COPENHAGEN (Reuters) - New banking rules agreed by global regulators in the Basel Committee on Thursday could have “a big impact” on Denmark’s banks, the Danish government said.
Capital requirements for the largest banks could increase by up to 83 billion crowns ($13 billion) once the new rules are fully phased in, an increase of 36 percent from already known future requirements, the business ministry said.
The increase is largely due to the so-called output floor, which the Basel Committee on Thursday proposed should start at 50 percent in 2022 and then rise gradually to 72.5 percent by Jan. 1, 2027.
That means that banks’ risk-weighted assets, measured under their own internal models, cannot be less than 72.5 percent of the value reached with a standardized approach.
Danish lenders have argued they will be hit unevenly hard by such a floor as it does not adequately factor in the very low risk of holding Danish mortgage bonds.
The Danish $400 billion mortgage bond market, one of Europe’s largest, has not had a single default in its 220-year history.
The European Commission said the new rules proposed by the Basel Committee will be applied in the European Union taking into account “specificities” of the bloc’s banking sector.
“Denmark will put forward in the EU a demand that the Danish financial sector should not be hit unnecessarily hard and we will work for the capital requirements to continue to reflect the actual risks,” Denmark’s business minister Brian Mikkelsen said in a statement.
($1 = 6.3186 Danish crowns)
Reporting by Teis Jensen