The 18th of March 2020, a new executive order (BEK nr 223 af 17/03/2020) was issued in prolongation of the actions being taken to limit the spread of COVID-19 in Denmark (the “Executive Order”). The Executive Order sets out a number of deviations from current legislation. The Executive Order will be in force until the 30th of March 2020. This newsletter will provide a brief overview of the deviations in force on the fields of responsibility of the Danish Financial Supervisory Authority.
The Executive Order is issued as the current circumstances makes it difficult for companies to comply with a number of obligations imposed by the regulatory framework applicable to institutions subject to supervision by the Danish Financial Supervisory Authority (the “DFSA”).
The Executive Order sets out deviations to the following acts, which are supervised by the DFSA:
In general, the Executive Order deviates from sections of the acts that impose deadlines on the relevant institutions either to publish or provide information. The obligations deviated from typically include duties to:
Examples of the above listed is that financial undertakings are relieved of the obligation to submit the audited and approved annual report without undue delay after final approval. This is also in line with Chapter 1 of the Executive Order, where the deadline for submitting the annual report to the Danish Business Authority is prolonged, provided that specific conditions are met.
Further, a financial undertaking that has received a warning from the DFSA is relieved of the obligation to publish the information on its website as soon as possible and no later than three weekdays after the undertaking has received notice of the warning, or no later than at the time of publication required under the Capital Markets Act.
The following conditions must be met, in order to utilize the deviations:
Given the content of the Executive Order it is uncertain whether the DFSA will conduct an assessment of, whether or not it actually is impossible or disproportionately difficult for the institution to comply. Our recommendation is that an institution facing issues in complying due to the current circumstances, completes the request to the DFSA explaining why it is impossible or disproportionately difficult for the institution to comply.
It is noteworthy that the threshold is set at, what can be deemed to be “disproportionately difficult”. This means that it is not a question of cost or materiality that will be at the core of the assessment, but merely whether or not it is out of line with the difficulties usually associated with complying with the relevant acts.
Our assessment is that when internally evaluating whether or not it is the case, valid arguments (depending on the issue at hand) can be:
The DFSA has issued a statement that the Executive Order shall not be seen as an exhaustive list of what is possible. Therefore the DFSA encourage companies to reach out should they meet other practical or administrative issues. The statement from the DFSA can be found here.
Further, the DFSA has issued a short statement on temporary terms in respect of the accounting and reporting rules for financial institutions. Specifically Finance Denmark has raised questions as to how devaluations of companies is handled. DFSA has essentially stated, that temporary relaxation of the credit evaluation to credit worthy customers as a direct consequence of the current circumstances shall not result in a reduction in the customer’s credit worthiness. On the other hand, temporary breaches of existing agreements might be an indicator of a reduction in credit rating of the customer. The statement from the DFSA can be found here.
It is for the time being uncertain whether or not the current restrictions will be prolonged beyond the 30th of March. The Executive Order can be found here.