Denmark has required banks to hold countercyclical buffers of 0.5%, which will force them to build up extra capital during good economic times to protect them against the bad, Reuters reported March 14.
Banks have until March 31, 2019, to meet the requirement, the newswire wrote, adding that the decision follows a December 2017 recommendation by the county's Systemic Risk Council.
When this recommendation was released, the council said it would recommend a reduction of the rate if substantial stress occurred in the Danish financial system and if there was a risk of severe tightening of lending to households and firms.
But the Danish government said it believes the new requirements will have no effect on economic development since most banks already have enough capital to meet the buffer, Reuters reported.
