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Denmark’s Banking sector: Facts and Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

The Danish economy has continued its steady real GDP growth of about 2%. The employment also continues to increase, and it is now estimated to be above the structural level, leading to a rising pressure on the labour supply. However, tight fiscal policy and an expected rise in the work force suggest a limited risk of an overheating of the economy.

The number of employees in the financial sector is still decreasing, reaching 31,385 employed in 2017 compared with 40,907 in 2000. In 2018, there were 65 banks and seven mortgage banks in Denmark. Persistent consolidation has resulted in a large decline since 2000, when there were 185 banks and ten mortgage banks, yet the trend has slowed in the most recent years.

The special Danish mortgage system is a defining component of the financial sector in Denmark. Danish mortgage bonds are securities with high credit quality and very high liquidity.

Since the beginning of the financial crisis, the Danish banks have gradually recovered. However, earnings in the banks declined in 2018 from a record high in 2017. An analysis of the 18 largest banks and mortgage banks shows a decline in earnings from €5.5 billion to €4.1 billion and the return on equity now amounts to 8% compared to 11% in 2017. The decrease in 2018 reflected the turbulence on the stock market and continued low net interest income. An increased focus on and, hence, greater expenses for compliance and anti-money laundering also affected the earnings.

Overall, the Danish banking sector is robust, and banks have increased their capitalisation since the beginning of the financial crisis. The Danish banking sector had an overall capital ratio of 23%. In 2018, ten percentage points higher than in 2008. In addition, the core capital ratio was 19% in 2018. Both figures have been stable over the last three years. The Danish banking sector has also proved to be well capitalised and resilient in the stress tests conducted by the European Banking Authority).

The Danish financial sector is one of the most digitalised in world, and the digitalisation is still evolving with new initiatives such as a new mobile app for the online log-in solution, NemID. This is amongst the initiatives aimed at fighting the increase in online crime targeting the banks and its customers. Much of the digital development (including the new mobile app) has been achieved due to a good collaboration between the financial and the public sector.

Deposits are still rising. Atthe end of 2018, the Danes’ total deposits in the banks were €130 billion corresponding to an increase of 4.6% from 2017. In 2019, a new initiative, the “Share savings account” (Aktiesparekonto) has been rolled out, which gives a new option for Danish citizens to, invest, easily, at an advantageous tax rate, savings of up to approximately €6,500.

In early 2019, Finance Denmark launched a Forum for Sustainable Finance consisting of leading persons from companies, think tanks and experts within climate and sustainability. The forum will help support EU’s transition towards a more sustainable economy.

With Money Week, Finance Denmark and Danish banks put focus on personal finance in the municipal primary and lower secondary schools. The purpose of Money Week is to teach children and young people personal finance terms, such as interest rates, loans and budgets and to prepare them to take responsibility for their own personal finances so that they avoid getting into financial trouble. More than 16,000 pupils – or more than one in ten Danish pupils of the targeted age – participated in the Danish Money Week 2018. Sessions on financial literacy, how to budget and save and generally take care of personal finances, were given by teachers and more than 700 guest lecturers.

Contributor: Flemming Dengsø Nielsen