torben nielsen : financial stability, the danish perspective speech by mr torben nielsen, governor of danmarks nationalbank, arranged by the bank of finland, ivalo, 23 march 2007. * * * thank you for inviting me to talk about financial stability from a danish perspective. speech by governor torbenielsen i will start out giving an outline of the danish financial system and the changing nordic banking landscape. i will then talk about the role of danmarks nationalbank in safeguarding financial stability. looking ahead, one of our priority areas is stress testing of the danish financial system. our ambition is to learn more about how the banks affect each other and the economy in stress situations. finally, i will touch upon a topical issue, namely lending to households, household debt and house prices. the danish financial system and the changing nordic banking landscape the danish banking sector is very heterogeneous and is dominated by two large banking groups, danske bank and nordea, which covers more than 45 percent of the danish banking market. there are a small number of medium - sized institutions, jyske bank, sydbank, nykredit bank and fih, with a total market share of almost 20 percent. and we have more than 150 small banks sharing the residual market share of 35 percent. compared to the other nordic countries, the concentration ratio in denmark – measured by the concentration ratio cr5 – does not stand out. however, the nordic banking markets are amongst the most consolidated in europe – similar to other smaller european economies. in larger countries like germany and uk we find concentration ratios around 20 and 35 percent, respectively. the bulk of banking consolidation in the nordic countries took place just before – in the case of denmark – and shortly after the banking crises in finland, norway and sweden in the early 1990s. we experienced a second wave around the turn of the century with the formation of nordea as the most spectacular case. and the most recent event was danske banks purchase of sampo bank last autumn. there is a significant presence of foreign banks in denmark dominated by nordea. foreign banks and subsidiaries hold around 30 percent of total assets. expansion of foreign banks in denmark has typically not stemmed from organic growth via new branches or subsidiaries, but has instead been accomplished via mergers and acquisitions. the presence of foreign banks in denmark is comparable to norway and sweden. the finnish situation is exceptional, since nordea bank finland is counted as a swedish subsidiary and sampo bank as a danish

products are consumed. central banks could use artificial intelligence and big data to improve their economic forecasts and enhance the quality of official statistics. the eurosystem and the euro area authorities have worked extensively on new projects involving highly granular data. the anacredit, i. e. the analytical credit dataset on individual bank loans in the euro area, and the eu - wide derivatives data collected under the emir, european markets infrastructure regulation initiative, are good examples of these. the impact of fintech and bigtech challengers 1 / 3 bis central bankers'speeches let me move to financial technology companies, or fintechs, that are especially agile in deriving value from data. they have had an opportunity to start from scratch and design their information architecture based on modern principles of collaboration, connectivity and iteration, without having to bear the burden of legacy systems. modern data architecture gives these fintechs an advantage in data processing. in this context ‘ platform economics ’ is particularly intriguing. the bank of international settlements has recently paid special attention to large technology firms with established user bases that enter finance. the crucial question is, how the entry of these large technology companies, or the so - called bigtech companies, is going to affect competition, financial inclusion, data protection and financial stability? will their entry pave a way to more resilient financial markets? or will the bigtech companies ultimately exploit their efficiency on data collection and processing to gain market dominance and a monopoly position? however, while these new entrants are efficient in processing data, it is premature to declare the beginning of the end of traditional financial intermediation. banks will continue to be challenged by new entrants, and, thus, they need to invest heavily into new technology. this may compress profitability in the short - term. however, banks and other traditional financial intermediaries still have a long - term competitive advantage over new entrants that do not have long operating histories, and who may have less skills in business expertise, such as credit and risk management. new forms of interconnectedness and systemic risk when regulators say they worry about financial stability, they usually mean that they are concerned about how resilient the banking and financial system is to shocks. for instance, how would the market react if a large financial institution would encounter a breakdown that would make it unable to fulfill its promises to its clients and other relevant parties? how would the weakness in this financial institution impact functioning of the financial markets or