Order on the Calculation of Risk Exposures, Capital Base and Solvency Requirements

Order on the Calculation of Risk Exposures, Capital Base and Solvency Requirements 1)

Pursuant to Section 124, subsection 7, Section 128, subsections 1 and 2, Section 128a, Section 142, Section 143, subsection 1, items 2, 3, 5 and 6, and Section 373, subsection 4, of the Act on Financial Business, cf. Act Consolidation No. 650 of 9 June 2025, and Section 120, subsection 4, Section 128, subsection 2, and Section 270 of the Act on Securities Firms and Investment Services and Activities, cf. Act Consolidation No. 232 of 1 March 2024, it is hereby ordered:

Scope and Definitions

Section 1. This Order applies to the following entities:

1. Credit institutions.
2. Real estate credit institutions.
3. Securities firms covered by the requirements in Article 1, subsection 2, of the Regulation of the European Parliament and of the Council on prudential requirements for investment firms.
4. Securities firms covered by the requirements in Section 120, subsection 1, of the Act on Securities Firms and Investment Services and Activities.
5. Branches in Denmark of credit institutions, real estate credit institutions, or securities firms authorized in a country outside the European Union with which the Union has not concluded an agreement in the financial sector.
6. Financial holding companies covered by the requirements in Section 170, subsections 1, 2, 4 and 5, of the Act on Financial Business.
7. Securities holding companies covered by the requirements in Section 128, subsection 1, of the Act on Securities Firms and Investment Services and Activities.
8. Groups where one of the entities mentioned in items 1-3 or 6 is the ultimate parent company in Denmark.
9. Groups where the ultimate parent company in Denmark is a securities firm or a securities holding company covered by Section 129 of the Act on Securities Firms and Investment Services and Activities.

Section 2. For the purposes of this Order, an entity's working capital means the sum of equity, subordinated capital contributions, deposits and other debt, deposits in pool schemes, issued bonds at fair value, and issued bonds at amortized cost.

Adequate Capital Base and Solvency Requirements

Section 3. In calculating the entity's adequate capital base and individual solvency requirement, the entity's board of directors and management must take into account the matters set out in Annex 1.

Subsection 2. The solvency requirement is calculated as the percentage that the adequate capital base represents of the total risk exposure. The part of the solvency requirement relating to excessive gearing risk is calculated as a percentage of the total non-risk-weighted exposure.

Subsection 3. Entities covered by Section 1, items 4, 7 and 9, are not covered by subsection 2. The solvency requirement for these companies is calculated as an absolute value.

Subsection 4. Branches of securities firms covered by Section 1, item 5, are not covered by subsection 2. The solvency requirement for these companies is calculated as an absolute value.

Disclosure

Section 4. Credit institutions and real estate credit institutions must disclose the information set out in Annex 2, subject to subsection 2.

Subsection 2. Credit institutions and real estate credit institutions that are part of a group with other credit institutions and real estate credit institutions covered by the obligation to disclose the information in Annex 2 may disclose the entities' information collectively. The descriptions in Annex 2, item 1, may in such cases be described collectively for all credit institutions and real estate credit institutions in the group, provided the descriptions are representative of the credit institutions and real estate credit institutions in the group covered by the obligation to disclose the information. The collective disclosure must be made by each individual credit institution and real estate credit institution.

Section 5. Credit institutions and real estate credit institutions may, at their own responsibility, postpone the disclosure of the information in Annex 2 to avoid harming their legitimate interests, provided the postponement will not mislead the public and the entity can ensure that the information is treated confidentially. The entity must disclose the information as soon as possible without harming the entity's legitimate interests.

Section 6. Credit institutions and real estate credit institutions must disclose the information in Annex 2, item 1, at least once a year. Credit institutions covered by Article 4, subsection 1, item 146, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions must disclose the information in Annex 2, items 2-6, semi-annually. Other credit institutions must disclose the information in Annex 2, items 2-6, annually.

Subsection 2. If significant changes occur in the information that credit institutions or real estate credit institutions are required to disclose pursuant to Section 4, the entity must immediately thereafter disclose the changes.

Subsection 3. Disclosure of the information in Annex 2 must be made in Danish or English.

Total Risk Exposure

Section 7. In groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 170, subsections 1, 2 and 4, of the Act on Financial Business, the requirements for total risk exposure are calculated pursuant to Article 92, subsections 3 and 4, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, for the financial holding company and the group. In groups where the ultimate financial holding company in Denmark performs consolidation pursuant to Section 170, subsection 5, of the Act on Financial Business, the requirements for total risk exposure are calculated pursuant to Article 92, subsections 3 and 4, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, for the financial holding company.

