On Tuesday, the Minister received a recommendation from the Systemic Risk Council, which is to monitor the financial sector in Denmark, that it was time again to ask banks and mortgage banks to put money aside.
It happens through something called the countercyclical capital buffer. It covers the fact that the government demands that in good times money be set aside for bad times in the banks and mortgage lenders.
The idea is that when a crisis arises, the money that has been set aside can be used. This should prevent banks from having money to lend in financial crises.
The mechanism was put into use under the corona. Here, the Minister lowered the requirements for how much should be set aside to zero.
It thus freed up more money that banks and mortgage lenders could use and lend.
In the press release, the Minister of Trade and Industry says:
– In March 2020, the government released the countercyclical buffer to support the banks’ lending capacity so that the banks could hold hands under companies and jobs during the closures.
– Denmark has come well through the corona crisis, and the government expects that economic activity will increase further as closed industries are reopened and the population is vaccinated.
– Therefore, it makes sense to put aside in good times, so we have something to resist if Denmark were to be hit again.
Thus, the reintroduced requirement is also a sign that the Danish economy, according to the government, is moving away from the crisis situation that has prevailed since the corona epidemic broke out.
Finans Danmark, which is an organization for the banks and mortgage banks, said on Tuesday that it believes it is too early to start putting money aside again.
The Systemic Risk Council already announced on Tuesday that the council before the end of the year will probably recommend that the requirement for how much money should be set aside be raised again.
Source: The Nordic Page
