New financial regulation in Denmark after the crisis, or: the politics of not really doing anything

Since the financial crisis, Danish policy-makers have not been idle. As a
response to the mismanagement and lax credit policies of Danish banks,
which have led to a long list of destitute banks being wound up, the gov-
ernment has chosen to wait for new international standards to come along,
while putting its faith in the Danish FSA (Finanstilsynet) to limit overly
risky behaviour on the part of the banks in a future upturn. From making
sure that the financial institutions follow the law, the FSA should now pro-
actively alleviate the effects of an inherently unstable financial system and
fence in the banks to adhere to a clearer norm of legitimate banking. How-
ever, recent scandals, notably the case of ‘Amagerbanken’, show the difficul-
ties in living up to this new proactive role. Out of political considerations,
the government has chosen not to reform one of the main culprits of the fi-
nancial crisis: the liberalised loan market that created a historically unprec-
edented bubble in the housing market, resulting in an explosive growth
in the deposit deficit and in turn significantly increasing the dependence
of Danish banks on the international money markets. Taken together, the
government has exhibited great reforming zeal, but without solving the
problems that laid the ground for the Danish version of the financial crisis.