Section 8. Entities covered by the requirement to participate in benchmark exercises, pursuant to Section 143, item 6, of the Act on Financial Business, must send the results of the calculations for their exposures or positions, which are included in the benchmark portfolios, to the Danish Financial Supervisory Authority at least once a year or upon request by the Danish Financial Supervisory Authority.

Subsection 2. The benchmark calculations must be sent together with a statement of the methods used.

Subsection 3. The benchmark calculations must be sent in accordance with the model in the implementing technical standards developed by the European Banking Authority (EBA) pursuant to Article 78 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.

Capital Base and Transitional Provisions

Section 9. In groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 170, subsections 1, 2 and 4, of the Act on Financial Business, the requirements for capital base, in Part Two, and the requirements for transitional provisions, in Part Ten, Section 1, Chapters 1 and 2, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, apply to the financial holding company and the group. In groups where the ultimate financial holding company in Denmark performs consolidation pursuant to Section 170, subsection 4, of the Act on Financial Business, the requirements for capital base, in Part Two, and the requirements for transitional provisions, in Part Ten, Section 1, Chapters 1 and 2, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, apply to the financial holding company. In groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 128 of the Act on Securities Firms and Investment Services and Activities, the requirements for capital base, in Part Two, of the Regulation of the European Parliament and of the Council on prudential requirements for investment firms, apply to the securities holding company and the group.

Section 10. In the calculation of the capital base at the individual, sub-consolidated or consolidated level for credit institutions, real estate credit institutions, securities firms, as well as financial holding companies and securities holding companies, which are part of a group with a Group 1 insurance undertaking, which is the entity's subsidiary or an associated undertaking, where consolidation is performed pursuant to Article 11 of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, a deduction is made for the proportional share of the insurance undertaking's solvency capital requirement, which the insurance undertaking has calculated pursuant to Section 154 of the Act on Insurance Business, corresponding to the part of the directly or indirectly owned capital in the Group 1 insurance undertaking. The deduction is reduced by an amount corresponding to the difference between the following amounts, provided that the deduction cannot become less than zero:

1. The proportional direct or indirect owned share of the capital base, which follows from Section 154, subsection 1, of the Act on Insurance Business, in the Group 1 insurance undertaking.
2. The value of the ownership share in the Group 1 insurance undertaking, as it is included in the balance sheet, plus the value of capital elements included in the Group 1 insurance undertaking's capital base.

Subsection 2. In the calculation of the capital base for a holding company, which is part of a group with a Group 2 insurance undertaking, which is the holding company's subsidiary or an associated undertaking, a deduction is made for the proportional share of the minimum basic capital, pursuant to Section 156, subsection 2, of the Act on Insurance Business, corresponding to the part of the directly or indirectly owned capital in the Group 2 insurance undertaking. If the Group 2 insurance undertaking's individual solvency requirement is at least equal to the minimum basic capital, the difference between the insurance undertaking's individual solvency requirement and the minimum basic capital is also deducted. The deduction pursuant to the first sentence is reduced by an amount corresponding to the difference between the following amounts, provided that the deduction cannot become less than zero:

1. The proportional direct or indirect owned share of the basic capital in the Group 2 insurance undertaking.
2. The value of the ownership share, as it is included in the balance sheet, plus the value of subordinated debt, including subordinated debt from other group entities, which is included in the Group 2 insurance undertaking's basic capital pursuant to Section 36, subsection 1, item 1, of the Order on the Calculation of Basic Capital for Group 2 Insurance Undertakings and on the Calculation of Capital Base for Certain Securities Firms.

Subsection 3. In the calculation of the capital base for an insurance undertaking that does not have its statutory seat in a country within the European Union or in a country with which the Union has concluded an agreement in the financial sector, the home country's rules are used in the calculation of the solvency capital requirement, provided it is at least the solvency capital requirement that would have resulted if the insurance undertaking had its statutory seat within the European Union.

Subsection 4. Subsections 1 and 2 apply only if the credit institution, real estate credit institution, or securities firm, or the financial holding company or securities holding company, has obtained the Danish Financial Supervisory Authority's permission pursuant to Article 49, subsection 1, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions.

Section 11. Before credit institutions, real estate credit institutions, securities firms, financial holding companies or securities holding companies covered by the Companies Act enter into agreements on hybrid core capital or supplementary capital instruments containing conversion terms, the general meeting must decide to enter into the agreement on the hybrid core capital or the supplementary capital instruments, or by determination in the articles of association authorize the board of directors to enter into the agreement on the hybrid core capital or the supplementary capital instruments and simultaneously authorize the board of directors to carry out the corresponding capital increase for use in the conversion. The authorization to carry out the capital increase for use in the conversion must be in place prior to entering into the agreement on hybrid core capital or supplementary capital instruments for there to be inclusion in hybrid core capital or supplementary capital instruments. Conversion terms may only be utilized as long as the issuer is a credit institution, a real estate credit institution or a financial holding company covered by the Companies Act.

