Report and Accounts 2003

Directives, etc.

Status concerning the Financial Services Action Plan
In 1999 the European Commission launched a Financial Services Action Plan. The Action Plan prioritises the work of implementing the single financial market and includes 47 proposals for directives. The European Council has resolved that the proposals must be adopted by April 2004, and the Action Plan finally implemented by the member states in 2005. At present 36 proposals have been finally adopted. According to the Action Plan, proposals for directives concerning the securities market should have been adopted in 2003, but a few of these are not expected to be adopted until 2004, cf. below.

As the remaining proposals for directives are adopted, attention will increasingly be attached to timely and uniform implementation in the individual member states, as well as regulatory adjustments to match developments in the financial markets. In addition, the dialogue concerning regulation of financial markets with non-EU authorities, e.g. in the USA, will be extended.

Selected proposals for directives under the Action Plan are outlined below.

Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (the Prospectus Directive)
At the meeting of the Ecofin Council in November 2002 political agreement was reached on this proposal, which was finally adopted on 15 July 2003.

The primary objective of the directive is to create better and more uniform conditions for investing and raising capital in the EU. This implies that a prospectus which has been approved by one member state can freely be listed and offered in other member states, i.e. it obtains a so-called single passport. Another objective is to enhance consumer protection in connection with investment in securities. Consequently, the directive includes a number of provisions aimed at ensuring more uniform prospectuses. In addition, capital procurement by small and medium-sized enterprises must be facilitated. The directive applies to securities offered to the public or admitted to trading on a regulated market. Government issues are exempt from the directive.

The directive is a framework directive to be completed under the new decision-making procedure, the Lamfalussy procedure. This means that the technical implementation measures to be determined by the European Commission in consultation with the Committee of European Securities Regulators, CESR.

The directive must be implemented in Danish law by May 2005.

Directive on Takeover Bids
In October 2002 the European Commission submitted a proposal for a directive on takeover bids harmonising the rules for cross-border acquisitions of stock-exchange-listed companies in the EU. The primary objective of the proposal is to enhance legal rights in connection with cross-border takeover bids and to protect minority shareholders. In addition, it was the aim of the Commission to remove the companies' "defences" against acquisitions, meaning A and B shares, limitations to ownership and voting rights, among other things.

A number of member states, including Denmark, could not accept the Commission's proposal. This led to a compromise without the Commission, which was adopted by the Council of Ministers on 27 November 2003. On 16 December 2003 this compromise was finally adopted after a vote in the European Parliament. Unlike the proposal from the Commission, the directive adopted allows the use of share classes, and limitations to ownership and voting rights will remain in force, also in connection with a takeover.

Directive on markets in financial instruments
On 7 October 2003 the Ecofin Council reached political agreement on a new directive on markets in financial instruments. Final adoption of the directive awaits incorporation of the amendments proposed by the European Parliament. These amendments are still in the negotiation phase.

The directive will influence the future development of the securities markets in the EU. It will replace the current Investment Services Directive from 1993, which is out of date in areas such as investor protection, types of investment services on the market and the overall market structure. Furthermore, the current directive has proved to be an insufficient foundation for a single securities market in the EU. The new directive seeks to further harmonise the rules concerning investment firms. In Denmark, this category includes investment companies and credit institutions offering securities trading services. This will be a further contribution to the creation of a single market for financial services in the EU, which is the very objective of the EU's Financial Services Action Plan. The political agreement reached by the Ecofin Council reflects a compromise to balance the considerations of market function and investor protection.

The directive is a framework directive, i.e. several issues must subsequently be specified in a committee procedure with the participation of the member states and the European Commission (the Lamfalussy procedure).

Proposal for directive on transparency (the Transparency Directive)
In March 2003 the European Commission submitted a proposal for a directive on transparency. At the meeting of the Ecofin Council on 25 November 2003 political agreement was reached on the proposed directive.

Via minimum requirements, the directive aims to harmonise the information to be published on issuers of securities listed on a regulated market, e.g. a stock exchange. This information is intended to support better investment decisions.

A number of member states, including Denmark, could not support the European Commission's original proposal since it would entail compulsory quarterly accounts for share issuers. In the proposal on which political agreement was reached, share issuers are subject to a requirement to publish at a specified interval between the half-year and full-year accounts, a statement concerning the factors affecting the financial result of the company since the latest accounts were published.

A decision by the European Parliament can presumably be expected in the spring of 2004.

Regulation No. 1606/2002 of 19 July 2002 on application of international accounting standards
Under the European Commission's Financial Services Action Plan the Ecofin Council and the European Parliament adopted in July 2002 a regulation on application of international accounting standards, known as the IAS regulation. The objective of the regulation is to improve the functioning of the single market by requiring stock-exchange-listed companies, including financial enterprises, to apply international accounting standards when presenting their consolidated accounts. The aim is thus to improve the transparency and comparability of accounts within the EU and in the long term also at the global level.

The international accounting standards are issued by the International Accounting Standards Board (IASB), an independent privately-funded body. The international accounting standards comprise 35 individual standards covering a wide range of principles for recognition, measurement and publication of accounting information.

As of 1 January 2005 the regulation makes it compulsory for all companies domiciled in the EU or the EEA that have equity capital or debt listed on regulated markets in the EU or the EEA to prepare their consolidated accounts in conformity with the international accounting standards adopted by the European Commission. The IAS regulation also establishes a procedure for adoption of the individual accounting standards. Accounting standards issued by the IASB must be adopted by the European Commission and by the member states via a so-called comitology procedure. When the standards have been adopted, they will be published in the Official Journal and will take immediate effect for the accounts comprised by the regulation.

In September 2003 the European Commission issued a regulation (Regulation no. 1725/2003 of 29 September 2003) adopting all existing international accounting standards with the exception of IAS 39 Financial instruments: recognition and measurement, and IAS 32 Financial instruments: disclosure and presentation. Possible subsequent adoption of IAS 32 and IAS 39, concerning all types of financial instruments including deposits and lending, securities, financial derivatives, etc., is pending finalisation of the IASB's current projects to revise these standards.

Under the IAS regulation, member states may permit or require that the accounts of individual companies and the consolidated accounts of unlisted companies also be presented in accordance with the international accounting standards.

Acts, etc.

Financial Business Act

On 4 June 2003 the Folketing (Parliament) adopted the Financial Business Act, replacing the previous act of June 2001. The act came into force on 1 January 2004.

