The stress test is based on risk management and financial reporting figures at 31 December 2017, and it comprises two macroeconomic scenarios for the years 2018-2020 – a baseline scenario and an adverse scenario. The stress test was carried out applying a static balance sheet assumption and therefore does not consider possible actions to mitigate the effect of the scenarios. Consequently, this is to be considered a highly adverse scenario.
The result of the stress test is that Danske Bank Group’s common equity tier 1 (CET1) capital ratio at the end of 2020 is determined to be 16.4% and 12.8%, respectively, in the baseline and adverse scenarios. Danske Bank Group’s total capital ratio at the end of 2020 is determined to be 20.9% and 16.8%, respectively, in the baseline and adverse scenarios.
CET1 capital buffer of almost DKK 10 billion in the adverse scenario
A CET1 capital ratio of 12.8% at the end of 2020 corresponds to a capital buffer of 1.1% or almost DKK 10 billion in relation to the Group’s CET1 capital requirement in the adverse scenario. The determination of the capital buffer takes into account the capital need and assumed costs in relation to the money-laundering case at the Group’s Estonian branch, which are within the scope of the Danish FSA decision of 4 October 2018. Danske Bank’s total capital ratio of 16.8% at the end of 2020 also exceeds the projected total capital requirement in the adverse scenario. The total capital buffer is 0.5% or a little more than DKK 4 billion.
Despite the severity of the adverse scenario, Danske Bank’s fully loaded capital also exceeds the capital requirements when adjustments are made for the completed 2018 share buy-back programme, net issuance of capital instruments and earnings in the first half of 2018.
The results of Danske Bank’s stress test are available at danskebank.com/stress-test.