Revised Banking Guidelines under the Financial Business Act - International Law Office

In December 2006 the Financial Services Authority (FSA) finalized a new set of guidelines for Danish banks. The guidelines primarily concern the organization of banks, their internal controls and the areas in which written procedures and policies are necessary. The guidelines set out the FSA's interpretation of Sections 71(1)(1) to (8) of the Financial Business Act, as well as certain other provisions, and may thus be seen as a summary of the FSA's recommended practice for the areas covered by the guidelines.

The revised guidelines contain the following new provisions:

• The Committee of European Banking Supervisors' Guidelines on the Application of the Supervisory Review Process under Pillar II and the technical criteria laid down in Annex V of EU Directive 2006/48/EC are implemented. Among other provisions, banks must now have business continuity plans concerning liquidity, significant irregularities in operation and the actions to be taken if a key employee leaves the bank.
  
  
• In light of the experience gained from the accounting rules that came into force on January 1 2005 (International Accounting Standards and International Financial Reporting Standards), the revised guidelines set down good accounting practice and specify the documentation that banks must have in relation to individual and group assessment of loans and receivables.
  
  
• The board of directors must implement procedures or systems that can, on a daily basis, identify loans where there is objective evidence of impairment (ie, the classification of loans).

In addition, banks must have written procedures in the following areas:

• assessment of capital adequacy;
  
  
• assessment of individual solvency needs;
  
  
• preparation of the annual report; and
  
  
• good business practice.

The revised guidelines do not incorporate any changes that may be necessary to implement the EU Markets in Financial Instruments Directive; however, this is expected to be implemented in Denmark shortly.

For further information on this topic please contact Anders M Hansen at DANDERS & MORE by telephone (+45 33 12 95 12) or by fax (+45 33 12 95 15) or by email (anders.hansen@dandersmore.dk).