Denmark achieves high overall compliance with international standards and codes, with a score of 70 out of 100 in our Standards Compliance Index. Denmark is committed to transparency and openness, as evidenced by its high compliance in macroeconomic policy and data transparency. Denmark abides by most standards in the market infrastructure category, except in the area of accounting, where international standards have not yet been made mandatory. In corporate governance, Denmark has been at the forefront of reform, with elements of its corporate governance regime going beyond the requirements of the Organization for Economic Cooperation and Development's Principles of Corporate Governance. In the areas of banking, securities, and insurance supervision, Denmark remains largely compliant with the relevant international standards.

Macroeconomic Policy and Data Transparency

Denmark has been a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard (SDDS) since June of 1996 and first met all the Standard's specifications in September of 2000. It produces the full range of required advance release calendars and summary methodologies for all requisite datasets. The IMF notes that Denmark produces a full array of publications on its official statistics and makes many of them available online. Timeliness, coverage, and periodicity generally meet or exceed SDDS standards, but Denmark did avail itself of the timeliness flexibility option for its merchandise trade data. The SDDS website suggests that there still may be some room for improvement, particularly in the areas of transparency of practices and checks on data quality and integrity. However, information provided on the website generally agreed with the findings of the 2006 IMF Article IV Consultation report which found Denmark's statistical data not only to be very good, but also sufficient for the purposes of surveillance. More »

The IMF's 2006 Financial System Stability Assessment describes Denmark's monetary policy framework as transparent. The foundational legislation underlying the creation and governance of the Danish National Bank (DNB) is the Act of the DNB, first passed in 1936 and amended four times since. Although not a member of the European Monetary Union (EMU), Denmark nonetheless complies with some of the articles of the Statutes of the European System of Central Banks, which have contributed to the strength of its autonomous status. The DNB website makes available to the public a variety of documents that spell out its mandate, including access to the text of relevant legislation. Denmark has long been a subscriber to the IMF's SDDS, and the SDDS website discloses that Denmark publishes advance release calendars for its data reports, releases its data simultaneously to interested users, and maintains high standards of coverage, timeliness, and periodicity in its statistical reporting. The DNB's 2007 Report and Accounts publication notes a commitment to international comparability of its reporting on monetary data. User access to data has recently been facilitated by the fact that the DNB has transitioned its data reporting to the Statistics Denmark database, StatsBank. More »

There is little direct discussion of Denmark's fiscal transparency practices in the most recent IMF publications, other than with regard to the country's fiscal statistics regime. Back in 2002, however, the IMF reported that Denmark's fiscal framework is transparent and sets clear quantitative fiscal targets. A 2004 IMF report praised Denmark's ongoing progress in public finance consolidation and public debt reduction, both of which contribute to fiscal transparency. While Denmark has no formal organic budget law to govern the budget process, a 2004 journal article by authors Blondel and Ruffner describe a well-developed, efficient, and effective budget process tailored to the country's unique tradition of coalition government. Fiscal reporting is comprehensive, although there are some areas where improvements could be made, particularly with regard to the frequency with which in-year reports are produced and the time lag in publishing the audited annual financial statement. More »

Institutional and market infrastructure

According to a 2002 study prepared for the European Commission (EC), in Denmark, 23 of the Principles for Effective Insolvency and Creditor Rights Systems developed by the World Bank have been fully adopted, 11 have been almost fully adopted, 5 have been partially adopted, and 2 have not been adopted. The EC report of 2002 notes that the current operative Danish insolvency legislation is the Bankruptcy Act of 1997 as amended in 1998, adding that in 2001 a Bankruptcy Board was created to investigate issues relating to insolvency and bankruptcy and to make recommendations for reforms. A 2006 PricewaterhouseCoopers (PWC) study found that the Danish insolvency system was mainly creditor-oriented. The PWC report noted that there were some draft reforms being developed that would address debt restructuring for small-claim insolvency proceedings. More »

