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Danske Defeat on Risk Weights Shows Regulatory Supremacy 

June 20, 2014
Francis Schwartzkopff, Businessweek

As regulators across Europe and the U.S. show signs of caving in to bank industry warnings that new rules risk hurting the economy, Denmark’s watchdog has just won a milestone battle against the nation’s biggest bank.

Danske Bank A/S (DANSKE), whose assets are equivalent to more than 180 percent of Denmark’s gross domestic product, abandoned its efforts to fight an order by the Financial Supervisory Authority to increase its risk-weighted assets by at least 10 percentage points. The bank’s argument that its internal ratings-based approach correctly measured risk was rejected by the FSA, which tested the model’s results against other banks. The order raised Danske’s capital need by $1.1 billion, the bank said.

“The bottom line is that this benchmarking exercise in modeling has been affirmed,” Christian Hede, a Copenhagen-based analyst at Nordea Bank AB, said by phone.

Read More: BloombergBusinessweek

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