Subsection 2. Section 167, subsections 1 and 2, and Section 168 of the Companies Act apply to the general meeting's decision to enter into an agreement on hybrid core capital or supplementary capital instruments containing conversion terms, in credit institutions, real estate credit institutions, securities firms, financial holding companies or securities holding companies covered by the Companies Act. Section 167, subsection 3, of the Companies Act applies correspondingly to the general meeting's decision, insofar as the decision concerns the legal position before conversion takes place at the issuer's initiative, or if the general meeting chooses to enter into an agreement to issue hybrid core capital or supplementary capital instruments.

Subsection 3. The general meeting's authorization to the board of directors pursuant to subsection 1 is given for one or more periods of up to five years at a time. The deadline applies only to the entry into the agreement on the hybrid core capital or the supplementary capital instruments and not to any subsequent capital increase resulting from the conversion.

Subsection 4. In the authorization to the board of directors pursuant to subsection 1, the articles of association must state the following:

1. The date of expiry of the period mentioned in subsection 3.
2. The maximum amount by which the board of directors may increase the capital.
3. Provisions regarding the matters mentioned in Section 158, items 5, 6 and 9-11, of the Companies Act.

Subsection 5. For credit institutions, real estate credit institutions and financial holding companies covered by the Companies Act, the board of directors may, with authorization pursuant to subsection 1, decide to issue hybrid core capital or supplementary capital instruments. Section 169, subsection 2, of the Companies Act applies in this context to the board of directors' decision. The board of directors must take a position on the recipient's legal position if the matters mentioned in Section 169, subsection 3, of the Companies Act are implemented before conversion takes place at the issuer's initiative. Section 169, subsections 4 and 5, and Sections 170 and 171 of the Companies Act apply to the board of directors' decision to issue hybrid core capital or supplementary capital instruments.

Subsection 6. Sections 172-177 of the Companies Act apply to the general meeting's decision to enter into an agreement on hybrid core capital or supplementary capital instruments with terms for conversion and to the use of the board of directors' authorization to carry out a capital increase for use in conversion pursuant to subsection 1.

Subsection 7. The general meeting's authorization to the board of directors pursuant to subsection 1 lapses if the issuer is no longer a credit institution, a real estate credit institution or a financial holding company covered by the Companies Act.

Subsection 8. If the issuer ceases to be a credit institution, a real estate credit institution or a financial holding company covered by the Companies Act, hybrid core capital or supplementary capital instruments, like other debt capital, may continue not to be recognized as part of the company's share capital.

Section 12. Entities covered by Article 89, subsection 3, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions, must use the method in Article 89, subsection 3, point (a), in relation to qualifying holdings.

Reporting

Section 13. In groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 170, subsections 1, 2 and 4, of the Act on Financial Business, the reporting requirements in Article 430 of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions apply, and these groups must report the capital adequacy assessment via COREP reporting templates. In groups where the ultimate financial holding company in Denmark performs consolidation pursuant to Section 170, subsection 4, of the Act on Financial Business, the reporting requirements in Article 430 of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions apply, and these groups must report the capital adequacy assessment via COREP reporting templates. In groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 128, subsection 1, of the Act on Securities Firms and Investment Services and Activities, the reporting requirements in Article 54 of the Regulation of the European Parliament and of the Council on prudential requirements for investment firms apply, and these groups must report the capital adequacy assessment via COREP reporting templates.

Subsection 2. The capital adequacy assessment must be approved by the entity's management.

Subsection 3. The reporting must be made on a machine-readable permanent medium.

Subsection 4. Group reports pursuant to subsection 1 must exclusively be made at the ultimate group level, subject to subsection 5.

Subsection 5. The Danish Financial Supervisory Authority may require reporting of sub-group assessments for sub-groups where consolidation is not performed pursuant to Article 11, subsections 1 and 2, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions.

Subsection 6. Credit institutions and real estate credit institutions must send the documentation set out in Annex 1, items 30 and 31, on paper or other permanent medium to the Danish Financial Supervisory Authority no later than 45 working days after the end of the year, unless another time has been agreed with the Danish Financial Supervisory Authority. Credit institutions and real estate credit institutions that at the end of the latest financial year had a working capital of less than DKK 1 billion and are not part of a SIFI group are exempt from this reporting obligation.

