Finanstilsynet to Simplify Rules for Smaller Credit Institutions

Press Release 18-02-2026

As part of its strategy, Finanstilsynet is now launching a project to enable smaller and non-complex credit institutions in Denmark to be subject to simpler and more proportional regulation. Financial regulation, most of which is established at the EU level, has expanded significantly since the financial crisis. The starting point of the regulation is uniform rules across EU countries regardless of the size of the institutions, though with certain possibilities for proportionality. Finanstilsynet is now initiating work to identify areas where smaller and non-complex Danish credit institutions, which typically do not operate internationally, can be covered by simpler and more proportional frameworks than today.

Finanstilsynet will, as a minimum, examine the following:

• Recovery plans
• Redemption of own capital instruments
• Corporate governance and risk management
• Capital base and solvency requirements

The initiatives follow other already implemented proportional adjustments in the areas of liquidity and fit and proper assessments for the board members of the smallest credit institutions. Collectively, the initiatives will constitute a national proportionality regime.

"Rule simplification is a strategic main track in Finanstilsynet's work. We therefore have a clear focus on proportionality, so that the requirements reflect the actual risks and do not impose unnecessary burdens on companies. It makes good sense that the small savings bank and the large banking group are not always met with the same detailed requirements.

We are therefore now looking at requirements for the organization of credit institutions, recovery plans, and the calculation of capital needs. At the same time, it is clear that simplification must not come at the expense of financial stability or the protection of consumers and investors. The goal is a regulation that is risk-based, proportional, and more flexible in practice," says Finanstilsynet's Director Louise Mogensen.

Proportionality measures already implemented

Finanstilsynet has actively worked on rule simplification and proportionality in recent years.

In autumn 2025, Finanstilsynet published revised guidelines in the area of liquidity. The new versions provide more targeted and practical guidance, particularly for small and medium-sized credit institutions, making it easier to navigate and comply with the requirements in the regulation in this area, including the covered requirements in the management order.

Changes have also been made to the fit and proper rules, meaning that board members in group 3 and 4 credit institutions no longer need to be assessed for suitability, and a number of key persons in group 4 credit institutions are exempt from fit and proper assessments.

Proposals and initiatives underway

Recovery plans

One of the possibilities for greater proportionality relates to the preparation of recovery plans. Finanstilsynet has sent a draft of an updated order and guideline out for public consultation. The draft proposes changing the frequency for submitting recovery plans from annually to every third year for companies that can use simplified obligations. Finanstilsynet is also expanding the possibility of using simplified obligations to cover more credit institutions. The covered institutions were notified in 2025. Additionally, the threshold for when the smallest credit institutions can limit themselves to submitting their capital raising plan instead of a more comprehensive recovery plan is being raised from a balance sheet total of DKK 1 billion to DKK 2 billion.

Redemption of own capital instruments

Finanstilsynet also expects to soon publish a sector news item on simplified processes for permissions for credit institutions wishing to have a limited framework for the redemption of own capital instruments, e.g., for use in market making in their own shares or similar. The proposal for new processes has been consulted on with industry organizations in the field. The simplified processes are expected to apply to institutions that meet a number of conditions regarding capital overcoverage, etc., particularly small and medium-sized credit institutions. Finanstilsynet will explore the possibility of further simplifications and proportionality for other permissions in this area and has noted the Single Supervisory Mechanism's (ECB/SSM) statements on simplified processes in the area of capital redemption, which will be included in the Danish considerations.

Corporate governance and risk management

The management order sets out a number of frameworks that are intended to ensure sound operations, good corporate governance, and effective risk management of credit institutions. Finanstilsynet will investigate how further work on proportionality can be conducted in relation to the management order and develop a proposal for further specification thereof, which can be implemented in 2027.

Capital base and solvency requirements

The solvency requirements guideline helps clarify the frameworks for institutions' calculation of sufficient capital base and solvency requirements. Finanstilsynet will propose measures to increase proportionality in the guideline without reducing institutions' capital coverage of risks. Smaller and non-complex credit institutions will, for example, be able to use simpler methods to calculate solvency add-ons – and thereby, among other things, reduce the scope of supplementary analyses and sensitivity calculations.

Finanstilsynet will also investigate whether there are other areas that can be covered by the new framework for more proportional regulation for smaller and non-complex credit institutions and will report on the work at the end of 2026.

Determination of the regulation

Detailed regulation is often established through technical processing at the European Banking Authority (EBA) rather than in individual EU countries. Finanstilsynet actively contributes to efforts to influence financial regulation at the EU level to ensure it is as simple, proportional, and risk-based as possible. This applies both in Brussels and within European supervisory authorities.

However, some regulation is determined nationally and implemented through orders issued by Finanstilsynet. In addition, Finanstilsynet provides guidance and concrete practice.

Finanstilsynet's work on proportionality in regulation should be viewed in connection with EBA's simplification recommendations from October 2025 and also takes place in the context of the Commission's upcoming report on the banking market, expected later this year. The Danish proportionality work should be seen as an independent initiative that supplements the framework for proportional regulation in the EU.

What is the proportionality regime?

A small local bank with limited risks and a large, complex financial group with a broad risk profile do not necessarily need to be subject to exactly the same requirements. Therefore, Finanstilsynet advocates for more proportional rules. With the national proportionality regime, rules and requirements are adapted to the size, complexity, and risk profile of the companies, where European rules permit this.

This means that less complex credit institutions receive simpler and more transparent frameworks in areas where their actual risks are lower and which reflect their business model.

The regime is part of Finanstilsynet's rule simplification work and is intended to make it easier to operate financial businesses – without compromising the robustness of the companies or the protection of consumers and investors. The goal is a more flexible and risk-based regulation that supports a robust and sound sector for the entire society.

Last updated 17-02-2026

Contact

Morten Holm Steinvig Press Contact

Email: mhs@ftnet.dk

Phone: +45 33 55 83 36 (Monday-Friday 09:00 - 16:00)

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