Denmark: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight and Macroprudential Policy Framework

IMF Staff Country Reports, August 12, 2020

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The Financial Sector Assessment Program (FSAP) work was conducted prior to the COVID-19 pandemic; this Technical Note (TN) does not assess the impact of the crisis or recent crisis-related policy measures.
Despite the timing, given the FSAP’s focus on vulnerabilities and policy frameworks, the findings and recommendations of the TN remain pertinent.
In response to the Covid-19 crisis, the countercyclical capital buffer (CCyB) has been fully released.

The Minister for Industry, Business and Financial Affairs (MIBFA) has decision-making power over most macroprudential tools in Denmark; this allocation of authority is rare in international practice.
The Systemic Risk Council (SRC) includes members from Danmarks Nationalbank (DN) and Danish Financial Supervisory Authority (DFSA) and plays an advisory role.
The SRC has powers to give recommendations with a comply or explain mechanism.

Since the last FSAP, the authorities have undertaken several macroprudential measures.
In recent years, the authorities have taken wide-ranging macroprudential policy actions in response to growing systemic vulnerabilities.
These actions have seemed to slow down some of the riskier trends.

Subjects: Financial institutions, Financial sector policy and analysis, Housing prices, Macroprudential policy, Mortgages, Prices, Systemic risk, Systemic risk assessment
Keywords: Baltics, capital requirement, central bank, coordination role, CR, debt service, Europe, Global, housing market, Housing prices, ISCR, Macroprudential policy, member institution, Mortgages, risk weight, SRC ability, SRC chair, SRC meeting, SRC member, SRC secretariat, Systemic risk, Systemic risk assessment