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2021-12-14

Order on the Calculation of Indicators and Factors for Designating Systemically Important Financial Institutions

The Danish Financial Supervisory Authority issues this order to establish the methodology for calculating indicators that determine which financial institutions are designated as Systemically Important Financial Institutions (SIFIs). The regulation defines specific metrics, such as total assets, national payment transaction values, and cross-jurisdictional liabilities, and mandates that these be calculated at the group or solo level depending on the institution's reporting status. It further requires SIFIs to publish institution-specific indicator summaries within three business days of receipt and imposes penalties for non-compliance with these disclosure obligations.

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Order on the Calculation of Indicators and Factors for Designating Systemically Important Financial Institutions etc.

Pursuant to Section 308, subsections 8-9, and Section 373, subsection 4, of the Financial Business Act, cf. Act Consolidation No. 2497 of 15 December 2021, as amended by Act No. 2382 of 14 December 2021, the following is enacted:

Chapter 1

Scope and Definitions

Section 1. This Order applies to banks and mortgage credit institutions.

Subsection 2. The Danish Financial Supervisory Authority shall calculate the indicators and factors for the institutions' systemic importance in accordance with Section 3 in order to designate systemically important financial institutions (SIFI) in accordance with Section 308 of the Financial Business Act.

Subsection 3. For institutions that prepare group accounts, cf. the Order on Financial Reporting for Credit Institutions and Securities Brokerage Companies etc., the calculation, cf. subsection 2, shall be carried out at the group level. The inclusion of a subsidiary insurance company or an associated insurance company shall be carried out in accordance with Section 198 of the Financial Business Act, subject to subsection 4.

Subsection 4. For institutions that prepare group accounts in accordance with IFRS, the calculation, cf. subsection 2, shall be carried out at the group level in accordance with the group accounting rules, cf. the Order on Financial Reporting for Credit Institutions and Securities Brokerage Companies etc. The inclusion of a subsidiary insurance company or an associated insurance company shall be carried out in accordance with Section 198 of the Financial Business Act.

Subsection 5. For institutions that do not prepare group accounts, the calculation, cf. subsection 2, shall be carried out at the solo level, cf. the Order on Financial Reporting for Credit Institutions and Securities Brokerage Companies etc.

Section 2. In this Order, the following definitions apply:

  1. Total assets: Total balance sheet assets.

  2. Value of national payment transactions: Payments made during the reporting year excluding intra-group payments.

  3. Deposits in Denmark: The sum of deposits and other liabilities plus deposits in pooled schemes, minus the institution's deposits in branches and subsidiaries abroad. The indicator relates to deposits from all sectors excluding central banks and monetary financial institutions.

  4. Loans in Denmark: The sum of loans and other receivables, minus the institution's loans from branches and subsidiaries abroad. The indicator relates to loans to all sectors excluding central banks and monetary financial institutions.

  5. Nominal value of derivatives not traded on a regulated market (OTC derivatives): The sum of OTC derivatives in the trading book and OTC derivatives for accounting hedging.

  6. Liabilities across jurisdictions: The sum of cross-border liabilities consisting of derivatives, short positions, and deposits. The items do not include intra-group liabilities and liabilities that the institution's entities in Denmark and abroad (subsidiaries and/or branches) have with counterparties in their host country.

  7. Assets across jurisdictions: The sum of cross-border assets consisting of derivatives, equity instruments, debt securities, and loans as well as advances. The items do not include intra-group assets and assets that the institution's entities in Denmark and abroad (subsidiaries and/or branches) have with counterparties in their host country.

  8. Outstanding debt issuances: The sum of issued bonds and subordinated capital injections.

  9. Liabilities within the global financial system: The sum of intra-financial liabilities consisting of derivatives, short positions, and deposits. The counterparty sector is defined as credit institutions and other financial companies located worldwide.

  10. Assets within the global financial system: The sum of intra-financial assets consisting of derivatives, equity instruments, debt securities, and loans as well as advances. The counterparty sector is defined as credit institutions and other financial companies located worldwide.

  11. Liabilities within the financial system in Denmark: The sum of intra-financial liabilities consisting of derivatives, short positions, and deposits. The counterparty sector is defined as credit institutions and other financial companies located in Denmark.

  12. Assets within the financial system in Denmark: The sum of intra-financial assets consisting of derivatives, equity instruments, debt securities, and loans as well as advances. The counterparty sector is defined as credit institutions and other financial companies located in Denmark.

  13. A significant branch: A branch is considered significant if the branch has a market share in the form of deposits of more than 2 percent in Denmark, or if the branch, upon suspension or cessation, is expected to have an impact on systemic liquidity and payment, clearing, and settlement systems in Denmark. The branch's size and significance in terms of the number of customers in the Danish banking system or the financial system will also be an element that may lead to the branch being considered significant.

