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2026-05-29

Inspection Report for Hvidbjerg Bank A/S

The Danish Financial Supervisory Authority issued an inspection report for Hvidbjerg Bank A/S identifying elevated credit, operational, and compliance risks driven by aggressive loan growth, concentrated corporate and agricultural exposures, and inadequate credit assessment and outsourcing oversight. The regulator ordered the bank to implement prudent valuations for cooperative apartment certificates, ensure reliable monitoring and correct risk classification for corporate and private customers, and establish formal guidelines and documentation for outsourced risk and compliance functions. Furthermore, the authority mandated an increase in management estimates for expected credit losses and raised the bank's Pillar II solvency requirement to 10.6 percent to adequately cover the identified deficiencies.

Denmark

Finanstilsynet Denmark

Inspection Report 29-05-2026

The Danish Financial Supervisory Authority conducted an ordinary inspection at Hvidbjerg Bank A/S in weeks 6 and 8 of 2026. The inspection was carried out as part of the ongoing supervision of the bank. The inspection covered the bank's most significant risk areas based on a risk-based assessment.

Summary and Risk Assessment

Hvidbjerg Bank is a local bank headquartered in Thyholm with four branches in Struer, Holstebro, Viborg, and Hurup, respectively. The market area covers Northwest Jutland and Central Jutland, including parts of Aarhus. The bank has a distribution between private and corporate exposures of 59 percent and 41 percent, respectively.

The bank has a slightly higher share of property and agricultural exposures, as well as a significantly larger share of large customers, compared to comparable institutions. This entails an elevated credit risk, as both the property and agricultural sectors have historically been associated with significant losses, and economic difficulties among larger individual customers can lead to substantial losses for the bank.

The bank's loan growth increased from 3.7 percent to 13.5 percent during 2025. This entails a risk that growth occurs at the expense of credit quality, thereby placing high demands on the bank's credit management.

When financing cooperative apartment certificates, the bank values the certificate based on its accounting value and does not assess the cooperative's underlying property. This creates a risk that the bank overvalues the certificate and approves loans that do not align with the bank's desired risk appetite and credit policy. The bank has been ordered to conduct a prudent valuation of the certificate's actual value [1].

The Danish Financial Supervisory Authority reviewed a total of 100 group exposures, equivalent to approximately 28.5 percent of the bank's loans as of 30 September 2025.

The review revealed examples where the bank's management of several large corporate exposures was inadequate, and the risk classification for two exposures was overly optimistic. This increases the risk that the bank will identify financial difficulties on an incorrect basis and too late, potentially leading to significant losses. The bank has been ordered to ensure reliable monitoring and management of corporate customers showing signs of weakness, including ensuring correct risk classification [2].

In several cases, the bank failed to obtain, incorporate, and document relevant information regarding private customers' finances and other material circumstances. This also applies to customers located far from Hvidbjerg with atypical financial situations. This increases the risk that the bank makes decisions on an incorrect basis and assumes higher risks than intended. Consequently, regarding private customers, the bank has been ordered to ensure reliable credit assessments and effective monitoring and control of credit risks [3].

The bank had outsourced tasks within the risk management and compliance functions but lacks guidelines for cooperation with and oversight of the external provider. Additionally, the bank lacked sufficient documentation of management's prior consultation with the compliance and risk management functions regarding material decisions. This entails a risk that material tasks are not performed and that the risk and compliance functions are not consulted. The bank has been ordered to develop guidelines and ensure relevant procedures and documentation [4].

The bank had not recognized a sufficient management estimate to cover errors and deficiencies, including model risk in the calculation of expected credit losses. The Danish Financial Supervisory Authority assesses that the bank should increase its management estimate, and the bank will take this into account in the next regular calculation.

The bank has allocated 0.5 percent of Pillar II risk-weighted assets to cover operational risks related to key-person dependency and the risk of inadequate segregation of duties. The Danish Financial Supervisory Authority assesses that this can also cover the deficiencies in the compliance and risk management functions observed during the inspection. An additional add-on of 0.2 percentage points would be adequate to cover the deficiencies in the credit area identified during the inspection. The bank's solvency requirement has been calculated at 10.6 percent following the inspection.

[1] Cf. Management Order § 4, para. 2, no. 1, cf. Annex 1, no. 16

[2] Cf. Management Order § 4, para. 2, no. 1, cf. Annex 1, no. 21 and 25

[3] Cf. Management Order § 13, para. 1, § 14, para. 1, and Annex 1, no. 16

[4] Cf. Management Order § 16, para. 1, cf. Annex 7, no. 12, and § 17, para. 1

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