The new Financial Business Act constitutes a further step towards restructuring financial legislation. It is the first leg of a continuous process, and in the ongoing reform efforts the possibilities of simplifying the rules further will be investigated. Such proposals are scheduled for the coming sessions of the Folketing.

The act repeals the Act on Danish Commercial Banks and Savings Banks, the Act on Insurance Companies, the Act on Investment Companies, the Electronic Money Institutions Act and the Act on Savings Enterprises in their entirety. In addition, the Mortgage Credit Act and the Act on Investment Associations have been repealed. The latter are maintained as product acts, providing for separate regulation of the products, i.e. mortgage-credit bonds and investment certificates, on the one hand and the investment associations' administration companies and the mortgage-credit institutes on the other.

Basically, the provisions regulating the mortgage-credit institutes, banks and investment companies have been combined and transferred. The provisions relating to insurance companies, pension funds and e-money institutions have been incorporated unchanged in their entirety. Special provisions for individual areas have initially been maintained. The act does not fundamentally change the conditions of financial enterprises. In a few areas material amendments have, however, been made.

A concession system has been introduced for financial enterprises equivalent to the system applying in the insurance sector. In future a banking licence will only give access to conducting banking activities. If a bank also wishes to engage in securities trading, the Danish Financial Supervisory Authority must issue a separate licence in this respect. However, licences cannot be combined freely. For instance, a bank may only engage in insurance activities and mortgage-credit activities via subsidiaries.

The minimum capital requirement for banks and mortgage-credit institutes is harmonised to 8 million euro (approximately kr. 60 million), which constitutes an increase in the requirement for banks and a reduction of the requirement for mortgage-credit institutes (previously kr. 150 million).

The management provisions have been harmonised. This means that in future the Danish Financial Supervisory Authority will be empowered to remove one or more members if they no longer comply with the fit-and-proper provisions, without having to withdraw the licence to operate. Previously it was necessary to withdraw the licence if a member of the management was no longer eligible. The new provision is in line with the recommendations in the international supervisory standards, including the recommendations of the Basel Committee.

The provisions concerning other duties taken on by the management and the rules concerning speculation have been harmonised and simplified. The rules have been rewritten with a view to the protection they are to offer. Fundamentally it is up to the management of the individual financial enterprise to assess whether conflicts of interest may occur. In addition, only individuals appointed by the Board of Directors are directly comprised by the rules.

The rules concerning speculation have been amended to relate more specifically to the group of persons for whom the risk of confusing their own interests with those of the enterprise is present. With the new rules, the Executive Order on speculation can be repealed since the act itself now specifies what can be deemed to be speculative transactions and thus prohibited. The rules are simplified and relaxed.

The terminology used in capital-adequacy provisions has been harmonised.

As a consequence, the concept of base capital has been introduced instead of liable capital, and supplementary capital has become subordinate loan capital. There are no actual changes in the rules concerning calculation of solvency since these rules are maintained for the various types of institutions.

As a new element, the act stipulates maximum limits for increasing the rate of interest on the hybrid core capital and subordinate loan capital, respectively. The purpose is to avoid a situation, e.g. in the case of non-payment of instalments, in which the institution and a lender agree on interest-rate increases which are so high that non-redemption of the capital becomes disproportionately expensive for the institution.

In addition, a new criterion has been introduced for writing down subordinate loan capital and hybrid core capital. This criterion was not included in the former provisions. Under the act, capital can either be written down as before, by subsequent injection of new capital into the institution, or, as a new option, if the institution is wound up without losses to the non-subordinate creditors. It is presumed that this addition can ease the liquidation of an ailing institution via contributions from the Deposit Guarantee Fund or otherwise.

The Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act
On 4 June 2003 the Folketing (Parliament) adopted the Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act. Parts of the act came into force on 1 October 2003, the rest on 1 January 2004.

In connection with the revision of the Financial Business Act, the Association of Danish Mortgage Banks wanted to preserve a separate product act on mortgage credit to emphasise the special nature of this product in relation to lending and bond issues by other credit institutions. Mortgage-credit institutes will in future be regulated by the Financial Business Act as regards the company and the Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act as regards the product.

A number of amendments have been introduced. As regards loans for owner-occupied housing and summer cottages it is now possible to defer amortisation for up to 10 years. This is a deviation from the previous principle, i.e. that the repayment profile for such loans should as a minimum follow an annuity. Deferred-amortisation loans are expected to give mortgage-credit institutes more flexibility to develop new loan products, but these must still be subject to the balance principle. It is stipulated in the explanatory notes that in connection with deferred amortisation the mortgage-credit institute must ensure that the credit limits are observed, e.g. by inspecting the collateral.

For certain types of real property, valuation to determine the size of the loan, was previously based on the purchase sum. This option still exists under the new product act. It relates to non-profit rental housing, etc., properties for social, cultural and educational purposes, industrial properties and craftsman's properties and collective energy-supply plants. For loans to the three latter categories the capital requirements for the mortgage-credit institute have, however, been tightened in respect of the part of the loan exceeding the credit limit seen in relation to market value.

Act to amend the Securities Trading, etc. Act
On 4 December 2003 the Folketing (Parliament) adopted the Act to amend the Securities Trading, etc. Act. A part of the act came into force on 1 January 2004. Most of it will come into force on 1 January 2005. Parts of the act will, however, only come into force by order of the Minister for Economic and Business Affairs when the Hague Convention comes into force in relation to the EU.

The act implements the EU directive of June 2002 on financial collateral agreements. This directive concerns agreements in bilateral relationships and aims to promote and streamline pledging of cross-border collateral by harmonising the rules. The directive makes it possible to conduct transactions on a more secure credit basis than previously. This is achieved by reducing the formalities for establishing and enforcing collateral and by protecting such agreements against certain effects of insolvency. In addition, the directive ensures access to rapid realisation of the collateral, as well as the option of supplementary collateral. In a few areas the provisions of the act exceed the requirements of the directive. This is the case regarding e.g. definition of the circle of persons, as well as adaptation of certain reversal provisions in relation to final settlement and pledging of supplementary collateral. The provisions shall apply to agreements made between two credit institutions or a credit institution and a business enterprise or between two business enterprises.

Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act
On 4 December 2003 the Folketing (Parliament) adopted the Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act. The act came into force on 1 January 2004 with the exception of the accounting chapter, which is expected to come into force on 1 January 2005.

The act implements the UCITS directive as well as a number of the recommendations in the 1999 report from the Savings Committee under the Committee on the Financial Sector after the Year 2000. In addition, the act comprises regulation to some extent of "other collective investment schemes" on the basis of new international standards aimed at increased investor protection. The act also entails implementation of some of the results of the committee work on provisions concerning management and speculation, and some provisions have been harmonised in relation to the Financial Business Act as part of the government's efforts to simplify legislation.

The act entails amendments in the following areas, among others:

Custodian banks will be allowed to own investment-management companies (previously administration companies) which manage the assets of investment associations. At the same time protective measures are introduced to avoid conflicts of interest to the detriment of investors.

Investment associations will now be able to invest in derivatives, in bank deposits and in other associations. At the same time the dispersion provisions are amended so that risk cannot be concentrated on a few issuers issuing many different instruments.

In future it will be possible to establish so-called limited-membership associations, i.e. associations with few members, normally institutional investors. Such associations are subject to simpler regulation.

Regulation will take place of "other collective investment schemes", which – unlike investment associations and special-purpose associations – can gear investments by raising loans ("hedge funds"). Such schemes already exist in the form of foreign-exchange or option pools with banks.

The associations will be allowed to split their assets into unit classes for different types of investors. The purpose of this is to streamline portfolio management and strengthen international competitiveness.

Investment associations, special-purpose associations, limited-membership associations and other collective investment schemes will all be subject to the powers of the Financial Business Council, and the Federation of Danish Investment Associations will have a representative in the Council.

Bill to amend the Financial Business Act, etc.
In December 2003 the Danish Financial Supervisory Authority submitted the above bill to Danmarks Nationalbank for consultation. The bill was presented to the Folketing (Parliament) in February 2004.

The bill includes amendments to the provisions on financial conglomerates in the Financial Business Act. The purpose is to ensure supplementary supervision of the conglomerates.

Financial conglomerates are groups comprising both credit institutions and insurance companies. So far they have not been subject to group supervision at EU level. However, under the Financial Conglomerates Directive (directive 2002/87/EC) provisions will be introduced on supplementary supervision of credit institutions, insurance companies and investment firms in a financial conglomerate by 11 August 2004. Among other things, the Financial Conglomerates Directives requires that financial conglomerates must always have a certain base capital. In addition, the competent supervisory authority must monitor risk concentration and intragroup transactions. Finally, a financial conglomerate must have adequate risk-management procedures and internal controls. The requirements in the directive broadly correspond to the treatment of financial groups in the Financial Business Act. To ensure the greatest possible uniformity in the provisions for financial groups, regardless of their organisational structure, the necessary amendments to the Financial Business Act will as a consequence of the Financial Conglomerates Directive also be applied to financial groups that are not conglomerates.

The group provisions apply to groups under the supervision of the Danish Financial Supervisory Authority, as well as groups comprising Danish financial enterprises where the parent company is a financial enterprise or a holding company domiciled outside the EU (groups with a parent company in another EU member state are subject to the legislation of that member state).

In addition to the amendments warranted by the Financial Conglomerates Directive a number of other amendments are proposed, inter alia as a result of the regulation on European companies.

Consultation responses

Concerning the proposed Financial Business Act
The proposal is described above.

On 7 February 2003 Danmarks Nationalbank submitted the following consultation response:
This proposal is a continuation of the efforts to introduce a new legal structure in the financial area. Under the current proposal a number of financial acts are repealed, including the Mortgage Credit Act, which will, however, to some extent be maintained as a product act, i.e. mortgage-credit bonds are regulated separately from the regulation of mortgage-credit institutes.

Danmarks Nationalbank endorses this further step in the direction of a joint act governing the financial sector with a view to ensuring that similar products are to a higher degree treated in the same way within the various financial areas. As stated in the explanatory notes to the proposal, the intention is to investigate the possibility of harmonising and simplifying the rules even more. Danmarks Nationalbank believes that the amendments to the provisions concerning management and speculation in the current proposal are a good example of how thorough preparation can lead to harmonisation and simplification of rules.

Danmarks Nationalbank finds it natural that the proposal enables the Danish Financial Supervisory Authority to refuse a financial enterprise permission to establish subsidiaries in countries outside the EU where the authorities are unwilling or unable to supply adequate information for supervisory purposes or to give access to inspection with a view to consolidated supervision.

The proposal empowers the Danish Financial Supervisory Authority to remove one or more persons from the management of a financial enterprise if the fit-and-proper provisions are no longer complied with. This was incorporated on the basis of international recommendations. Danmarks Nationalbank welcomes this less extensive sanction, which means that the Danish Financial Supervisory Authority will no longer need to withdraw the operating licence.

The rules in relation to passing on information within a group have been amended several times in recent years. Danmarks Nationalbank finds it important that the rules do not prevent exchange of the information required for risk management within groups. The proposed solution fulfils this objective since individual private exposures seldom affect a bank's risk management.

As a new element, it is proposed to regulate the maximum increase of the rate of interest on hybrid core capital and subordinate loan capital, respectively. The purpose is to avoid agreement of interest-rate increases which are so high that non-redemption becomes disproportionately expensive for the institution. In addition, a new criterion has been introduced for writing down subordinate loan capital and hybrid core capital. This criterion was not included in the former provisions. According to the proposal capital can either be written down as before, by subsequent injection of new capital into the institution, or, as a new option, if the institution is wound up without losses to the non-subordinate creditors. Danmarks Nationalbank finds that both these changes will support the robustness of the subordinate capital. As intended, a better basis is thereby created for using the subordinate capital to cover losses in any future banking crises and for providing the highest possible degree of security for the depositors. In the first stage of the legislative reform the accounting chapter was brought in line with the Financial Statements Act. However, the commencement date for this chapter was postponed, pending committee work on the implications for the financial institutions, as well as the international development in the area. The committee work is planned, but has not yet been initiated. Danmarks Nationalbank assumes that the existing accounting provisions will remain unchanged until the accounting chapter of the Financial Business Act comes into force. Moreover, it is important to Danmarks Nationalbank that the committee recommends putting the chapter into force and that the transition to the new accounting provisions is in accordance with international developments in the area.

