Basel III Kapitalreglernes betydning for danske pengeinstitutter og kreditformidlingen

Thomas Zøfting-Larsen

Student thesis: Master thesis


This thesis provides an analysis of the impact of Basel III’s risk based measures and the Leverage ratio on the 16 largest Danish banks. These banks represent more than 90 per cent of bank lending and bank assets in Denmark. The third Basel capital accord imposes higher requirements to insure financial stability by demanding improved quality of capital and more of it. Capital regulation will have diverse effects on banks depending on the type and size of the bank. Ex post effects, the global financial crisis combined with stricter capital requirements can impose damage to small banks and the real economy, by withholding loans to some of the public. The aim of this thesis is to identity capital shortfall and leverage with these 16 banks, and to emphasize the benefits and the damages to the banking sector and the public. The analysis of the risk based solvency measures reveals a quite stable banking sector by 2014. Full implementation of Basel III by 2019, reveals capital shortfall with some banks. Nordea is the only SIFI that will not meet the requirements, and will have to fund Tier 1 capital for more than 16 billion Danish krone. Among the smaller banks, a few will have significant funding issues. The issues varies broadly by their needs whether it is CET1, Tier 1 or overall solvency. Vestjysk Bank stands out by needing more than five per cent CET1 and Tier 1 capital. Their capital shortfall amounts up to 1 billion Danish krone, which is massive in terms of the size of their risk-weighted assets. Vestjysk Bank is the only one falling below the required minimum capital level in this analysis. The results of the Leverage ratio analysis reveals that none of the Danish banks are close to the 3 per cent limit. The results shows that larger banks tend to be more levered. This fact supports the higher capital requirements for SIFIs. A breakdown of the Leverage ratio over time suggests that Danish Banks are becoming less levered due to their increased amounts of capital from the risk-based capital requirements. The thesis finds that smaller banks will meet funding difficulties relative to SIFIs because of the current economic climate and the implicit government guarantees. The higher capital levels does not support increase the costs of banking and thereby finding higher lending rates legitimate. SIFIs’ costs will be higher, because of the decreasing value of their implicit guarantee. Capital regulation need to be improved and further studied, to minimize the damage to businesses depending on banking as a funding source. Banking regulation should not have too adverse effects on economies and economic growth.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2015
Number of pages104