Denmark’s central bank calls for stricter lending rules for homeowners


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The Danish central bank, also known as the Danish Nationalbank, is seen in Copenhagen, January 22, 2015. REUTERS / Fabian Bimmer / File Photo

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COPENHAGEN, December 2 (Reuters) – Denmark’s central bank on Thursday renewed calls for tighter mortgage rules, saying some homeowners are vulnerable to falling house prices and rising interest rates.

Separately, the bank said the result of a stress test showed that while Danish banks have sufficient equity capital to withstand a recession, some of the country’s six consistently important banks are on the verge of hitting markets. safety cushions.

The Danish government has so far defied recommendations made earlier this year by the central bank and expert advisers to curb mortgage lending amid soaring prices and riskier lending.

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“In the context of the financial crisis, we have seen how badly the individual homeowner, the financial industry and society as a whole can be affected by falling prices in the housing market,” said Peter Storgaard, Manager central bank financial stability.

“We believe that due diligence will be required to ensure that this vulnerability does not become too great,” he said.

The central bank said a larger down payment and amortization requirement for heavily indebted homeowners would contribute to a more resilient housing market.

He said in a separate statement that a bank stress test had shown that lenders had enough capital to withstand a “severe recession scenario.”

However, in the most severe stress test scenario, systemic banks would collectively lose about DKK 13 billion ($ 1.98 billion) below their cushion requirements, the bank said.

“It is important that banks ensure during the right periods that they have a robust surplus over the Minimum Qualifying Liabilities Required (MREL), a sufficiently diversified maturity profile of their MREL issues, and that issues have a long maturity, ”the bank said. noted.

($ 1 = 6.5701 Danish crowns)

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Reporting by Jacob Gronholt-Pedersen; Editing by John Stonestreet, David Goodman and Jan Harvey

Our Standards: Thomson Reuters Trust Principles.

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