Denmark: Financial System Stability Assessment with reports on - IMF

4615. A key characteristic of the Danish payment system infrastructure is the high degree ofco-operation <strong>with</strong>in the financial sector in relation to the technical infrastructure. The mainparts of the infrastructure for the clearing of retail payments and securities are owned by thebanks collectively. This cooperation has resulted in unified systems handling all types ofretail payments. All banks have access to the common infrastructure and also the smallerbanks can offer their clients a full range of payment services. The common infrastructure ishighly automated. The governance framework is well arranged and all banks can influencethe decision taking process on development, pricing, and other relevant issues. Collusivepractices and discrimination in payment systems are not allowed. The Danish CompetitionAuthority is responsible for the enforcement of these rules laid down in the DanishCompetition Act.16. <strong>Denmark</strong> has a sound legal infrastructure for payment and securities settlementtransactions in which key issues as finality, netting, delivery-versus-payment (DVP) and theenforceability of collateral arrangements are well regulated. Electronic signatures and the useof electronic data is recognized by the court and all contractual relationships are enforceable.A zero hour rule does not exist. Finality of payments is ensured in case of bankruptcy. Thereare separate laws for the provision of payment instruments that also regulate consumerprotection <strong>with</strong> respect to electronic payments and card payments. Accounting practices areup to international standards.17. Payment systems are overseen by the DFSA and Danmarks Nationalbank, whichcooperate closely. The oversight powers of the two institutions are regulated in the STA. Thecooperation and consultative arrangements between the two overseers are laid down in aMoU that is publicly available. The STA was amended effective March 1, 2006, whichfurther clarifies the oversight authority. There is a narrow cooperation between central banksand banking supervisory authorities <strong>with</strong> respect to crisis management in the Scandinaviancountries and in the EU.18. There are efficient procedures for the resolutions of problems in case of fraud, errors,delays, and failures. However, the procedures in case of a bankruptcy in VP and in theSumclearing to reduce replacement cost risk, credit risk, liquidity, and possible systemiccould be strengthened. The Act on certain payment means, applicable on electronic paymentinstruments, protects consumer on excessive risks due to fraud. Due the design of theinfrastructure for debit card transaction, the system might be vulnerable to fraud (use ofmagnetic stripe cards, no centralized check on availability of sufficient balances in theaccount, part of the infrastructure is still signature based instead of pin-based). Theintroduction of EMV-chip cards to replace the magnetic stripe card <strong>with</strong> a view to reduce thevulnerability encounters resistance from the retail sector, since the upgrade of their terminalsis costly for them. A comprehensive cost benefit analysis for the different paymentinstrument for all the parties involved, as well as a thorough comparison of the costs and feesstructure in <strong>Denmark</strong> <strong>with</strong> costs and fees in other similar countries, is not yet available. Aclear analysis of the incentives to use the most efficient payment in certain situations wouldbe useful to gauge the macro-economic efficiency and reduce the overall level of costs.