Finansiel Stabilitet is exposed to a number of financial risks, including market risk and, to a lesser extent, credit and property risk. The overall risk management policy is determined centrally for the Group’s companies and is aimed at minimising the losses that may arise as a consequence of unpredictable developments in the financial markets and other factors.

Risk is managed separately for each segment: Activities handled on behalf of the government; the Deposit Guarantee Fund and the Resolution Fund.

Activities handled on behalf of the government may be subdivided into two areas: Bank Package activities and Other areas. As Other areas are undertaken for the account and risk of the government, they solely involve operational risk, which is not discussed in the following.

The Bank Package activities, which are influenced by special circumstances resulting from Finansiel Stabilitet’s takeover of failing banks in 2009-2012, are still in the course of being wound up, and the absolute amount of risk is therefore gradually declining, all other things being equal.

Following the solvent liquidation of FS Finans I-IV, the Bank Package activities solely comprise Finansiel Stabilitet.

Credit risk on the acquired exposures is managed based on the legislative framework governing Finansiel Stabilitet’s business activities. Pursuant to this, Finansiel Stabilitet is not allowed to assume new exposures or, in general, to extend existing exposures. Credit risk is thus in all material respects limited to existing loans and guarantees and the development of these. The remaining credit risk is managed with due consideration for and in the context of Finansiel Stabilitet’s resolution of activities, including the principles of ensuring that the resolution is conducted in a financially responsible, proper and fair manner. The remaining loans are of poor credit quality.

The remaining risk relating to loans and guarantees is assessed to be relatively limited.

The Board of Directors has defined limits for Bank Package activities’ total exposure to market risk (interest rate risk, equity risk and currency risk). Market risk is monitored on an ongoing basis, and the Board of Directors is kept informed of the Group’s overall exposure.

The Bank Package activities are not exposed to changes in interest rates.

Following the sale of equities, the Group still has a few sector equities and minor unlisted shareholdings on its balance sheet.

Efforts are made on an ongoing basis to sell these shareholdings but, as a result of very limited liquidity, this is a longer-horizon task.

See note 13, Shares, etc. for a specification of share positions and the calculation of interest rate risk at the bottom of note 18.

Currency risk
In connection with activities related to the resolution of failing banks, Finansiel Stabilitet may be exposed to currency risk.

The currency risk is to the necessary extent hedged, and the overall currency exposure is thus limited. EUR positions are not hedged.

As at 31 December 2024, exchange rate indicator 1, calculated excluding EUR, was 0% (31 December 2023: 0%) of equity.

A 2.25% change in the DKK/EUR exchange rate and a 10% change in all other exchange rates would affect Finansiel Stabilitet’s result by DKK 1 million (2023: DKK 1 million).

See also the calculation of currency risk at the end of note 18.

Finansiel Stabilitet has access to funding its activities via the state-funded re-lending scheme. This access means that the Company can contact Danish Government Debt Management at Danmarks Nationalbank in order to obtain loans, when necessary. Having access to the re-lending scheme enables Finansiel Stabilitet to handle unforeseen large payments without necessarily having to maintain a very large demand deposit. Having access to the re-lending scheme enables Finansiel Stabilitet to handle unforeseen large payments without necessarily having to maintain a very large demand deposit.

The principal risk under the Deposit Guarantee Fund is the risk of future losses from the restructuring and resolution of failing banks resulting in losses on covered deposits.

At 31 December 2024, the Restructuring Department of the Deposit Guarantee Fund had commitments made by the banks in the amount of DKK 3.2 billion (2023: DKK 3.2 billion). These are not considered to be subject to credit risk.

Moreover, the investment of the Deposit Guarantee Fund’s funds will be subject to risk in the future, depending on the chosen investment profile. The Act on a Depositor and Investor Guarantee Scheme stipulates that the funds of the Deposit Guarantee Fund must be invested in low-risk assets. Each year, Finansiel Stabilitet’s Board of Directors defines the investment strategy for the Resolution Fund.

The investment strategy must be determined so as to ensure that the available financial means of the Deposit Guarantee Fund are from time to time proportionate with the Deposit Guarantee Fund’s potential liabilities.

Investment of cash funds must take into account that currency risk must be hedged (EUR positions are not included in this calculation) and interest rate exposure must be within the limits set out in the investment strategy approved by the Board of Directors. The strategy currently applies a target duration of 2-3 years for the invested part of the funds.

Since 2018, the Deposit Guarantee Fund has invested cash funds under bond mandates in 0-5-year mortgage bonds. As at 31 December 2024, the Deposit Guarantee Fund had invested DKK 7,502 million. The average duration of bonds at the end of 2024 was 2.54 years, and interest rate risk in the event of a 1% change in the level of interest rates was calculated at DKK 191 million (2023: DKK 186 million).

The Deposit Guarantee Fund is mainly funded by the Deposit Guarantee Fund’s own assets. Additional funding may be obtained by means of Finansiel Stabilitet’s access to state-funded re-lending.

Resolution Fund
The principal risks relate to losses in connection with the restructuring or resolution of institutions in which the Resolution Fund has injected capital. Moreover, the investment of the Resolution Fund’s funds will be subject to risk, depending on the chosen investment profile. The Act on Restructuring and Resolution of Certain Financial Enterprises stipulates that the assets of the Resolution Fund must be invested in low-risk assets.

Each year, Finansiel Stabilitet’s Board of Directors defines the investment strategy for the Resolution Fund. The investment strategy must be determined so as to ensure that the available financial means of the Resolution Fund are from time to time proportionate with the Resolution Fund’s potential liabilities.

Investment of cash funds must take into account that currency risk – excluding EUR – must be hedged and interest rate exposure must be within the limits set out in the investment strategy approved by the Board of Directors. The strategy currently applies a target duration of 2-3 years for the invested part of the funds.

Since 2018, the Resolution Fund has invested part of its cash funds under bond mandates in 0-5-year mortgage bonds. As at 31 December 2024, the Resolution Fund had invested DKK 3,030 million. The average duration of bonds at the end of 2024 was 2.54 years, and interest rate risk in the event of a 1% change in the level of interest rates was calculated at DKK 77 million (2023: DKK 70 million).

The Resolution Fund no longer has any equity, interest rate or currency risks from institutions taken over.

The Resolution Fund is exposed to a minor extent to credit risk on exposures not yet resolved from institutions taken over. For a description hereof, see the section under Bank Package activities.

The Resolution Fund is mainly funded by the Resolution Fund’s own assets. Additional funding may be obtained by means of Finansiel Stabilitet’s access to state-funded re-lending.