Commissioner Jonathan Hill
European Commission
DG Financial Stability, Financial Services and Capital Markets Union
Brussels
MINISTER FOR BUSINESS AND
GROWTH
MINISTRY OF
Dear Commissioner Jonathan Hill
Thank you for the opportunity to respond to the Commission consultation
on covered bonds in the European Union.
As I am sure you are aware, covered bonds play a very important role in
the Danish economy due to the well-functioning Danish mortgage credit
system. More than 60 per cent of domestic lending to companies and
households is based on covered bonds and the Danish covered bond mar-
ket is among the largest in Europe also in absolute terms. In light of our
long and positive experiences with covered bonds I appreciate the Com-
mission’s intention to explore the considerable potential in a more inte-
grated covered bonds market in Europe building on and taking into ac-
count well-functioning national systems.
I believe that a covered bonds framework in the European Union building
on core elements of the Danish mortgage credit system would create the
right conditions for an increased use of covered bonds across Europe.
I would like to point out a couple of useful facts about the Danish mort-
gage credit system which highlight the stability of our framework. First,
Danish mortgage credit institutions have historically experienced very
low losses – also during periods of economic and financial stress. No
Danish mortgage credit institution has ever defaulted and their covered
bonds have never led to credit losses for investors. This was also the case
during the recent financial crisis.
From mid-2007 to mid-2013 housing-prices in Denmark fell around 20
per cent. Nevertheless, the Danish mortgage credit institutions fulfilled
the requirements as laid down in CRD III and raised additional collateral.
During this period the Danish mortgage credit institutions even raised
collateral above the legal requirements.
Secondly, Danish covered bonds were just as liquid as Danish govern-
ment bonds during the financial crisis. The proven high liquidity charac-
teristics of Danish covered bonds are also to a large degree reflected in
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