Frontpage News 2013 The banks are bett...

The banks are better prepared for the future

8 October 2013

New half year figures from the Danish Financial Supervisory Authority show that the Danish banks are well on the way out of the crisis. This strengthens the base for meeting an increasing loan demand when the crisis turns. 
The FSA has just made up the banks’ total accounting figures for the first half year of 2013. The figures show that the financial sector’s health condition is significantly improved compared to the same period last year.

’’The figures confirm that banks today have a stronger standing than last year. There is now balance between loans and deposits and the banks have strengthened the capital coverage. Thus, the banks are better prepared to meeting an increasing loan demand,’’ explains Deputy Chief Executive at the Danish Bankers Association, Louise Mogensen.  

Figure 1. Deposit deficit in the Danish banks
Source: The Danish Financial Supervisory Authority.
Note: The deposit deficit is the difference between the deposit and lending. If the deposit exceeds the loan, there are surplus deposits.


The banks' deposit deficit fell from 249bn DKK in the first two quarters of 2012 to 63bn DKK in the first two quarters of 2013.
In the total loans and deposits, repurchase agreements are included, which fluctuate more than regular loans and deposits, and thus, it can provide a more nuanced image to omit them. When adjusting for this, the deposit deficit of 56bn DKK in 2012 turned into a deposit surplus of 162bn DKK during the current year.
At the same time, the banks' capital ratio increased to 20.5 percent during the first two quarters compared to 17.4 percent in the same period last year. 
Figure 2: The banks' capital ratios 
Source: The Danish Financial Supervisory Authority.
"Part of the explanation to the positive development in the relationship between loans and deposits is that both companies and households have restructured bank loans to mortgages. In addition, both households and businesses put more money in the bank," says Louise Mogensen.
The Danish Bankers Association’s Chief Operating Officer points out that it is not necessarily in the interest of banks or the national economy that the deposit deficit is further reduced.
"The banks are always happy to accommodate healthy growth projects, and lending is expected to increase when the economy really turns and especially companies have reduced their high savings. Simultaneously, household deposits probably fall when consumption rises," says Louise Mogensen and continues:
"The deposit deficit may therefore fall again, without this constituting a threat. What is essential is that a better balance is created than before the crisis, and that the banks' capital is increased. One must also remember that the Danes primarily save through pension funds, which account for a certain proportion of banks' bond issues. It contributes to a structurally higher deposit deficit than in countries where pension savings are primarily through deposits," she says.
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