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Denmark’s Banking sector: Facts and Figures

Updated December 2020 – For earlier editions of Facts & Figures click here

The Danish economy continued in 2019 its steady real GDP growth of about 2%. The number of employees in the financial sector is still decreasing, reaching 35,669 employed in 2019 compared to 40,907 in 2000. In 2019, there were 63 banks and seven mortgage banks in Denmark. Persistent consolidation has implied a large decline since 2000 when there were 185 banks and 10 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, revenue in the banks continued to decline in 2019 from a record high in 2017. An analysis of the 19 largest banks and mortgage banks shows a small increase from €4.2 billion to €4.6 billion. And the return on equity now amounts to 8.6 % compared to 12% in 2017. The decrease in 2019 reflects the turbulence on the stock market and continued low net interest income.

Overall, the Danish banking sector is robust, and banks have increased their capitalization since the beginning of the financial crisis. The Danish banking sector had an overall capital ratio of 24.8% in 2019, 10 percentage points higher than in 2008. In addition, the core capital ratio was 22.3% in 2019. Both figures have increased gradually over the last five years. The Danish banking sector has also proved to be well-capitalized and resilient in the stress tests conducted by the EBA.

The Danish financial sector is one of the most digitalized in the world, and the digitalization is still evolving with new initiatives such as a new mobile app for the online log-in solution, NemID. This is amongst the ongoing initiatives and works aimed at fighting the increase in online crime targeting the banks and their 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.

At the beginning of 2019, Finance Denmark launched a Forum for Sustainable Finance consisting of leading persons from companies, think tanks and experts involved climate and sustainability. The forum will help support the EU’s transition towards a more sustainable economy. In November, the same year, 20 recommendations were presented to the financial sector, which Finance Denmark and its members now try to implement.

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. Almost 18,000 pupils – or more than one in ten Danish pupils of the targeted age – participated in the Danish Money Week 2019. 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 fdn@fida.dk