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Erhvervsudvalget 2011-12
KOM (2011) 0453 Bilag 2
Offentligt

Opinion from the Folketing on priorities in relation to the Capital

Requirements Directive

The Danish Folketing supports the intention of the new rules to create a more

robust and resilient financial sector. However, the current proposals contain

elements which would be detrimental to the Danish mortgage credit system if

implemented.

14 June 2011

Ref. 11-000462-15

The new financial rules will apply to over 8,000 institutions in Europe and

must accommodate a number of different business models which have proved

themselves to be sound before, during and after the recent financial crisis. A

good example of this is the Danish mortgage credit system; empirical studies

have shown that mortgage credit bonds issued under this system remained as

liquid as government bonds during the financial crisis.

We therefore call for the European implementation of the Basel III standards

etc. to take the following into account:

It should be permissible for those mortgage credit bonds which con-

tinue to meet a set of strict liquidity requirements to be included in the

liquidity buffer on a par with government bonds. The inclusion of as-

sets should be determined by their liquidity characteristics rather than

by the identity of the issuer. The method proposed for countries with

low government debt therefore doesn't constitute a solution either.

It should be permissible for an institution to include its own bonds as

fully liquid provided that they meet strict liquidity requirements and are

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as liquid as government bonds. Institutions' own bonds support the

current repayment system which has been praised by, inter alia, the

European Commission as being transparent, efficient and cheap for

consumers.

Account should be taken of the special Danish mortgage credit sys-

tem (match funding) in designing the mechanics of the payment ceil-

ing which would limit the liquidity inflow in relation to the liquidity out-

flow. The mechanism currently proposed would punish the Danish

system unnecessarily given that the match funding requirement

means the liquidity inflow of Danish mortgage credit institutions is

close to matching the outflow.

It should be possible to include bonds with a residual maturity of less

than one year in the longer term liquidity measure, subject to those

bonds meeting strict liquidity requirements.

Mortgage credit bonds should be risk weighted based on their rating

according to the standard method for financial institutions. Account

should also be taken of a number of financial institutions continuing to

issue guarantees in connection with change of ownership and pre-

financing while counting these guarantees towards collateral. This

would ensure the inclusion of extra collateral in the rating, reducing

sensitivity to the actions of rating agencies without causing concentra-

tion problems in the Danish sector.

The final determination of the Liquidity Coverage Ratio (liquidity buffer

and liquidity stress) should be the subject of a political decision follow-

ing the normal decision procedure involving the Council and the Eu-

ropean Parliament. That will ensure a democratic basis for this im-

portant set of rules given their potentially significant effect on the Eu-

ropean economy.

Mortgage bonds play a central role throughout the EU as the basis for stable

financing of loans to households and companies. The above changes would

provide a marked strengthening of the implementation of the Basel III stand-

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ards in Europe, while at the same time ensuring the continuation of a funda-

mentally sound Danish mortgage credit system within the present framework.

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