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International Monetary Fund. Monetary and Capital Markets Department
COVID-19 pandemic: The Financial Sector Assessment Program (FSAP) work was conducted prior to the COVID-19 pandemic, so this Technical Note (TN) does not assess the impact of the crisis or the recent crisis-related policy measures. Nonetheless, given the FSAP’s focus on vulnerabilities and policy frameworks, the findings and recommendations of the TN remain pertinent. While Denmark’s institutional arrangements are uncommon, the authorities have undertaken several macroprudential measures since the last FSAP. The Minister for Industry, Business and Financial Affairs (MIBFA) has decision-making power over most macroprudential tools in Denmark, which is rare in international practice. However, the Systemic Risk Council (SRC), which includes members from the Danmarks Nationalbank (DN) and Danish Financial Supervisory Authority (DFSA) plays an advisory role and has powers to give recommendations with a comply or explain mechanism. In recent years, the authorities have taken wide-ranging macroprudential policy actions in response to growing systemic vulnerabilities, which have seemed to slow down some of the riskier trends. More recently, in response to the Covid-19 crisis, countercyclical capital buffer (CCyB) has been fully released.
International Monetary Fund. Monetary and Capital Markets Department

decision-making. Procedurally, the secretariat starts working on draft recommendations only after receiving a mandate from the SRC, which often follows a phase of consensus building within SRC meetings. This has led to delayed action in some cases. Second, limited powers of the SRC can also lead to inaction bias in cases where MIBFA does not comply with its recommendations. This has happened, particularly regarding risks related to deferred amortization loans in the household sector. To strengthen the framework, the SRC chair should be given the ability, enshrined in law

International Monetary Fund. Monetary and Capital Markets Department

phase of consensus building within SRC meetings. 12 While there are merits to consensus building, in its extreme form implies that each member has an implicit veto power. The institutional arrangement should foster consensus building without letting it hold up decision-making. Delayed activation of CCyB and household sector tools despite signs of building vulnerabilities are two examples where consensus building may have limited action. Another reason for inaction bias is the limited powers of the SRC. The SRC does not have hard powers over macroprudential tools

International Monetary Fund. Monetary and Capital Markets Department
Much of the work of the Financial Sector Assessment Program (FSAP) was conducted prior to the COVID-19 pandemic. Given the FSAP’s focus on medium-term challenges and vulnerabilities, however, many of its findings and recommendations for strengthening policy and institutional frameworks remain pertinent. This report reflects key developments and policy changes since the FSAP mission work was completed, and includes illustrative scenarios to quantify the possible implications of the COVID-19 shock on the solvency of systemically important financial institutions (SIFIs). Prior to the COVID-19 pandemic, the Danish authorities had taken important steps to improve financial system resilience. The authorities had actively used macroprudential tools to bolster the robustness of the financial system. The supervision of the banking and insurance sectors had improved. Likewise, recent legislation has strengthened anti-money laundering and combating the financing of terrorism (AML/CFT) supervision. Major reforms such as a new bank resolution framework had also considerably improved Denmark’s financial safety net and crisis management frameworks.
International Monetary Fund. European Dept.

, data availability and quality. The issuance and implementation phases seem to be working adequately. Once a recommendation by the SRC is made, the MIBFA has three months to comply or explain and there seems to be adequate transparency in the implementation phase. Text Figure 2. The Process for MaPP Implementation in Denmark 3. However, the consensus building phase seems to have taken too long in some cases . From published statements of the SRC meetings, it can be seen that observations mentioning “the build-up of systemic risk” started on September 2014

International Monetary Fund. European Dept.
The solid performance of the economy continues to be supported by domestic demand and labor market pressures are gradually building. The current account surplus is declining amid higher investment. The outlook is for continued growth with risks tilted to the downside. While overall house price growth has started to soften, elevated household debt remains a key source of risk. Banks are sound and profitable.
International Monetary Fund. Monetary and Capital Markets Department
This Detailed Assessment of Observance report specifies Base Core Principles (BCP) for effective banking supervision in Australia. An assessment of the effectiveness of banking supervision requires a review of the legal framework, and a detailed examination of the policies and practices of the institution(s) responsible for banking regulation and supervision. In line with the BCP methodology, the assessment focused on banking supervision and regulation in Australia and did not cover the specificities of regulation and supervision of other financial institutions. The assessment has made use of five categories to determine compliance: compliant; largely compliant, materially noncompliant, noncompliant, and non-applicable. The report insists that Australian Prudential Regulation Authority (APRA) should put more focus on assessing the various components of firms’ Internal Capital Adequacy Assessment Process and other firm-wide stress testing practices. A periodic more comprehensive assessment of banks’ risk management and governance frameworks will further enhance APRA’s supervisory approach.
International Monetary Fund. Monetary and Capital Markets Department

This Detailed Assessment of Observance report specifies Base Core Principles (BCP) for effective banking supervision in Australia. An assessment of the effectiveness of banking supervision requires a review of the legal framework, and a detailed examination of the policies and practices of the institution(s) responsible for banking regulation and supervision. In line with the BCP methodology, the assessment focused on banking supervision and regulation in Australia and did not cover the specificities of regulation and supervision of other financial institutions. The assessment has made use of five categories to determine compliance: compliant; largely compliant, materially noncompliant, noncompliant, and non-applicable. The report insists that Australian Prudential Regulation Authority (APRA) should put more focus on assessing the various components of firms’ Internal Capital Adequacy Assessment Process and other firm-wide stress testing practices. A periodic more comprehensive assessment of banks’ risk management and governance frameworks will further enhance APRA’s supervisory approach.