MPs send Barnier latest salvo as Danish detail ARMs plans

Danish mortgage banks have begun announcing their plans for the forthcoming auction season of more than Dkr200bn (Eu26.8bn) of ARMs bond sales, while Danish MPs launched the latest salvo in the ongoing battle for covered bonds to be included as Level 1 assets in LCRs.

The chairs of two parliamentary committees — European Affairs and Business & Growth — wrote to Commissioner for internal market and services, Michel Barnier, on Monday and reiterated the views of the Danish government, regulators and banking industry on the European Banking Authority’s recent recommendation that covered bonds not be eligible as Level 1 assets.

Karin Gaardsted, MP

“It is with surprise and disappointment that we have learned that a majority of the Board of Supervisors of the EBA on 20 December 2013 has come to the conclusions that covered bonds should be treated as second class to government bonds,” wrote European Affairs Committee chair Eva Kjer Hansen and Business & Growth Committee chair Karin Gaardsted.

They noted that the EBA’s own technical study had put covered bonds on a par with government bonds and that it would therefore have been expected that the regulator recommend that covered bonds be eligible as Level 1 assets.

“Since the final decision on the delegated act is taken by the European Commission it is our hope that the Commission will base its decision on actual facts that we believe show the robustness of the Danish mortgage system,” they said.

Noting that the Danish parliament is unanimous in its concerns about the consequences of the EBA recommendations being adopted, the MPs proposed a meeting with the Commission to further explain their fears.

Meanwhile Denmark’s mortgage banks have been firming up their plans for the forthcoming auction season, predominantly of bonds to refinance adjustable rate mortgages (ARMs) as of 1 April.

Danske Bank analysts expect some Dkr200bn in non-callable reset bullets, with Dkr150bn being in the one year segment, Dkr15bn in the three year, and Dkr5.5bn in five years.

Realkredit Danmark said on Monday that it is planning to sell Dkr58.92bn and Eu470m of one to five year paper from 17-28 February, with Dkr46.5bn of this in one year bonds.

Last week Nykredit announced preliminary plans for auctions over the same two week period, where it will sell Dkr105.5bn and Eu1.9bn of one and three year bonds, all but Dkr4.5bn of it in one years, with Dkr10.6b of Cibor linked loans also being refinanced on the final day.

Nordea Kredit plans to hold auctions from 25-27 February but will not announce amounts until early February. DLR Kredit and BRFkredit have yet to announce their plans.