Danish banks lower charge for customers who make purchases abroad 

An order went into effect Wednesday requiring Danske Bank and Nordea to charge customers less when paying in foreign currencies. 

Danish banks lower charge for customers who make purchases abroad 
Users of Dankort debit cards from Nordea and Danske Bank will now pay lower surcharges on payments made abroad, but the banks want to reverse the order. Photo: Kristian Djurhuus/Ritzau Scanpix

Customers at Danske Bank and Nordea will now pay a lower charge when they use their bank-issued debit card – referred to as a Dankort – to make purchases when abroad.

Earlier this year, the Competition Council (Konkurrencerådet) determined both Danske Bank and Nordea added unreasonable surcharges to purchases abroad — 1.5 percent within the EU and 2 percent for the rest of the world. 

As per the Competition Council’s findings, Danske Bank must drop the currency exchange surcharge altogether within the EU and reduce the rate to 1.5 percent outside the bloc, broadcaster DR reports on Wednesday.

Nordea has changed its surcharge from 1.5 percent in the EU and 2 percent in the rest of the world to 1 and 1.5 percent respectively.

Danske Bank opposes the Competition Council ruling. The bank has appealed the decision and will argue its case before a judge at the Copenhagen District Court. No date has yet been set for a hearing.

“Although we don’t agree with the council’s decision and have appealed the case with the courts, this is a case of an order by an authority, which we have to comply with by the set deadline,” Danske Bank head of media communications Stefan Singh Kailay told DR via email.

“That is exactly what we have done with the price changes of August 1st. That does not change our view of the ruling,” he wrote.

“(The council) is focusing on one element of the overall payment transaction and the level of profit on that alone, and not on the overall cost of the Visa-Dankort service. This creates a misleading picture of what we actually earn from the cards,” he wrote.

The currency exchange surcharge is applied as a percentage of the amount you pay with your card in a foreign currency, such as in foreign shops, hotels or restaurants as well as on websites.

Nordea, which has also reduced its surcharges, has also appealed against parts of the ruling according to DR.

“We do not think we have charged too much in this area, but conversely have – in good faith – set our prices in a free, competitive market. We have full transparency with our customers in this area,” the bank’s head of media communications Stine Wind told DR via email.

“Every time you complete a payment in a foreign currency with your card, you can see how much you pay as currency exchange surcharge in our Wallet,” she added.

READ MORE: Danish banks raise interest rates but many remain negative 

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Danish banks ’well equipped’ for financial instability

Denmark’s banking sector is well equipped to deal with potential instability should uncertainty seen at some international banks reach Denmark, according to a national risk assessment council.

Danish banks ’well equipped’ for financial instability

In a statement, the Systemic Risk Council (Det Systemiske Risikoråd), which monitors potential dangers in the financial sector, said it assessed Danish banks to be equipped to ward off major crises.

“The Council finds that the Danish banking sector in general is in a good position to withstand the deterioration of the financial market conditions,” it said in the statement.

“This reflects, among other things, that the measures taken since the financial crisis have increased the robustness of the financial sector in Denmark,” it stated.

The assessment by the risk council comes after two notable incidents involving international banks in recent weeks increased global uncertainty.

US bank Silicon Valley Bank was earlier this month ordered to close after a collapse, while major Swiss bank Credit Suisse was eventually taken over by rival UBS after a dramatic fall in its share price and a withdrawal rush by customers.

“The international financial markets are currently affected by turmoil triggered by problems in specific banks in the US and Europe,” the Danish Risk Council wrote.

“The development emphasizes that changes in risk perception in financial markets can occur suddenly and lead to large fluctuations in a short time. At the same time, this is an important reminder that sound risk management and robust liquidity and capital buffers are important tools to maintain the trust in individual banks and in the financial system,” it said.

In its assessment, the Council maintained its view that the countercyclical capital buffer be increased to 2.5 per cent from March 2023, in line with a 2022 finance ministry decision.

The buffer is a requirement for banks to put money aside to ensure they have funds to draw on if their economic situation becomes strained.

It exists to ensure that banking institutions have a cushion that makes them more resilient if risks materialise, the Risk Council explained in the statement.

“The current earnings also create an opportunity to build up capital to absorb losses and maintain credit granting,” it said.

It can be reduced if banks need to draw from it in difficult times.

“The Council is ready to recommend a reduction of the buffer rate with immediate effect if stress occurs in the financial system and there is a risk of severe tightening of credit granting to households and companies,” the Council said.

READ ALSO: REVEALED: Danish banks’ policies on non-Danish speaking customers