Christoffer Mollenbach, Danske's treasurer, says managing liquidity ratios is a difficult balancing act that means not all deposits are welcome. “We have to manage across the ratios, some of which are contradictory” and so “banks want to avoid large last-minute transactions,” he said in an interview in Copenhagen.

The so-called liquidity coverage ratio is designed to ensure lenders can survive a market freeze. But regulators recently began requiring banks to distinguish between cash that firms keep on hand to run their business on a day-to-day basis, and non-operational deposits. The latter of those two categories generates a bigger liquidity buffer requirement, the argument being that such deposits are more likely to be withdrawn if times get tough.

Denmark imposes stricter liquidity requirements than the rest of the European Union. Banks in the country need to prove they can withstand a three-month funding drought, compared with the one month that applies elsewhere in the EU. Danske had a liquidity buffer of 603 billion kroner at the end of June, after extending the duration of its short-term funding and reducing the need for liquid assets.

Already last year, Danske found itself potentially needing to turn clients away. The bank got “a number of requests to take very sizable deposits,” Mollenbach said. Senior management debated what to do, before ultimately deciding they were ready to accept the cash. In the end, the placement demand wasn't as great as initially expected. Excess deposits are particularly hard to deal with when money markets are volatile, as they were at the end of last year.

Mollenbach says one of the unintended consequences of stricter liquidity requirements is that banks' “ability to absorb changes in customer behavior is becoming more limited, and the year-end pricing is an example of that.”

“We generally saw money-market prices significantly distorted over year-end,” he said. Such last-minute transactions are “the kind of thing Danske, and most other banks, would like to avoid,” he said.

Excess client cash is the biggest drag on bank liquidity coverage ratios, according to a December report by the European Banking Authority, which looked at 2015 numbers. Non-operational deposits, which include short-term unsecured interbank funding, had “the greatest negative impact,” the EBA found.

Denmark's combination of stricter liquidity rules and negative rates, which most economists predict will last into 2019, is proving a challenging cocktail for the country's banks. But Danske has shown that lenders can still perform very well in such an environment. It delivered record profits in 2016 and its shares have gained about 16% this year, compared with the roughly 10 % increase in European financial stocks.

Cash and cash equivalents are testing pre-crisis levels at some of the Nordic region's biggest companies, including giants such as Novo Nordisk and Volvo.

“As we move closer to the fourth quarter, we normally start to advise customers regarding their options on excess liquidity in preparation for the year end,” said Jakob Groot, who heads fixed income, currencies and commodities at Danske. “This will be even more important this year, given the volatility we saw at last year-end in deposit rates.”

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