National Bank of Denmark publishes analysis finding medium sized banks take a disproportionate share of risky corporate borrowers while sectorwide risk remains limited

The National Bank of Denmark has published an analysis of risky corporate customers moving between banks, concluding that this migration does not currently in itself pose a threat to financial stability because lending volumes remain limited. The analysis warns, however, that banks often do not know a new customer’s payment history at a previous bank, which can allow credit-impaired borrowers to obtain additional credit on terms that do not fully reflect their risk. It finds that medium-sized banks are more likely than large banks to take on these customers. Across 2022 to 2025, large and medium-sized banks issued DKK 1,087 billion of loans to corporate customers, including DKK 123 billion to new customers and DKK 52 billion to customers coming from other banks. New lending to customers that had previously been identified as risky amounted to DKK 1.3 billion based on prior credit-impairment indicators and DKK 3.0 billion based on high probability of default, with overlap bringing the combined total to DKK 3.4 billion. Medium-sized banks accounted for 18 per cent of analysed new lending overall, but 47 per cent of lending to customers with previous risk indicators and 41 per cent of lending to customers with previously high probability of default. The analysis also finds that these customers are more likely to go bankrupt. Among customers switching or adding banks, 0.5 per cent of lending to non-risky customers was later affected by bankruptcy, compared with 3.1 per cent for customers identified through prior risk indicators. The National Bank of Denmark says these developments should remain part of ongoing monitoring, particularly if lending to such customers grows as a share of total lending.