Download Notification of countercyclical buffer in Denmark

Notification of countercyclical buffer in Denmark
When CRD IV/CRR was implemented in Denmark a possibility was introduced whereby the countercyclical buffer could be introduced already
from 2015 (up to 0.5 percent). In line with Article 160(6) of CRD IV,
Denmark is hereby notifying you of this possibility.
Furthermore, Denmark recognizes the rate of other Member States who
have chosen a shorter phasing-in period than specified in CRD IV article
160(2). We are therefore also making this decision known to you.
Finally, we can inform you that the Minister for Business and Growth on
19 December 2014 announced that the Danish countercyclical buffer rate
will be set a 0 percent as of 1 January 2015 which applies as of 1 January
2016.
The countercyclical buffer is set based on a qualitative assessment that
takes quantitative factors into consideration. The quantitative factors are
primarily a buffer guide and five key indicators. Based on this approach
there are no signs of cyclical risks building up at present.
The relevant data and reasoning for this buffer rate can be found on the
homepage of the Danish Systemic Risk Council: http://risikoraad.dk/inenglish/the-countercyclical-capital-buffer/
For your convenience, we have also inserted the relevant figures below.
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Chart 1
Credit-to-GDP gap and the buffer guide
Note:
The credit-to-GDP gap is defined as deviations of the ratio of credit-to-GDP from its long-term trend, cf.
Chart 2.
Abildgren (2007), Abildgren (2010), Statistics Denmark, the MONA data bank, Danmarks Nationalbank
and own calculations.
Source:
Credit-to-GDP ratio, trend and credit-to-GDP gap
Chart 2
Per cent of GDP
Percentage points
300
Build-up of systemic risks
Financial crisis
60
Financial crisis
50
250
40
200
30
20
150
10
100
0
-10
50
-20
0
1981
1984
1987
1990
Credit-to-GDP gap (right-hand axis)
Note:
1993
1996
Trend
1999
Credit
2002
2005
2008
2011
2014
-30
Treshold: 2 percentage points (right-hand axis)
The credit-to-GDP gap is defined as deviations of the ratio of credit-to-GDP from its long-term trend. See Appendix A for more details about the definition of credit and trend calculation. The series have been adjusted for
data breaks back in time. The threshold is in accordance with international recommendations, cf. Box 1.
Source: Abildgren (2007), Abildgren (2010), Statistics Denmark, the MONA data bank, Danmarks Nationalbank and own
calculations.
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House price-to-income gap
Chart 3
Index 2000=1
Pct.
1.8
60
Build-up of systemic risks
Financial crisis
Financial crisis
1.6
50
1.4
40
1.2
30
1.0
20
0.8
10
0.6
0
0.4
-10
0.2
-20
0.0
1980
1983
1986
1989
1992
1995
House price-to-income gap (right-hand axis)
1998
2001
2004
House price-to-income ratio
2007
2010
2013
-30
Trend
Note:
The house price-to-income gap is defined as deviations of the ratio of house price to income from its long-term
trend. The trend is estimated for the period from 1st quarter 1973 to 2nd quarter 2014 and calculated in the
same way as for the credit-to-GDP gap, cf. Appendix A. The trend is not indexed. The house price is measured
by the price of single family houses from Statistics Denmark, and the income is households' disposable income
from the MONA data bank of Danmarks Nationalbank. Both series are seasonally adjusted. Disposable income
has been adjusted for data breaks back in time.
Source: Statistics Denmark, the MONA data bank and own calculations.
Debt service ratio
Chart 4
Per cent of GDP
22
Build-up of systemic risks
Financial crisis
Financial crisis
20
18
16
14
12
10
1983
1985
1987
Debt service ratio
Note:
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Median
The debt service ratio is defined as households' and non-financial corporations' interest payments and debt
repayments relative to GDP. The indicator is estimated in accordance with Drehmann and Juselius (2012),
supplemented by actual interest payments and debt repayments for mortgage banks since 2003. The series has
been adjusted for data breaks back in time.
Source: Abildgren (2010), Statistics Denmark, Danmarks Nationalbank and own calculations.
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Leverage of banks
Chart 5
Number of times
28
Financial crisis
Financial crisis
Build-up of systemic risks
26
24
22
20
18
16
14
12
10
1981
1983
1985
1987
Leverage
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Median
Note:
Leverage is defined as the sum of assets, guarantees and commitments divided by Tier 1 capital (including
Additional Tier 1 capital). The leverage is shown as a 4-quarter moving average.
Source: Danish Financial Supervisory Authority.
Interest spread on new lending to households
Chart 6
Percentage points
8
Build-up of systemic risks
Financial crisis
7
6
5
4
3
2
1
0
2003
2004
2005
2006
2007
Interest spread on new lending to households
Note:
2008
2009
2010
2011
2012
2013
2014
Median
The interest spread is shown as a 3-month moving average. The interest spread is defined as the banks' lending
rate on new lending, excluding overdrafts, relative to Danmarks Nationalbank's lending rate. Developments in
the rate of interest on new lending reflect fluctuations in interest rate levels, but are also very much influenced
by the distribution of new lending for the month, meaning that, viewed in isolation, a higher share of collateralised loans will reduce the total. The series has been adjusted for data breaks back in time.
Source: Danmarks Nationalbank.