The proposal harmonises the deadline for submission of annual reports to the Danish Financial Supervisory Authority to four months, which is shorter than the existing deadline for insurance companies and pension funds. Danmarks Nationalbank believes that financial institutions should, whenever possible, publish an announcement of their annual accounts within three months of the end of the financial year, which is the deadline for listed companies.

The proposal empowers the Danish Financial Supervisory Authority to impose individual requirements on an institution whose financial position entails a risk that the institution will lose its licence to operate. This provision enables the Danish Financial Supervisory Authority in specific cases to determine individual capital requirements for banks at an earlier point than has been the case so far. Danmarks Nationalbank supports this option.

Concerning the proposed Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act
The proposal is described above.

On 7 February 2003 Danmarks Nationalbank submitted the following consultation response:
This act is a special act for the mortgage-credit product, while the remaining elements of the current Mortgage Credit Act are incorporated in the Financial Business Act.

Danmarks Nationalbank attaches importance to the fact that this proposal does not change the cornerstones of mortgage credit. These are primarily the balance principle, but also the maximum term to maturity and the credit limits.

The proposal will make it possible to defer amortisation for up to 10 years on loans for owner-occupied all-year housing and summer cottages. Danmarks Nationalbank welcomes the increased choice.

Deferred-amortisation loans require stricter monitoring of the overall financial situation of the borrower. The borrower and his or her advisors must carefully consider the risks implied by deferred amortisation. In addition, deferred amortisation increases the requirements regarding current assessment of the collateral by the mortgage-credit institutes.

Danmarks Nationalbank notes that the proposal still allows the mortgaging of business properties, etc. on the basis of repurchase sums. With a view to the collateral underlying the mortgage-credit bonds, capital requirements will be increased for lending in excess of the credit limit measured in relation to market value. Danmarks Nationalbank finds this appropriate.

Concerning the Act to amend the Securities Trading Act, and the Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act
The proposals are described above.

On 29 August 2003 Danmarks Nationalbank submitted the following consultation response:
Concerning the draft bill on investment associations, special-purpose associations and other collective investment schemes, etc., Danmarks Nationalbank's comments are as follows:

Danmarks Nationalbank supports the proposal to permit custodian banks to own investment-management companies. This clarifies the relations between the custodian bank, investment-management company and investment association. The introduction of new protective measures and the option to apply provisions from company law to the relations between the companies mean that a better overall framework is created for countering conflicts of interest. It is worth noting that the general meeting of the investment association decides whether to sell the investment-management company to the custodian bank.

Efforts should continue to find a model for the segregation of pension pools from banks to investment associations/"funds" as proposed by the Savings Committee.

The enhanced placement options for investment associations, combined with a general tightening of the dispersion rules and the rules on exceeding the placement limits, would seem appropriate.

Concerning the draft bill to amend the Securities Trading, etc. Act, Danmarks Nationalbank's comments are as follows:

Danmarks Nationalbank endorses the implementation proposed in the Securities Trading, etc. Act of the Financial Collateral Directive. Danmarks Nationalbank supports the scope of the proposal, particularly the proposal that accounts entered into by the finance departments of industrial groups will be protected by the statutory basis, on a par with the financial sector. In addition, Danmarks Nationalbank agrees that the netting provisions should apply whether or not the parties have entered into a collateral agreement. Finally, Danmarks Nationalbank supports the proposal concerning governing law in relation to the law of property (Chapter 18 b), including handling of the 2002 Hague Convention on the law applicable to certain rights in securities deposited with an intermediary.

Concerning the proposal to amend the Financial Business Act, etc.
The proposal is described above.

On 12 December 2003 Danmarks Nationalbank submitted the following consultation response:
The proposed Financial Business Act includes amended provisions relating to financial conglomerates. The amendments implement the Financial Conglomerates Directive (2002/87/EC).

The trend in the financial markets in recent years has been towards creation of larger units providing products and services across the traditional divisions between e.g. banking, mortgage-credit and insurance activities and across national borders. This increases the requirements for regulation and supervision. When a financial enterprise becomes part of a conglomerate, it is important to ensure that the creation of the conglomerate does not reduce the effect of rules laid down for the individual industries or create new risks.

The purpose of the Financial Conglomerates Directive is to create a level playing field for different types of financial groups. It aims to take into account a number of group risks, including prevention of simultaneous use of the same capital in several entities of the conglomerate (no multiple gearing), as well as ensuring that group structures are transparent, that intragroup transactions take place on market terms and that risks within one company do not spread to other parts of the same group.

The provisions of the Financial Conglomerates Directive are to a large extent already covered by the Financial Business Act. To ensure the greatest possible uniformity in the provisions for financial groups, regardless of their organisational structure, it is proposed that the necessary amendments to the Financial Business Act in consequence of the Financial Conglomerates Directive should also apply to financial groups that are not conglomerates. In addition, the deductibility of capital interests in other financial enterprises is harmonised to some extent.

Danmarks Nationalbank supports the current proposal to implement the Financial Conglomerates Directive, and agrees that uniform rules are desirable for financial groups, irrespective of their organisation. The proposed implementation of the Financial Conglomerates Directive is also found to be in accordance with Danish legislative tradition.

According to the proposal, the Financial Conglomerates Directive and its implementation seek to take account of the risks which may occur as a result of the creation of a conglomerate. In this connection Danmarks Nationalbank finds it important to emphasise that the supplementary regulation of conglomerates/groups is also aimed at protecting the individual company under supervision against abuse by the rest of the conglomerate/group. It is important that the management of the individual company is able to make independent decisions in the interest of the individual company. These problems are particularly relevant in connection with cross-border groups.

The rules for passing on information within groups have been amended several times in recent years. Danmarks Nationalbank finds it important that the rules do not prevent exchange of the information required for risk management within groups. The proposed solution meets this objective since individual private exposures seldom affect a bank's risk management.

In earlier consultation responses concerning the Financial Business Act, Danmarks Nationalbank has supported further steps towards a single act regulating the financial sector so that similar products are to a larger extent treated equally within the various financial areas. The preparation of and subsequent amendments to the Financial Business Act have been part of a continuous process, and the ongoing legal reform process has been aimed at investigating the possibilities of further harmonisation and simplification of the rules. One example of this was the committee work on the provisions concerning management and speculation. Danmarks Nationalbank looks forward to seeing further results in this area.


