An extract from The Banking Regulation Review, 11th Edition
The Danish banking industry has seen an increasing concentration in the financial market since the late 1980s, even though Denmark is still characterised by its significant number of small and medium-sized banks compared with other European countries. The market share of these small and medium-sized banks is, however, of a size that still indicates a Danish banking sector dominated by a few very large financial conglomerates.
The regulatory regime applicable to banks
Under Danish law, banks are defined as undertakings that receive deposits or other funds from the public, which are to be repaid, and grant loans at their own expense. The general regulation of banking activities is set out in the Danish Financial Business Act (FBA) and executive orders and guidelines issued pursuant thereto.
Responsibility for the authorisation, regulation and supervision of banks and other financial undertakings, as well as the interpretation of rules set out in the FBA and other rules applicable to banks, has been placed on the Danish Financial Supervisory Authority (FSA), which is a government agency under the Ministry of Industry, Business and Financial Affairs. Other main objectives of the FSA are market supervision; an independent obligation to ensure compliance with regulations on insider trading, price manipulation, conduct of business rules and good marketing practice; and collecting and publishing information about the financial sector. The FSA has announced that its current primary focus is to ensure continued financial stability and confidence in financial undertakings and markets. In recent years, this has meant increased attention to compliance with the fit and proper requirements applicable to the management of banks and, more frequently, visits to banks to ensure compliance with, inter alia, capital requirements. Since the financial crisis of 2008, the FSA has continuously emphasised that it applies a risk-based approach to the supervision of Danish financial institutions.
The FSA is supervised by a board of directors appointed by the Ministry of Industry, Business and Financial Affairs. The board has an active role in deciding the policies and focus of the FSA as well as a general oversight function.i Banking and credit institution activities
Pursuant to Section 7 of the FBA, banks in Denmark are required to be licensed. This requirement is triggered by deposit-taking activity from the public. Licensed banks are entitled to carry out the banking activities listed in Annexes 1 and 4A to the FBA and activities that are ancillary thereto. The act of commercial lending on a stand-alone basis to non-consumers is not subject to a licensing requirement.ii Securities activities
Undertakings that offer securities trading services commercially to third parties are required to hold a licence as a securities dealer, as stipulated in Section 9 of the FBA. Licensed activities are listed in Annex 4 of the FBA. As part of its banking licence, a licensed bank can carry out the same activities as a securities dealer without a separate licence as a securities dealer.iii Regulated activities in Denmark by non-Danish entities
Credit institutions duly licensed in other European Economic Area (EEA) Member States may, in accordance with the passport notification procedures laid down in the Credit Institutions Directive, passport their licence into Denmark and offer activities included in their home state licence to customers in Denmark on a cross-border basis or through the establishment of a branch in Denmark.
In line with the foregoing, credit institutions and other undertakings that are duly licensed in other EEA Member States may also passport a licence to carry out investment service activities in Denmark and offer such activities to Danish customers on a cross-border basis or through the establishment of a branch in accordance with the passport notification procedure laid down in the Markets in Financial Instruments Directives (MiFID and MiFID II).
Finally, credit institutions and investment firms that have been authorised in a country outside the EEA can obtain a licence from the FSA pursuant to Section 33 of the FBA to carry out investment service activities in Denmark. If investment services are to be provided to retail clients, the institution in question must establish a Danish branch office. The establishment of a branch office is subject to a separate approval regime pursuant to Section 33a of the FBA.
The provisions governing the public offer of securities in Denmark are laid down in Chapter 3 of the Danish Act on Capital Markets and executive orders issued pursuant thereto, implementing the Prospectus Directive.