In line with the EC's Regulation No. 1606 of 2002, listed companies in Denmark are required to use International Financial Reporting Standards (IFRSs) as endorsed by the European Union for preparation of consolidated accounts. The 2008 EC report on the implementation of Regulation No. 1606 notes that starting 2009, all non-financial listed companies will also be required to use IFRSs in preparation of annual accounts. All other entities will be permitted to prepare annual and consolidated accounts in accordance with IFRSs. Entities that do not apply international standards follow national Generally Accepted Accounting Principles (GAAP) primarily comprised of the Financial Statements Act, the Danish Accounting Standards (DKASs), and Ministerial Orders issued by the Ministry of Business and Industry in Denmark. A 2004 report by Bebbington and Song notes that although the Financial Statements Act is based on the International Accounting Standards Board framework, differences exist largely due to the incorporation of the requirements laid out in the EC directives. Similarly, the DKASs, which are applicable to listed entities, are based on IFRSs, although there are differences with the equivalent international standard, the report adds. As far as the financial reporting requirements for small and medium-size enterprise (SMEs) are concerned, a presentation by Jan-Christian Nielsen of the Danish Commerce and Companies Agency notes that starting 2009, the international standard on SMEs may be allowed but not required in Denmark. More »

According to a 2007 IMF Technical Note, the Danish framework for corporate governance is not only "largely compliant" with the Organization for Economic Cooperation and Development's (OECD) Principles of Corporate Governance, but in some areas goes beyond these standards. In fact, the report notes that the Danish Recommendations on Corporate Governance will guide international work to further strengthen corporate governance standards. In 2001 the Nørby Committee was established to make recommendations on measures to improve corporate governance and the Committee decided to make specific Danish recommendations instead of using international standards - such as the OECD Principles. The Nørby Committee’s recommendations are implemented on a comply-or-explain basis and were updated in 2004. A 2008 U.S. County Commercial Guide for Denmark further corroborates that in general, Danish corporate law is in line with European Union legislation and that the legal, regulatory and accounting systems are transparent and in line with international standards. However, the small size and limited liquidity of Danish equity markets can pose a challenge to effective investor protection. More »

According to a 2007 Institute of State Authorized Public Accountants (FSR) self-assessment, Denmark adopts International Auditing and Assurance Standards Board’s pronouncements as national standards although with modifications to reflect the local legal environment. The self-assessment reiterates that all of the International Standards on Auditing (ISAs) promulgated by the IAASB have been adopted with the exception of ISA 320, ISA 501, and ISA 600. However, ISAs not adopted at the time of the self-assessment were expected to be adopted in the spring of 2007, the self-assessment adds, though as of November 2008 there is no publically available information confirming their adoption. With the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the European Commission (EC). European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. According to the information provided on the EC website, Denmark has fully transposed the above-mentioned Directive into its national legislation. More »

The Financial Action Task Force (FATF) conducted a mutual evaluation of Denmark's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime against the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations in 2006. In its assessment, the FATF concludes that Denmark is fully compliant with 8, largely complaint with 16, partially compliant with 17, and non-compliant with 8 recommendations and special recommendations. The shortcomings identified by the 2006 mutual evaluation related to preventive measures such as customer due diligence and suspicious transactions reporting both for financial institutions and Designated non-Financial Business and Professions. At the time of the FATF assessment Denmark had only just implemented a new Act, namely the Act on Measures to Prevent Money Laundering and Financing of Terrorism (MLA) which came into effect in March 2006. The 2006 MLA was further amended and consolidated in 2007. The MLA, according to the 2006 mutual evaluation, strengthened preventive measures against money laundering and terrorist financing but its effectiveness was too early to gauge as the assessment was conducted at the same time as the passage of the 2006 MLA. One aspect of the 2006 MLA was however identified by the mutual evaluation as a major flaw, namely that the Act does not extend beyond Denmark to Greenland and the Faroe Islands which results in non-compliance with some of the FATF recommendations. More »

