Banks’ overly optimistic assessments of their financial health still pose a risk to the economy, concludes the comprehensive review of the causes and effects of the financial crisis in Denmark, released yesterday.
The report recommends that banks no longer be allowed to issue their own bills of health.
By underestimating the risks associated with their loans, banks keep too little money on reserve and instead lend out more funds.
Seven of the country’s banks, including the three largest, rely on internal evaluations of how much risk is associated with their lending.
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