Denmark’s central bank calls for tougher 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, Dec 2 (Reuters) – Denmark’s central bank renewed calls on Thursday for tougher 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 enough capital to withstand a recession, some of the country’s six consistently important banks are close to reaching safety cushions.

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

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“As part of the financial crisis, we have seen how the individual homeowner, the financial sector and society as a whole can be affected by falling prices in the housing market,” said Peter Storgaard, head of the financial stability of the central bank.

“We think it will be due diligence to make sure this vulnerability doesn’t get too big,” he said.

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

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

However, in the most severe stress test scenario, systemic banks would collectively fall about 13 billion Danish kroner ($1.98 billion) short of their buffer requirements, the bank said.

“It is important that banks ensure during good times that they have a solid excess over the minimum eligible liabilities requirement (MREL), a sufficiently diversified maturity profile of their issuances of MREL and that the issues have a long maturity,” the bank said. noted.

($1 = 6.5701 Danish kroner)

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

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