Sunday 26 October 2014

Denmark orders Danske Bank to raise credit card risk weightings

Published 01/08/2014 | 12:17

The headquarters of Danske Bank A/S, left, stand opposite the Danish central bank, or National Bank, right, in Copenhagen, Denmark, on Monday, March 26, 2012. Danish businesses that need to raise capital are increasingly bypassing commercial banks and going directly to the market themselves or borrowing from mortgage lenders. Photographer: Linus Hook/Bloomberg
Danske Bank HQ

Denmark's financial regulator has told the country's top two banks to assign tougher risk measures to retail credit cards and overdrafts but said the change would have a minimal impact on their capital adequacy ratios, an official said.

The Financial Services Authority made the assessment for Danske Bank and Jyske Bank as well as smaller banks, Laan og Spar Bank and Nykredit Bank.

Per Lamberth, deputy director of banking at the Financial Services Authority, said the current risk weightings did not reflect the volatility of certain parts of their assets.

"They (the four banks) have been using a special low risk weighting for certain types of exposures to retail customers," said Lamberth, naming the type as "qualifying retail revolving exposure".

"One of the requirements of using this risk weight is that these exposures have lower volatility than others. We found that they couldn't demonstrate that."

For Danske Bank this means an increase in its risk-weighted assets by 2.7 billion Danish crowns ($485 million), but its capital solvency ratio remains the same at 18.1 percent of risk-weighted assets as of the end of March 2014, the FSA said in its individual assessment of the impact on the banks.

Jyske Bank's capital ratio falls to 16 percent from 16.2 percent, with risk-weighted assets rising by 1.1 billion crowns.

Nykredit's risk-weighted assets rise by 1.3 billion crowns, with its capital ratio unchanged at 18.3 percent, while Laan og Spar's ratio falls to 16.4 percent from 18.3 percent on a 623 million crown rise in risk-weighted assets.

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