At the inspection, the Danish FSA reviewed 35 of DLR’s largest loans, including the institute’s 10 largest new loans. The inspection also included a review of, among other things. credit policies, credit instructions and business procedures, policies and management reports related to the credit area.
Summary and risk assessment
The Danish Financial Supervisory Authority found that the volume of large loans with objective indication of credit deterioration had decreased since the last study of the theme. However, it remains at a high level, not least in the light of the business cycle.
In the opinion of the Danish Financial Supervisory Authority, DLR’s assessment and rating of major credit cases is predominantly true. However, the Danish FSA found two cases where the rating was too high.
DLR must ensure that for all customer groups an assessment is required of a managerial supplement to the department’s write-downs. DLR was ordered to do so.
Several of the institute’s major new loans were pre-mortgages for properties under construction for rental. In the opinion of the Danish Financial Supervisory Authority, lending to rental properties under construction is characterized by an increased risk, not least in the current market.
For Q3 2019, DLR had calculated its solvency need at 9.1%. Actual solvency amounted to 16.5 per cent, which, in addition to the solvency need, would cover buffer requirements of a total of 4.0 per cent. The Danish Financial Supervisory Authority did not comment on the solvency need.