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				The Statutory Basis for the Financial Sector
					Directives, etc. Status concerning the Financial Services Action Plan In 1999 the European Commission launched a Financial Services Action Plan. The Action Plan prioritises the work of implementing the single financial market and includes 47 proposals for directives. The European Council has resolved that the proposals must be adopted by April 2004, and the Action Plan finally implemented by the member states in 2005. At present 36 proposals have been finally adopted. According to the Action Plan, proposals for directives concerning the securities market should have been adopted in 2003, but a few of these are not expected to be adopted until 2004, cf. below. As the remaining proposals for directives are adopted, attention will increasingly be attached to timely and uniform implementation in the individual member states, as well as regulatory adjustments to match developments in the financial markets. In addition, the dialogue concerning regulation of financial markets with non-EU authorities, e.g. in the USA, will be extended. Selected proposals for directives under the Action Plan are outlined below. Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (the Prospectus Directive) At the meeting of the Ecofin Council in November 2002 political agreement was reached on this proposal, which was finally adopted on 15 July 2003. The primary objective of the directive is to create better and more uniform conditions for investing and raising capital in the EU. This implies that a prospectus which has been approved by one member state can freely be listed and offered in other member states, i.e. it obtains a so-called single passport. Another objective is to enhance consumer protection in connection with investment in securities. Consequently, the directive includes a number of provisions aimed at ensuring more uniform prospectuses. In addition, capital procurement by small and medium-sized enterprises must be facilitated. The directive applies to securities offered to the public or admitted to trading on a regulated market. Government issues are exempt from the directive. The directive is a framework directive to be completed under the new decision-making procedure, the Lamfalussy procedure. This means that the technical implementation measures to be determined by the European Commission in consultation with the Committee of European Securities Regulators, CESR. The directive must be implemented in Danish law by May 2005. Directive on Takeover Bids In October 2002 the European Commission submitted a proposal for a directive on takeover bids harmonising the rules for cross-border acquisitions of stock-exchange-listed companies in the EU. The primary objective of the proposal is to enhance legal rights in connection with cross-border takeover bids and to protect minority shareholders. In addition, it was the aim of the Commission to remove the companies' "defences" against acquisitions, meaning A and B shares, limitations to ownership and voting rights, among other things. A number of member states, including Denmark, could not accept the Commission's proposal. This led to a compromise without the Commission, which was adopted by the Council of Ministers on 27 November 2003. On 16 December 2003 this compromise was finally adopted after a vote in the European Parliament. Unlike the proposal from the Commission, the directive adopted allows the use of share classes, and limitations to ownership and voting rights will remain in force, also in connection with a takeover. Directive on markets in financial instruments On 7 October 2003 the Ecofin Council reached political agreement on a new directive on markets in financial instruments. Final adoption of the directive awaits incorporation of the amendments proposed by the European Parliament. These amendments are still in the negotiation phase. The directive will influence the future development of the securities markets in the EU. It will replace the current Investment Services Directive from 1993, which is out of date in areas such as investor protection, types of investment services on the market and the overall market structure. Furthermore, the current directive has proved to be an insufficient foundation for a single securities market in the EU. The new directive seeks to further harmonise the rules concerning investment firms. In Denmark, this category includes investment companies and credit institutions offering securities trading services. This will be a further contribution to the creation of a single market for financial services in the EU, which is the very objective of the EU's Financial Services Action Plan. The political agreement reached by the Ecofin Council reflects a compromise to balance the considerations of market function and investor protection. The directive is a framework directive, i.e. several issues must subsequently be specified in a committee procedure with the participation of the member states and the European Commission (the Lamfalussy procedure). Proposal for directive on transparency (the Transparency Directive) In March 2003 the European Commission submitted a proposal for a directive on transparency. At the meeting of the Ecofin Council on 25 November 2003 political agreement was reached on the proposed directive. Via minimum requirements, the directive aims to harmonise the information to be published on issuers of securities listed on a regulated market, e.g. a stock exchange. This information is intended to support better investment decisions. A number of member states, including Denmark, could not support the European Commission's original proposal since it would entail compulsory quarterly accounts for share issuers. In the proposal on which political agreement was reached, share issuers are subject to a requirement to publish at a specified interval between the half-year and full-year accounts, a statement concerning the factors affecting the financial result of the company since the latest accounts were published. A decision by the European Parliament can presumably be expected in the spring of 2004. Regulation No. 1606/2002 of 19 July 2002 on application of international accounting standards Under the European Commission's Financial Services Action Plan the Ecofin Council and the European Parliament adopted in July 2002 a regulation on application of international accounting standards, known as the IAS regulation. The objective of the regulation is to improve the functioning of the single market by requiring stock-exchange-listed companies, including financial enterprises, to apply international accounting standards when presenting their consolidated accounts. The aim is thus to improve the transparency and comparability of accounts within the EU and in the long term also at the global level. The international accounting standards are issued by the International Accounting Standards Board (IASB), an independent privately-funded body. The international accounting standards comprise 35 individual standards covering a wide range of principles for recognition, measurement and publication of accounting information. As of 1 January 2005 the regulation makes it compulsory for all companies domiciled in the EU or the EEA that have equity capital or debt listed on regulated markets in the EU or the EEA to prepare their consolidated accounts in conformity with the international accounting standards adopted by the European Commission. The IAS regulation also establishes a procedure for adoption of the individual accounting standards. Accounting standards issued by the IASB must be adopted by the European Commission and by the member states via a so-called comitology procedure. When the standards have been adopted, they will be published in the Official Journal and will take immediate effect for the accounts comprised by the regulation. In September 2003 the European Commission issued a regulation (Regulation no. 1725/2003 of 29 September 2003) adopting all existing international accounting standards with the exception of IAS 39 Financial instruments: recognition and measurement, and IAS 32 Financial instruments: disclosure and presentation. Possible subsequent adoption of IAS 32 and IAS 39, concerning all types of financial instruments including deposits and lending, securities, financial derivatives, etc., is pending finalisation of the IASB's current projects to revise these standards. Under the IAS regulation, member states may permit or require that the accounts of individual companies and the consolidated accounts of unlisted companies also be presented in accordance with the international accounting standards. Acts, etc. Financial Business Act On 4 June 2003 the Folketing (Parliament) adopted