Standard & Poor's has revised its ratings on a number of Nordic financial groups. Notably, Danish banking giant Danske Bank has been downgraded from a positive to a stable rating, while investment banks Nykredit Realkredit and BRF Kredit both slid down to a negative outlook. Ratings for all five Danish banks mentioned in the report have been affirmed.

The change in outlook is the result of a global S&P analysis, which concludes that there is an increased funding risk in Denmark attributable to the Danish mortgage credit system, including the short-term mortgage credit loans.

The ratings agency stated that regulatory developments within the EU are failing to achieve a meaningful tightening of operational standards for banks.

“Therefore, we no longer maintain a more positive view of banking regulation in Denmark relative to other EU countries,” said Per Tornqvist, analyst at Standard & Poor's in Stockholm.

“In our opinion, Denmark's current regulation falls short of addressing fundamental imbalances in Danish banks' funding and liquidity management. The funding profiles of the Danish banks we rate are a weakness mainly due to banks' large gaps between the maturities of assets and liabilities, and high reliance on wholesale funding related to the Danish mortgage market,” Tornqvist added.

For Danske Bank, Denmark’s largest bank by assets and clients, the new rating outlook comes at a time when the firm has been employing a new strategy - shifting it’s client base from smaller retail clients to private banking and high net worth retail clients. Now the bank is eager to improve the rating as soon as possible.

“We have noted S&P’s new analysis,” said chief financial officer Henrik Ramlau-Hansen.

“Danske Bank has for some time been taking steps to change the funding structure relating to short-term mortgage credit loans, and on the basis of S&P’s change of our outlook, we will consider whether further measures are needed,” Ramlau-Hansen added.

Similar to Danske, the negative outlooks on the investment banks Nykredit Realkredit and BRFkredit are based on the substantial mismatch between short-term funding of long-term liabilities that exists in the Danish mortgage market, S&P stated.

Yet the firm maintains that downgrades of the overall bank rating will only be short term, should the banks move to improve their funding structure.

Danske Bank currently has branches in Denmark, Sweden, Norway, Finland, Northern Ireland and across the Baltics. As of 1 March 2013, Danske Bank's total assets amounted to DKK3,501 billion ($618.3 billion).