(a) the systemic risk buffer rate or rates;
- The buffer rate is at 7% of the risk weighted exposures in point (c)
(b) the institutions to which the systemic risk buffer applies;
- The buffer applies to all credit institutions.
(c) the exposures to which the systemic risk buffer rate or rates apply;
- The systemic risk buffer applies to real-estate companies, defined as the NACE-codes “Construction of buildings” (F411000) and “Real estate activities” (L). Cooperative housing and social housing exposures are exempted from the buffer, defined as codes 682010 and 682010 in the Danish NACE-extension (DB07)
Exposures in the 0-15% LTV-band are exempted from the buffer.
(d) a justification for setting or resetting the systemic risk buffer rate or
rates;
- The Systemic risk buffer was activated pursuant to a recommendation from the Danish Systemic Risk Council. Real estate companies are particularly sensitive to interest rate increases and adverse macroeconomic developments. These exposures also account of a large share of total lending by Danish credit institutions. There is there a risk that adverse economic conditions in the real-estate sector will affect financial stability. The purpose of the systemic risk buffer is to strengthen the capitalization of credit
institutions, such that they can absorb losses and loan-loss provisions on exposures against real-estate companies. See the recommendation by the
Systemic Risk Council for more information on the justification for the systemic risk buffer: https://systemicriskcouncil.dk/news/2023/october/activation-of-a-sector-specific-systemic-risk-buffer-for-corporate-exposures-to-real-estate-companies
(e) the date from which the institutions shall apply the setting or resetting
of the systemic risk buffer
- The buffer applies from June 30th 2024.
(f) the names of the countries where exposures located in those countries
are recognised in the systemic risk buffer.
- The buffer applies to Danish exposures. Exposures secured by real estate are subject to the buffer if the underlying property is located in Denmark. Exposures not secured by real-estate are subject to the buffer if the debtor is Danish.
The Danish notification to the ESRB regarding the measure can be found here.