Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Kingdom of Denmark (AAA/Stable; S-1+/Stable) on 26 May 2021. The review resulted in no action on the assigned ratings. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Denmark’s long-term issuer ratings of AAA/Stable are underpinned by credit strengths: i) a wealthy and competitive economy, ii) strong fiscal and monetary governance institutions, and iii) a robust external sector, including sizeable foreign-currency reserves backing the country’s long-standing peg of the krone to the euro plus a record of current-account surpluses. These factors increase economic resilience to external shocks such as to 2020’s severe global economic downturn and ensure that the government has fiscal space to enact countercyclical fiscal policy. Challenges relate to vulnerabilities in the Danish financial system, including high levels of household debt, which interact with other outstanding macro-financial risks. In Scope’s opinion, an ongoing proactive response of Danish financial supervisors is countering financial-system vulnerabilities and minimising system-wide risk as the recovery gains strength in 2021.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced. The ratings/Outlooks could be downgraded if, individually or collectively: i) household debt and housing market-related risk was to be accentuated, whether due to lack of proactive regulatory action or due to renewed weakening of economic conditions, escalating financial system risk and potentially adversely impacting the government balance sheet, ii) a deterioration in fiscal discipline results in a non-negligible further rise in gross and net government debt ratios, putting into question Denmark’s significant public finance strengths, and/or iii) risks in the Danish banking system increased, weakening financial system stability and resulting in a significant rise in bank funding costs.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Rating Methodology: Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Director.

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