The Danish Financial Supervisory Authority has published the main conclusions from its annual 2025 reviews of how selected Danish banks and mortgage credit institutions use the internal ratings-based (IRB) approach to set credit risk capital requirements. The reviews find that institutions still do not meet all European requirements, including full alignment with European Banking Authority (EBA) guidelines, although work is underway to address identified gaps. Across the six Danish groups authorised to use IRB instead of the standardised approach (AL Sydbank, Danske Bank, DLR Kredit, Jyske Bank, Lån & Spar Bank and Nykredit), the Authority highlights the need for stronger governance and independent lines of defence as core elements of a robust IRB framework. It notes technical and interpretative challenges in implementing Regulation (EU) 2024/1623 (CRR3), improved but still insufficient data quality requiring management attention, and uneven progress in integrating ESG-related credit risks into IRB models where data limitations remain a key constraint. The Authority will continue to monitor developments and stresses that institutions should maintain focus on strengthening processes and the underlying data used for IRB modelling.
Danish Finanstilsynet 2026-03-18
Danish Financial Supervisory Authority review finds no Danish IRB institution yet fully meets EBA guidelines and flags ongoing governance and data quality gaps
The Danish Financial Supervisory Authority's 2025 review of Danish banks and mortgage credit institutions using the internal ratings-based (IRB) approach reveals non-compliance with European requirements, including EBA guidelines. Key issues include governance weaknesses, data quality, and challenges in integrating ESG-related credit risks. The Authority emphasizes the need for improved processes and data management in IRB modelling.