the Financial Business Act, replacing the previous act of June 2001. The act came into force on 1 January 2004. The new Financial Business Act constitutes a further step towards restructuring financial legislation. It is the first leg of a continuous process, and in the ongoing reform efforts the possibilities of simplifying the rules further will be investigated. Such proposals are scheduled for the coming sessions of the Folketing. The act repeals the Act on Danish Commercial Banks and Savings Banks, the Act on Insurance Companies, the Act on Investment Companies, the Electronic Money Institutions Act and the Act on Savings Enterprises in their entirety. In addition, the Mortgage Credit Act and the Act on Investment Associations have been repealed. The latter are maintained as product acts, providing for separate regulation of the products, i.e. mortgage-credit bonds and investment certificates, on the one hand and the investment associations' administration companies and the mortgage-credit institutes on the other. Basically, the provisions regulating the mortgage-credit institutes, banks and investment companies have been combined and transferred. The provisions relating to insurance companies, pension funds and e-money institutions have been incorporated unchanged in their entirety. Special provisions for individual areas have initially been maintained. The act does not fundamentally change the conditions of financial enterprises. In a few areas material amendments have, however, been made. A concession system has been introduced for financial enterprises equivalent to the system applying in the insurance sector. In future a banking licence will only give access to conducting banking activities. If a bank also wishes to engage in securities trading, the Danish Financial Supervisory Authority must issue a separate licence in this respect. However, licences cannot be combined freely. For instance, a bank may only engage in insurance activities and mortgage-credit activities via subsidiaries. The minimum capital requirement for banks and mortgage-credit institutes is harmonised to 8 million euro (approximately kr. 60 million), which constitutes an increase in the requirement for banks and a reduction of the requirement for mortgage-credit institutes (previously kr. 150 million). The management provisions have been harmonised. This means that in future the Danish Financial Supervisory Authority will be empowered to remove one or more members if they no longer comply with the fit-and-proper provisions, without having to withdraw the licence to operate. Previously it was necessary to withdraw the licence if a member of the management was no longer eligible. The new provision is in line with the recommendations in the international supervisory standards, including the recommendations of the Basel Committee. The provisions concerning other duties taken on by the management and the rules concerning speculation have been harmonised and simplified. The rules have been rewritten with a view to the protection they are to offer. Fundamentally it is up to the management of the individual financial enterprise to assess whether conflicts of interest may occur. In addition, only individuals appointed by the Board of Directors are directly comprised by the rules. The rules concerning speculation have been amended to relate more specifically to the group of persons for whom the risk of confusing their own interests with those of the enterprise is present. With the new rules, the Executive Order on speculation can be repealed since the act itself now specifies what can be deemed to be speculative transactions and thus prohibited. The rules are simplified and relaxed. The terminology used in capital-adequacy provisions has been harmonised. As a consequence, the concept of base capital has been introduced instead of liable capital, and supplementary capital has become subordinate loan capital. There are no actual changes in the rules concerning calculation of solvency since these rules are maintained for the various types of institutions. As a new element, the act stipulates maximum limits for increasing the rate of interest on the hybrid core capital and subordinate loan capital, respectively. The purpose is to avoid a situation, e.g. in the case of non-payment of instalments, in which the institution and a lender agree on interest-rate increases which are so high that non-redemption of the capital becomes disproportionately expensive for the institution. In addition, a new criterion has been introduced for writing down subordinate loan capital and hybrid core capital. This criterion was not included in the former provisions. Under the act, capital can either be written down as before, by subsequent injection of new capital into the institution, or, as a new option, if the institution is wound up without losses to the non-subordinate creditors. It is presumed that this addition can ease the liquidation of an ailing institution via contributions from the Deposit Guarantee Fund or otherwise. The Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act On 4 June 2003 the Folketing (Parliament) adopted the Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act. Parts of the act came into force on 1 October 2003, the rest on 1 January 2004. In connection with the revision of the Financial Business Act, the Association of Danish Mortgage Banks wanted to preserve a separate product act on mortgage credit to emphasise the special nature of this product in relation to lending and bond issues by other credit institutions. Mortgage-credit institutes will in future be regulated by the Financial Business Act as regards the company and the Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act as regards the product. A number of amendments have been introduced. As regards loans for owner-occupied housing and summer cottages it is now possible to defer amortisation for up to 10 years. This is a deviation from the previous principle, i.e. that the repayment profile for such loans should as a minimum follow an annuity. Deferred-amortisation loans are expected to give mortgage-credit institutes more flexibility to develop new loan products, but these must still be subject to the balance principle. It is stipulated in the explanatory notes that in connection with deferred amortisation the mortgage-credit institute must ensure that the credit limits are observed, e.g. by inspecting the collateral. For certain types of real property, valuation to determine the size of the loan, was previously based on the purchase sum. This option still exists under the new product act. It relates to non-profit rental housing, etc., properties for social, cultural and educational purposes, industrial properties and craftsman's properties and collective energy-supply plants. For loans to the three latter categories the capital requirements for the mortgage-credit institute have, however, been tightened in respect of the part of the loan exceeding the credit limit seen in relation to market value. Act to amend the Securities Trading, etc. Act On 4 December 2003 the Folketing (Parliament) adopted the Act to amend the Securities Trading, etc. Act. A part of the act came into force on 1 January 2004. Most of it will come into force on 1 January 2005. Parts of the act will, however, only come into force by order of the Minister for Economic and Business Affairs when the Hague Convention comes into force in relation to the EU. The act implements the EU directive of June 2002 on financial collateral agreements. This directive concerns agreements in bilateral relationships and aims to promote and streamline pledging of cross-border collateral by harmonising the rules. The directive makes it possible to conduct transactions on a more secure credit basis than previously. This is achieved by reducing the formalities for establishing and enforcing collateral and by protecting such agreements against certain effects of insolvency. In addition, the directive ensures access to rapid realisation of the collateral, as well as the option of supplementary collateral. In a few areas the provisions of the act exceed the requirements of the directive. This is the case regarding e.g. definition of the circle of persons, as well as adaptation of certain reversal provisions in relation to final settlement and pledging of supplementary collateral. The provisions shall apply to agreements made between two credit institutions or a credit institution and a business enterprise or between two business enterprises. Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act On 4 December 2003 the Folketing (Parliament) adopted the Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act. The act came into force on 1 January 2004 with the exception of the accounting chapter, which is expected to come into force on 1 January 2005. The act implements the UCITS directive as well as a number of the recommendations in the 1999 report from the Savings Committee under the Committee on the Financial Sector after the Year 2000. In addition, the act comprises regulation to some extent of "other collective investment schemes" on the basis of new international standards aimed at increased investor protection. The act also entails implementation of some of the results of the committee work on provisions concerning management and speculation, and some provisions have been harmonised in relation to the Financial Business Act as part of the government's efforts to simplify legislation. The act entails amendments in the following areas, among others: Custodian banks will be allowed to own investment-management companies (previously administration companies) which manage the assets of investment associations. At the same time protective measures are introduced to avoid conflicts of interest to the detriment of investors. Investment associations will now be able to invest in derivatives, in bank deposits and in other associations. At the same time the dispersion provisions are amended so that risk cannot be concentrated on a few issuers issuing many different instruments. In future it will be possible to establish so-called limited-membership associations, i.e. associations with few members, normally institutional investors. Such associations are subject to simpler regulation. Regulation will take place of "other collective investment schemes", which – unlike investment associations and special-purpose associations – can gear investments by raising loans ("hedge funds"). Such schemes already exist in the form of foreign-exchange or option pools with banks. The associations will be allowed to split their assets into unit classes for different types of investors. The purpose of this is to streamline portfolio management and strengthen international competitiveness. Investment associations, special-purpose associations, limited-membership associations and other collective investment schemes will all be subject to the powers of the Financial Business Council, and the Federation of Danish Investment Associations will have a representative in the Council. Bill to amend the Financial Business Act, etc. In December 2003 the Danish Financial Supervisory Authority submitted the above bill to Danmarks Nationalbank for consultation. The bill was presented to the Folketing (Parliament) in February 2004. The bill includes amendments to the provisions on financial conglomerates in the Financial Business Act. The purpose is to ensure supplementary supervision of the conglomerates. Financial conglomerates are groups comprising both credit institutions and insurance companies. So far they have not been subject to group supervision at EU level. However, under the Financial Conglomerates Directive (directive 2002/87/EC) provisions will be introduced on supplementary supervision of credit institutions, insurance companies and investment firms in a financial conglomerate by 11 August 2004. Among other things, the Financial Conglomerates Directives requires that financial conglomerates must always have a certain base capital. In addition, the competent supervisory authority must monitor risk concentration and intragroup transactions. Finally, a financial conglomerate must have adequate risk-management procedures and internal controls. The requirements in the directive broadly correspond to the treatment of financial groups in the Financial Business Act. To ensure the greatest possible uniformity in the provisions for financial groups, regardless of their organisational structure, the necessary amendments to the Financial Business Act will as a consequence of the Financial Conglomerates Directive also be applied to financial groups that are not conglomerates. The group provisions apply to groups under the supervision of the Danish Financial Supervisory Authority, as well as groups comprising Danish financial enterprises where the parent company is a financial enterprise or a holding company domiciled outside the EU (groups with a parent company in another EU member state are subject to the legislation of that member state). In addition to the amendments warranted by the Financial Conglomerates Directive a number of other amendments are proposed, inter alia as a result of the regulation on European companies. Consultation responses Concerning the proposed Financial Business Act The proposal is described above. On 7 February 2003 Danmarks Nationalbank submitted the following consultation response: This proposal is a continuation of the efforts to introduce a new legal structure in the financial area. Under the current proposal a number of financial acts are repealed, including the Mortgage Credit Act, which will, however, to some extent be maintained as a product act, i.e. mortgage-credit bonds are regulated separately from the regulation of mortgage-credit institutes. Danmarks Nationalbank endorses this further step in the direction of a joint act governing the financial sector with a view to ensuring that similar products are to a higher degree treated in the same way within the various financial areas. As stated in the explanatory notes to the proposal, the intention is to investigate the possibility of harmonising and simplifying the rules even more. Danmarks Nationalbank believes that the amendments to the provisions concerning management and speculation in the current proposal are a good example of how thorough preparation can lead to harmonisation and simplification of rules. Danmarks Nationalbank finds it natural that the proposal enables the Danish Financial Supervisory Authority to refuse a financial enterprise permission to establish subsidiaries in countries outside the EU where the authorities are unwilling or unable to supply adequate information for supervisory purposes or to give access to inspection with a view to consolidated supervision. The proposal empowers the Danish Financial Supervisory Authority to remove one or more persons from the management of a financial enterprise if the fit-and-proper provisions are no longer complied with. This was incorporated on the basis of international recommendations. Danmarks Nationalbank welcomes this less extensive sanction, which means that the Danish Financial Supervisory Authority will no longer need to withdraw the operating licence. The rules in relation to passing on information within a group have been amended several times in recent years. Danmarks Nationalbank finds it important that the rules do not prevent exchange of the information required for risk management within groups. The proposed solution fulfils this objective since individual private exposures seldom affect a bank's risk management. As a new element, it is proposed to regulate the maximum increase of the rate of interest on hybrid core capital and subordinate loan capital, respectively. The purpose is to avoid agreement of interest-rate increases which are so high that non-redemption becomes disproportionately expensive for the institution. In addition, a new criterion has been introduced for writing down subordinate loan capital and hybrid core capital. This criterion was not included in the former provisions. According to the proposal capital can either be written down as before, by subsequent injection of new capital into the institution, or, as a new option, if the institution is wound up without losses to the non-subordinate creditors. Danmarks Nationalbank finds that both these changes will support the robustness of the subordinate capital. As intended, a better basis is thereby created for using the subordinate capital to cover losses in any future banking crises and for providing the highest possible degree of security for the depositors. In the first stage of the legislative reform the accounting chapter was brought in line with the Financial Statements Act. However, the commencement date for this chapter was postponed, pending committee work on the implications for the financial institutions, as well as the international development in the area. The committee work is planned, but has not yet been initiated. Danmarks Nationalbank assumes that the existing accounting provisions will remain unchanged until the accounting chapter of the Financial Business Act comes into force. Moreover, it is important to Danmarks Nationalbank that the committee recommends putting the chapter into force and that the transition to the new accounting provisions is in accordance with international developments in the area. The proposal harmonises the deadline for submission of annual reports to the Danish Financial Supervisory Authority