Danish banks are well-prepared to withstand potential losses stemming from a global trade war, although export-oriented companies pose a risk. This assessment comes from the National Bank of Denmark’s latest semi-annual financial stability review, released Tuesday.

The report highlights that the Danish financial sector is robust enough to manage challenges arising from trade conflicts impacting the Danish economy, a conclusion supported by the National Bank’s recent stress test.

According to Peter E. Storgaard, head of Financial Stability at the National Bank of Denmark, maintaining a strong liquidity position and capitalization is crucial for banks in the current risk environment.

Banks have benefited from high earnings in recent years due to elevated interest rates, coupled with limited losses from struggling customers.

However, the National Bank cautions that this situation could change, as interest rates and earnings decline, and export companies, who are also bank clients, face potential difficulties if global trade stagnates.