Denmark: Financial System Stability Assessment with reports on - IMF

28IFRS, aggressive expansion, efforts to reduce the reporting burden, and morecomplex supervision (Basel II).• It would be important to review personnel policies to ensure retention of specialists innew areas in high demand, such as validation of internal models, stress tests, anddetermining additional capital requirements for special areas.B. Standards <strong>Assessment</strong>s51. There is generally a high degree of compliance <strong>with</strong> the internationalsupervisory standards assessed. 23 The Basel Core Principles for Effective BankingSupervision (BCP) are either fully or largely observed (Annex II). Areas of less than fullcompliance concern the autonomy and resources of the DFSA and aspects of internalcontrols <strong>with</strong>in supervised institutions. Similarly, Insurance Core Principles are eitherobserved or broadly observed, and the assessment echoes that for the BCP regardingautonomy, resources, and internal controls (Annex III). However, the need to build capacityfor off-site quantitative analysis and stress-testing is also stressed in both areas.52. Overall compliance is also high concerning the Core Principles for <strong>System</strong>icallyImportant Payment <strong>System</strong>s and the Recommendations for Securities Clearing andSettlement <strong>System</strong>s (RSS) (Annexes IV and V). The mission made technical suggestionsfor further limiting the risks in Sumclearing and VP which is the sole central securitiesdepository (CSD) in <strong>Denmark</strong> and clears and settles securities transactions in the regulatedmarkets and in the over-the-counter (OTC) market (Annex V). A formal assessment of theIOSCO principles was not performed, but it was found that the securities markets in<strong>Denmark</strong> operate <strong>with</strong>in a strong legal framework. As a unified regulator, the DFSA hasefficiently used its structure to strengthen its consolidated supervision and prevent regulatorygaps.53. The new AML/CFT law enacted in February 2006, when it fully enters into forceand is effectively implemented, will considerably strengthen the regime of preventivemeasures for the financial and non-financial sectors (Annex VI). Laws criminalizingML/FT are well developed, and there are flexible mechanisms for restraint and confiscationof the proceeds of crime. However, building a fully-effective, FATF-compliant system willrequire: (i) enhancing prosecution of the ML/FT offenses, (ii) supervising financial andparticularly the non-financial sectors more proactively, (iii) stimulating additional STRreporting, especially from the non-bank and the designated non-financial sectors, (iv) reevaluatingthe roles and responsibilities of the <strong>Financial</strong> Intelligence Unit (FIU) and (v)improvements in the regimes of the home-rule jurisdictions of the Faroe Islands andGreenland.23 For further details, see the Reports on Observance of Standards and Codes (ROSCs) in the Annexes.