Danske Yield Rises as FSA Reviews Risk Weights: Copenhagen Mover

The yield on Danske Bank A/S’s 2020 euro bond rose in Copenhagen trading after the Danish Financial Supervisory Authority told Denmark’s biggest lender to revise its internal rating model.

The yield on the 1.625 percent 2020 euro bond rose to 1.575 percent at 12:52 p.m. local time from 1.543 percent yesterday, the biggest one-day advance in more than a week. Danske’s shares fell as much as 8 percent in the Danish capital.

The regulator told Danske to adjust its model in a step that will require the bank to add about 100 billion kroner ($18 billion), or 13 percent, to its risk-weighted assets “over time.” Danske said it may appeal the decision, questioning the legal right of the FSA to force through the changes.

The regulator said it has “for some time held the opinion that the bank had credit risks that were not adequately covered by Pillar I,” according to a statement. “The FSA’s opinion is based, among other things, on the FSA’s review of specific exposures in connection with credit inspections and on reviews of the bank’s internal ratings-based models.”

The order relates to the Copenhagen-based bank’s loss assessments on corporate loans, and will make lending to the country’s businesses more costly, Chief Financial Officer Henrik Ramlau-Hansen said.

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