Subsection 7. The group's solvency requirement must be reported to the Danish Financial Supervisory Authority.

Subsection 8. Credit institutions, real estate credit institutions and securities firms, pursuant to Section 1, subsection 4, must report the individual solvency requirement to the Danish Financial Supervisory Authority no later than 20 working days after the end of the quarter.

Subsection 9. Subsections 5 and 6 do not apply to groups where the ultimate parent company in Denmark performs consolidation pursuant to Section 128, subsection 1, of the Act on Securities Firms and Investment Services and Activities.

Penalties

Section 14. Violation of Section 3, subsection 1, Section 4, subsection 1, Section 6, subsections 1 and 2, Section 8, Section 9, Section 13, subsection 1, and Annex 1 and 2, may be punishable by a fine. A fine shall also be imposed on anyone who fails to comply with an order to perform or refrain from performing certain actions with a view to complying with the provisions of this Order or the Annexes.

Subsection 2. Companies and other legal persons may be subject to criminal liability pursuant to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 15. This Order enters into force on 1 July 2025.

Subsection 2. Order No. 2155 of 3 December 2020 on the calculation of risk exposures, capital base and solvency requirements is repealed.

Danish Financial Supervisory Authority, 12 June 2025 Louise Caroline Mogensen / Bettina Høstrup

Annex 1 Adequate Capital Base and Solvency Requirements for Credit Institutions etc.

Table of Contents

Background 1-6

General Matters on Calculation of Adequate Capital Base and Solvency Requirements 7-32

Internal Process in the Entity, Particularly Regarding Board and Management 7-14

The Entity's Approach to Calculation of Adequate Capital Base and Solvency Requirements 15-19

Re-evaluation and Monitoring 20-22

Reporting 23-29

Documentation 30-32

Methods 33-41

Matters to be Considered in Assessing the Adequate Capital Base and Solvency Requirement 42-101

Introductory Matters on Matters to be Considered 42-47

Earnings 48-50

Lending Growth 51-53

Credit Risks 54-61

Concentration Risks 62-64

Market Risks 65-73

Interest Rate Risks Outside the Trading Book 74-82

Liquidity Risks 83

Operational Risks 84

Gearing 85

Other Risks 86-91

Control Environment 92-101

Background

1. The rules on adequate capital base and individual solvency requirement are found in Section 124 of the Act on Financial Business and Section 120 of the Act on Securities Firms and Investment Services and Activities. The Danish Financial Supervisory Authority may, pursuant to Section 124, subsection 3, and Section 350, subsection 1, of the Act on Financial Business, set a higher individual solvency requirement than that set out in Article 92, subsection 1, point (c), or for the gearing ratio requirement set out in Article 92, subsection 1, point (d), of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions. The Danish Financial Supervisory Authority may, pursuant to Section 121, subsection 1, of the Act on Securities Firms and Investment Services and Activities, set a higher individual solvency requirement in the form of a supplement to the capital base requirement pursuant to Article 11 of Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements for investment firms.

2. It follows from Section 171, Section 172, and Section 174, subsection 1, of the Act on Financial Business, and Section 129 of the Act on Securities Firms and Investment Services and Activities, as well as from Article 11, subsections 1 and 2, of the Regulation of the European Parliament and of the Council on prudential requirements for credit institutions and Article 7, subsection 1, of Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements for investment firms, that the rules also apply on a consolidated basis.

3. The solvency requirement is measured in relation to the total risk exposure. The part of the solvency requirement relating to excessive gearing risk is, however, measured in relation to the total non-risk-weighted exposure. The solvency requirement is thus calculated as a percentage, pursuant to Section 124, subsection 2, of the Act on Financial Business. In the calculation of the solvency requirement, both percentage amounts and actual kroner amounts may be included. Management must therefore ensure that the adequate capital base also stays within the requirement in percentage terms pursuant to Section 124, subsection 2, of the Act on Financial Business. For companies mentioned in Section 1, subsection 4, 7 and 9, the solvency requirement is measured as an absolute value, pursuant to Section 120, subsection 2, of the Act on Securities Firms and Investment Services and Activities.

4. An adequate capital base is the capital required to cover the solvency requirement, pursuant to Section 124, subsection 2, of the Act on Financial Business and Section 120, subsection 2, of the Act on Securities Firms and Investment Services and Activities. The adequate capital base is calculated as the amount that is appropriate to cover the entity's risks, pursuant to Section 124, subsection 1, of the Act on Financial Business and Section 120, subsection 1, of the Act on Securities Firms and Investment Services and Activities.

5. The entity must be aware that the adequate capital base is the numerator in the fraction when the solvency requirement is calculated, and that the solvency requirement may change over time.