Denmark’s mortgage banks are persevering with efforts to find a way of easing the impact on borrowers of the upcoming expiry of interest-only loan periods after recently having had a proposal rejected by the government, as rating agencies and the IMF warn about the risks posed by such loans.
Realkredit Danmark ended auctions of ARM bonds on a strong note last Friday (15 March), with its sale of one, three and five year bonds also bringing to a close the latest refinancing round by Dutch mortgage banks, with some Eu31bn equivalent of ARM bonds auctioned in total.
The Association of Danish Mortgage Banks and the Danish central bank fear adverse effects on financial markets from an EU financial transaction tax (FTT), with the association focussing on perceived negative consequences for Danish mortgage bonds.
A committee of the Danish Ministry of Business & Growth has recommended a quantitative approach to identifying systemically important financial institutions (SIFIs) under which six of Denmark’s financial groups would be designated SIFIs, with DLR Kredit additionally qualifying for qualitative reasons.
Spreads on Nykredit ARM bonds widened slightly today (Thursday) after some tightening of its one year bonds yesterday broke a softening trend, while levels on Realkredit Danmark and DLR Kredit one year bonds were almost unchanged.
A proposal by Denmark’s mortgage banks to relax amortisation requirements for borrowers on interest-only loans is credit negative for Danish banks, Moody’s said on Friday, because it highlights pressure on asset quality in the context of high levels of indebtedness and weak housing markets.
Danish covered bond legislation has been amended to allow for a broader use of so-called Junior Covered Bonds (JCBs), making them the first financial instrument explicitly designed to satisfy non-statutory OC requirements that essentially stem from rating agency considerations.
Danske Bank’s head of group treasury has played down reports that the Danish group is going to limit covered bond issuance as a percentage of total funding, but said it will keep an eye on the level given the regulatory focus on the topic.
BRFkredit Group’s pre-tax profit almost doubled in 2012, as a result of increased lending activities, lower costs, and higher earnings from the issuer’s investment portfolios, according to an official at the Danish lender.
DLR Kredit reported a 63% growth in pre-tax profit in 2012, driven by higher administration fees on its portfolio and declining provisions for loans, according to an official at the issuer.