In 2007, the IMF released a detailed assessment of Denmark's real-time gross settlement system for large-value payments, the KRONOS, and its retail payments system, Sumclearing as both these systems were categorized as SIPS by the Danish authorities. Both systems were assessed against the Committee on Payment and Settlements' Core Principles for Systemically Important Payment Systems (CPSIPS). KRONOS, according to the report observes seven CPSIPS, broadly observes two, and principle V is not applicable since KRONOS settles in real time. The Sumclearing system, on the other hand, observes six CPSIPS, broadly observes three, and partly observes one CPSIPS. The IMF assessors concluded that the payment system infrastructure in Denmark is "highly developed and technologically well advanced." The country has a strong legal infrastructure, and payment systems are overseen by the Danish National Bank (DNB). The DNB's oversight responsibilities are regulated by the Securities Trading Act. KRONOS was a participant in the Euro area's now defunct Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system. Denmark participated in TARGET as a non-euro area European Union (EU) member state. TARGET was replaced by TARGET2 in November 2007 and Denmark joined TARGET2 in May 2008. According to information provided on the DNB's website the terms and conditions for Danish participation in TARGET2 remain unchanged and the country is still subject to the restrictions for non-euro area EU member states, such as lack of access to euro liquidity overnight. While with TARGET, the large value interbank payment systems of member countries were interlinked, TARGET2 provides harmonized payment services under a single shared platform across its member countries. However, there is little information assessing TARGET2’s compliance with the CPSIPS except for a statement in a 2008 European Central Bank (ECB) report on TARGET2, in which it indicates that the system is expected to fully observe all the CPSIPS. Despite the lack of information on TARGET2, it is generally believed that the system is an improvement over its predecessor and its component systems. More »

Financial Regulation and Supervision

Denmark is adjudged compliant with 19 of the 30 principles and sub-principles that make up the Basel Core Principles (BCPs) for Effective Banking Supervision and largely compliant with the remaining 11 BCPs by a 2007 detailed assessment by the IMF. The areas of less than full compliance include the independence of the supervisor, licensing and investment criteria, connected lending, internal control and audit, money laundering, bank management contact, validation of supervisory information, remedial measures, and supervision of foreign branches in the country. Recommendations pertaining to the areas of less than full compliance include formalizing provisions in the Financial Business Act pertaining to the Danish Financial Supervisory Authority's (DFSA) statutory status, fit and proper testing of key management positions in banks, and prior approval for investments in non-financial companies. The detailed assessment also recommends that the DFSA be provided its own budget, have more discretion in identifying connected lending, strengthen its risk based supervision, enhance on-site inspections, maintain greater contact with bank management, and strengthen global consolidated supervision. More »

Although the 2006 Financial System Stability Assessment (FSSA) of Denmark by the IMF does not formally assess the country against the Objectives and Principles of Securities Regulation promulgated by the International Organization of Securities Commissions (IOSCO), an accompanying Technical Note does attest that the supervisory framework and practices generally adhere to sound supervisory practices and principles regarding the regulation of securities markets as codified in the IOSCO Principles. The FSSA also observes that the financial sector is deep, diversified and well-developed and that it operates within a strong legal framework, which is closely aligned with the European Union directives and prescriptions. The DFSA, as the integrated financial sector supervisor, aims to observe the IOSCO standards in its supervisory objectives, according to the DFSA website. The DFSA shares the responsibility of financial supervision with the National Bank of Denmark and has clear terms of coordination and power-sharing with it. The 2007 IMF Technical Note finds no gaps in the DFSA's supervision and praises Denmark for being one of the fastest states to integrate EU laws into domestic legislation and to go beyond the standards of other comparable countries in the effective enforcement of securities regulation. By way of recommendation, the Technical Note calls for greater allocation of financial and staff resources to the DFSA commensurate to its supervisory responsibilities. More »

Denmark is a member of the European Union and has a highly developed insurance market. Further, as a 2007 detailed assessment of insurance supervision by the IMF attests, the country is highly observant of the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) in 2003 (it observes 18 of the 28 ICPs and largely observes the remaining 10). By way of recommendation, the IMF calls for an increase in the scope of the insurance supervisor's fitness and propriety testing and for the issuance of an executive order requiring all companies to have an internal control/audit function. Other areas of less than full compliance include the supervisory authority, licensing, enforcement and sanctioning powers of the insurance supervisor - the Danish Financial Supervisory Authority; risk assessment; insurance activity; investments; derivatives; and the country's anti-money laundering framework. More »

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Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 311.9 billion USD (IMF)

2007 GDP (Per Capita): 57,261 USD (IMF)

2008 GDP (Growth Forecast): 1.2% (IMF)

2008 Inflation (CPI): 2.3% (IMF)

2007 Unemployment: 3.5% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 7 billion USD (UNCTAD)

FDI (Outward): 8.2 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 2236 million USD (OECD)