Danish banks are well-prepared to manage potential losses stemming from a global trade war, despite the risk to export-sensitive companies. This is the conclusion of the National Bank of Denmark’s latest semi-annual financial stability assessment, released recently.

The assessment, which included a stress test simulating the impact of an economic crisis on Danish banks, indicates the financial sector’s resilience. The National Bank emphasizes that the banks’ strong liquidity and high equity are key factors in their ability to withstand economic shocks.

Peter E. Storgaard, Head of Financial Stability at the National Bank, stated that a solid liquidity position and capitalization are critical for banks in the current risk environment.

In recent years, the banks’ healthy finances have been supported by high earnings due to elevated interest rates and limited losses on struggling customers. However, the National Bank cautions that this situation may shift.

The assessment highlights the potential for declining interest rates and earnings, coupled with the risk that export companies, and thus bank customers, could be negatively affected by a slowdown in global trade.