Lars Rohde: Macroprudential policy in Denmark

Lecture by Mr Lars Rohde, Governor of the National Bank of Denmark, at the University of Copenhagen, Copenhagen, 12 May 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

These lecture notes outline the journey of the Danish Systemic Risk Coun-cil ("the Council"), commencing at the roots of its establishment and end-ing at the present time where it functions as the macroprudential authori-ty in Denmark. The lecture notes split this journey into ten sections and casts light on both struggles and successes along the way. Section 1 summarises how the recommendations of the Committee on the Struc-ture of Financial Supervision led to the establishment of a systemic risk council in Denmark. The institutional setup of the Council is elaborated upon in Section 2, which also draws comparisons to the setup of macro-prudential authorities abroad. With the cornerstones of the institutional setup laid out, Sections 3 and 4 proceed by outlining the first year of the Council's work and the Council's two observations on conditions for a rapid build-up of systemic financial risks, respectively. Subsequently, the Council's road to introducing borrower-based measures in Denmark is presented in Sections 5 and 6. In Section 7, the Council's framework for assessing the countercyclical capital buffer is presented along with the recommendations for activating and building up the buffer. The Council's role as a macroprudential authority in the Faroe Islands and Greenland is summarised in Section 8, while Section 9 outlines the Council's part in fa-cilitating the debate on systemic cyber risk and resilience in the Danish financial sector. The last section of the lecture notes reflect on the Coun-cil's work till now and looks into the crystal ball to see what the future may hold. While the future is uncertain, it is clear that the Council's journey is far from over and the full potential of macroprudential policy in Denmark has yet to be seen.