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BANKING

Danish banks ’well equipped’ for financial instability

Denmark’s banking sector is well equipped to deal with potential instability should uncertainty seen at some international banks reach Denmark, according to a national risk assessment council.

Published: 21 March 2023 16:26 CET
Danish banks ’well equipped’ for financial instability
Danish banks are equipped to cope with current financial uncertainty, a risk council has said following recent instability at banks in Switzerland and the US. File photo: Andrew Kelly/Reuters/Ritzau Scanpix

In a statement, the Systemic Risk Council (Det Systemiske Risikoråd), which monitors potential dangers in the financial sector, said it assessed Danish banks to be equipped to ward off major crises.

“The Council finds that the Danish banking sector in general is in a good position to withstand the deterioration of the financial market conditions,” it said in the statement.

“This reflects, among other things, that the measures taken since the financial crisis have increased the robustness of the financial sector in Denmark,” it stated.

The assessment by the risk council comes after two notable incidents involving international banks in recent weeks increased global uncertainty.

US bank Silicon Valley Bank was earlier this month ordered to close after a collapse, while major Swiss bank Credit Suisse was eventually taken over by rival UBS after a dramatic fall in its share price and a withdrawal rush by customers.

“The international financial markets are currently affected by turmoil triggered by problems in specific banks in the US and Europe,” the Danish Risk Council wrote.

“The development emphasizes that changes in risk perception in financial markets can occur suddenly and lead to large fluctuations in a short time. At the same time, this is an important reminder that sound risk management and robust liquidity and capital buffers are important tools to maintain the trust in individual banks and in the financial system,” it said.

In its assessment, the Council maintained its view that the countercyclical capital buffer be increased to 2.5 per cent from March 2023, in line with a 2022 finance ministry decision.

The buffer is a requirement for banks to put money aside to ensure they have funds to draw on if their economic situation becomes strained.

It exists to ensure that banking institutions have a cushion that makes them more resilient if risks materialise, the Risk Council explained in the statement.

“The current earnings also create an opportunity to build up capital to absorb losses and maintain credit granting,” it said.

It can be reduced if banks need to draw from it in difficult times.

“The Council is ready to recommend a reduction of the buffer rate with immediate effect if stress occurs in the financial system and there is a risk of severe tightening of credit granting to households and companies,” the Council said.

READ ALSO: REVEALED: Danish banks’ policies on non-Danish speaking customers

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WORK PERMITS

Denmark to scrap rule requiring Danish bank account for foreign workers

Denmark's government is to exempt some foreign workers from a requirement to be paid into a Danish bank account, following a long campaign from business groups.

Published: 25 January 2024 11:40 CET
Denmark to scrap rule requiring Danish bank account for foreign workers

A new government bill will exempt foreign workers who have received a work permit under the “researcher” scheme and four so-called “fast track” schemes from the requirement to open and receive payment in a Danish bank account. 

“When renowned companies in Denmark experience some rules as being inappropriate, we of course take this seriously,” Kaare Dybvad Bek, Denmark’s Minister of Immigration and Integration, said in a press release announcing the move. 

“We have therefore decided to make some adjustments that ensure more flexibility for the companies that are certified and treat their employees properly.” 

The exemption will apply to those granted work permits under the “researcher” scheme and also to the “pay limit”, “education” and “short-term” tracks of the fast-track scheme. 

The Confederation of Danish Employers last year led a campaign to end the bank account rule, which can mean that new recruits go months without receiving a salary, as they must first obtain a residency permit, then a CPR number, a Danish address, a health insurance card and access to the MitID digital identification service. 

READ ALSO: Why Danish businesses want to scrap bank account work permit rule

To be eligible for a fast track permit, foreigners need to hired by a so-called “certified” company, typically a mid-sized and large company that hires internationally quite regularly. 

To become certified, a company must have at least 10 full-time employees in Denmark, and offer salary and employment conditions that meet Danish norms. 

Dybvad Bek said that the government had wanted to limit the exemption to established and reputable companies. 

“We have of course made sure that with the change in the law we do not open a floodgate for social dumping and underpayment,” he said. “Several of the adjustments are therefore targeted at certified companies, where we know that the conditions are fair.”

For employees still covered by the bank account requirement, the government is proposing extending the time limit for setting up a Danish bank account from 90 days to 180 days.

The government proposes that the new bill should come into force on 1 July 2024. 

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