” (P2G) for the participating Danish institutions. P2G can be interpreted as a prudential capital add-on, which aims to ensure that an institution at all times has a sufficiently robust capitalisation to withstand a severe adverse scenario.
The Danish FSA's ongoing dialogue with the institutions on capital targets, capital redemptions, and distribution policy will continue to be based on stress tests which apply scenarios and assumptions designed by the Danish FSA.
Results for the Danish participants in the EU-wide stress test 2023
Danske Bank, Nykredit, Jyske Bank, and Sydbank have participated in the EU-wide stress test 2023, which is coordinated by the European Banking Authority (EBA). The stress test is very severe and leads to a significant depletion in the banks’ capital ratios. For Danske Bank and Jyske Bank the decrease is of a magnitude such that the institutions have to make use of the capital conservation buffer over the three-year adverse scenario. Nykredit and Sydbank comply with capital requirements, but with modest excess capital. All institutions fulfil their solvency need with a comfortable margin.