Chapter 2

Calculation of Indicators for Calculating Systemic Importance

Section 3. The indicator "Total assets", cf. Section 308, subsection 6, no. 1, of the Financial Business Act, is calculated as the institution's total assets as a share of the total assets of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 2. The indicator "Value of national payment transactions", cf. Section 308, subsection 6, no. 2, of the Financial Business Act, is calculated as the value of national payment transactions in the institution as a share of the total value of national payment transactions in Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 3. The indicator "Deposits in Denmark", cf. Section 308, subsection 6, no. 3, of the Financial Business Act, is calculated as the institution's deposits in Denmark as a share of the total deposits in Denmark of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 4. The indicator "Loans in Denmark", cf. Section 308, subsection 6, no. 4, of the Financial Business Act, is calculated as the institution's loans in Denmark as a share of the total loans in Denmark of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 5. The indicator "Nominal value of derivatives not traded on a regulated market (OTC derivatives)", cf. Section 308, subsection 6, no. 5, of the Financial Business Act, is calculated as the nominal value of derivatives not traded on a regulated market (OTC derivatives) in the institution as a share of the total nominal value of derivatives not traded on a regulated market (OTC derivatives) in Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 6. The indicator "Liabilities across jurisdictions", cf. Section 308, subsection 6, no. 6, of the Financial Business Act, is calculated as the institution's liabilities across jurisdictions as a share of the total liabilities across jurisdictions of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 7. The indicator "Assets across jurisdictions", cf. Section 308, subsection 6, no. 7, of the Financial Business Act, is calculated as the institution's assets across jurisdictions as a share of the total assets across jurisdictions of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 8. The indicator "Outstanding debt issuances", cf. Section 308, subsection 6, no. 8, of the Financial Business Act, is calculated as the institution's outstanding debt issuances as a share of the total outstanding debt issuances of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 9. The indicator "Liabilities within the global financial system", cf. Section 308, subsection 6, no. 9, of the Financial Business Act, is calculated as the institution's liabilities within the global financial system as a share of the total liabilities within the global financial system of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 10. The indicator "Assets within the global financial system", cf. Section 308, subsection 6, no. 10, of the Financial Business Act, is calculated as the institution's assets within the global financial system as a share of the total assets within the global financial system of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 11. The indicator "Liabilities within the financial system in Denmark", cf. Section 308, subsection 6, no. 11, of the Financial Business Act, is calculated as the institution's liabilities within the financial system in Denmark as a share of the total liabilities within the financial system in Denmark of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Subsection 12. The indicator "Assets within the financial system in Denmark", cf. Section 308, subsection 6, no. 12, of the Financial Business Act, is calculated as the institution's assets within the financial system in Denmark as a share of the total assets within the financial system in Denmark of Danish banks and mortgage credit institutions and significant branches in Denmark of foreign banks and mortgage credit institutions.

Chapter 3

Publication

Section 4. The Danish Financial Supervisory Authority prepares an institution-specific overview for each SIFI designated in accordance with Section 308 of the Financial Business Act. The institution-specific overview contains the designated SIFI's indicators converted to basis points, calculated in accordance with Section 308, subsection 6, of the Financial Business Act, and the institution's placement in categories of systemic importance, cf. Section 308, subsection 7, of the Financial Business Act. The institution-specific overview is prepared in connection with the Danish Financial Supervisory Authority's designation of new SIFIs in accordance with Section 308 of the Financial Business Act.

Subsection 2. The institution must publish the institution-specific overview no later than three business days after the institution has received the overview from the Danish Financial Supervisory Authority. The institution must publish the institution-specific overview on its website in a place where it naturally belongs. When the institution has published the institution-specific overview, this must be immediately notified to the Danish Financial Supervisory Authority.

Subsection 3. The Danish Financial Supervisory Authority must publish a consolidated overview for all SIFIs on its website when the Danish Financial Supervisory Authority has received notification of publication, cf. subsection 2, from all SIFIs.

Chapter 4

Penal Provisions

Section 5. A fine shall be imposed on anyone who fails to comply with the requirement for publication, cf. Section 4, subsection 2.

Subsection 2. Companies etc. (legal persons) may be subject to criminal liability in accordance with the rules in Chapter 5 of the Criminal Code.

Chapter 5

Entry into Force

Section 6. This Order enters into force on 1 January 2022.

Subsection 2. Order No. 298 of 27 March 2014 on the calculation of indicators and factors for designating systemically important financial institutions etc. and Order No. 1398 of 29 November 2017 amending the Order on the calculation of indicators and factors for designating systemically important financial institutions etc. are repealed.

The Danish Financial Supervisory Authority, 14 December 2021

Jesper Berg / Kristina Astrup Blomquist

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