to four months, which is shorter than the existing deadline for insurance companies and pension funds. Danmarks Nationalbank believes that financial institutions should, whenever possible, publish an announcement of their annual accounts within three months of the end of the financial year, which is the deadline for listed companies. The proposal empowers the Danish Financial Supervisory Authority to impose individual requirements on an institution whose financial position entails a risk that the institution will lose its licence to operate. This provision enables the Danish Financial Supervisory Authority in specific cases to determine individual capital requirements for banks at an earlier point than has been the case so far. Danmarks Nationalbank supports this option. Concerning the proposed Mortgage-Credit Loans and Mortgage-Credit Bonds, etc. Act The proposal is described above. On 7 February 2003 Danmarks Nationalbank submitted the following consultation response: This act is a special act for the mortgage-credit product, while the remaining elements of the current Mortgage Credit Act are incorporated in the Financial Business Act. Danmarks Nationalbank attaches importance to the fact that this proposal does not change the cornerstones of mortgage credit. These are primarily the balance principle, but also the maximum term to maturity and the credit limits. The proposal will make it possible to defer amortisation for up to 10 years on loans for owner-occupied all-year housing and summer cottages. Danmarks Nationalbank welcomes the increased choice. Deferred-amortisation loans require stricter monitoring of the overall financial situation of the borrower. The borrower and his or her advisors must carefully consider the risks implied by deferred amortisation. In addition, deferred amortisation increases the requirements regarding current assessment of the collateral by the mortgage-credit institutes. Danmarks Nationalbank notes that the proposal still allows the mortgaging of business properties, etc. on the basis of repurchase sums. With a view to the collateral underlying the mortgage-credit bonds, capital requirements will be increased for lending in excess of the credit limit measured in relation to market value. Danmarks Nationalbank finds this appropriate. Concerning the Act to amend the Securities Trading Act, and the Investment Associations, Special-Purpose Associations and Other Collective Investment Schemes Act The proposals are described above. On 29 August 2003 Danmarks Nationalbank submitted the following consultation response: Concerning the draft bill on investment associations, special-purpose associations and other collective investment schemes, etc., Danmarks Nationalbank's comments are as follows: Danmarks Nationalbank supports the proposal to permit custodian banks to own investment-management companies. This clarifies the relations between the custodian bank, investment-management company and investment association. The introduction of new protective measures and the option to apply provisions from company law to the relations between the companies mean that a better overall framework is created for countering conflicts of interest. It is worth noting that the general meeting of the investment association decides whether to sell the investment-management company to the custodian bank. Efforts should continue to find a model for the segregation of pension pools from banks to investment associations/"funds" as proposed by the Savings Committee. The enhanced placement options for investment associations, combined with a general tightening of the dispersion rules and the rules on exceeding the placement limits, would seem appropriate. Concerning the draft bill to amend the Securities Trading, etc. Act, Danmarks Nationalbank's comments are as follows: Danmarks Nationalbank endorses the implementation proposed in the Securities Trading, etc. Act of the Financial Collateral Directive. Danmarks Nationalbank supports the scope of the proposal, particularly the proposal that accounts entered into by the finance departments of industrial groups will be protected by the statutory basis, on a par with the financial sector. In addition, Danmarks Nationalbank agrees that the netting provisions should apply whether or not the parties have entered into a collateral agreement. Finally, Danmarks Nationalbank supports the proposal concerning governing law in relation to the law of property (Chapter 18 b), including handling of the 2002 Hague Convention on the law applicable to certain rights in securities deposited with an intermediary. Concerning the proposal to amend the Financial Business Act, etc. The proposal is described above. On 12 December 2003 Danmarks Nationalbank submitted the following consultation response: The proposed Financial Business Act includes amended provisions relating to financial conglomerates. The amendments implement the Financial Conglomerates Directive (2002/87/EC). The trend in the financial markets in recent years has been towards creation of larger units providing products and services across the traditional divisions between e.g. banking, mortgage-credit and insurance activities and across national borders. This increases the requirements for regulation and supervision. When a financial enterprise becomes part of a conglomerate, it is important to ensure that the creation of the conglomerate does not reduce the effect of rules laid down for the individual industries or create new risks. The purpose of the Financial Conglomerates Directive is to create a level playing field for different types of financial groups. It aims to take into account a number of group risks, including prevention of simultaneous use of the same capital in several entities of the conglomerate (no multiple gearing), as well as ensuring that group structures are transparent, that intragroup transactions take place on market terms and that risks within one company do not spread to other parts of the same group. The provisions of the Financial Conglomerates Directive are to a large extent already covered by the Financial Business Act. To ensure the greatest possible uniformity in the provisions for financial groups, regardless of their organisational structure, it is proposed that the necessary amendments to the Financial Business Act in consequence of the Financial Conglomerates Directive should also apply to financial groups that are not conglomerates. In addition, the deductibility of capital interests in other financial enterprises is harmonised to some extent. Danmarks Nationalbank supports the current proposal to implement the Financial Conglomerates Directive, and agrees that uniform rules are desirable for financial groups, irrespective of their organisation. The proposed implementation of the Financial Conglomerates Directive is also found to be in accordance with Danish legislative tradition. According to the proposal, the Financial Conglomerates Directive and its implementation seek to take account of the risks which may occur as a result of the creation of a conglomerate. In this connection Danmarks Nationalbank finds it important to emphasise that the supplementary regulation of conglomerates/groups is also aimed at protecting the individual company under supervision against abuse by the rest of the conglomerate/group. It is important that the management of the individual company is able to make independent decisions in the interest of the individual company. These problems are particularly relevant in connection with cross-border groups. The rules for passing on information within groups have been amended several times in recent years. Danmarks Nationalbank finds it important that the rules do not prevent exchange of the information required for risk management within groups. The proposed solution meets this objective since individual private exposures seldom affect a bank's risk management. In earlier consultation responses concerning the Financial Business Act, Danmarks Nationalbank has supported further steps towards a single act regulating the financial sector so that similar products are to a larger extent treated equally within the various financial areas. The preparation of and subsequent amendments to the Financial Business Act have been part of a continuous process, and the ongoing legal reform process has been aimed at investigating the possibilities of further harmonisation and simplification of the rules. One example of this was the committee work on the provisions concerning management and speculation. Danmarks Nationalbank looks forward to seeing further results in this area.


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The Statutory Basis for the Financial Sector

Directives, etc.

Acts, etc.

Consultation responses