Nationalbanken stress test on Danish banks liquidity and capitalization

Central bank of Denmark the Danmarks National published stress tests for 2nd half of 2011 yesterday. Nationalbanken says that the overall liquidity of the Danish banks is good but that there is great variation in between banks. The central bank stresses that banks needs to continue to prepare to a time without government guarantees as those are expiring in the short to medium term. Nationalbanken has also expanded its credit facilities to include 3-year loans to ease to transition.

As far as capitalization goes, Nationalbanken says that large and medium-sized Danish banks will be able to withstand far worse economic conditions than the one we are at currently, but that one bank will need to raise more capital. Nationalbanken does also give a wider recommendation for continued strengthening of the capital base and said that in the event of a very severe negative shock, more banks would absolutely need to strengthen their capitalisation.