Financial Stability in an Evolving Regulatory and Supervisory Landscape

Abstract

This paper runs qualitative and quantitative analyses of the financial soundness of Danish banks. Helped by a series of Denmark's financial policy initiatives, banks have made progress in improving financial stability. However, vulnerabilities remain. To mitigate risks, banks should continue to build more robust capital and liquidity buffers, and enhance further the transparency of disclosures. The flexibility embedded in EU regulations should be used to design strong prudential policies, treating Basel III and the CRD IV regulations as floors. Crisis prevention and management could be further strengthened by phasing out gradually deferred-amortization mortgage loans and introducing risk-adjusted deposit insurance premia.

Keywords: Bank regulations, Bank supervision, Banks, Commercial banks, Danish banks, Denmark, Financial stability, Loans, SIFI, bail-in, covered bonds, crisis resolution, deposit insurance, macroprudential and microprudential policies, regulation and supervision, risk-weighted assets, systemic risk

JEL Classification: G01, G12, G15, G21, G28