Measures to Enhance Stability

Emergency communication system for business continuity in the financial sector
In the spring of 2006, Danmarks Nationalbank and the Danish Financial Supervisory Authority, in collaboration with the Danish Bankers Association and the Association of Danish Mortgage Banks, established a working group to assess the need for operational contingency plans for selected parts of the financial sector. The working group has prepared a report describing critical business activities in the financial sector, as well as a discussion paper with recommendation of processes and lines of communication at sectoral and authority level in relation to financial sector continuity planning. The objective is to improve communication and thus the financial sector's opportunities to respond to a major operational disruption caused by e.g. an act of terrorism.

The report was submitted to the organisations for consultation on 27 June 2007 with two key recommendations: 1) to establish a plan for financial sector business continuity, and 2) to anchor the secretariat (Response Team) in Danmarks Nationalbank.

The Danish Bankers Association, the Association of Danish Mortgage Banks and Danmarks Nationalbank have jointly begun to implement the contingency plan. A coordination committee has been established, consisting of decision-makers from the respective organisations. Its mandate is to coordinate the exchange of information and knowledge as input to the sector's coordinated response to a potential operational disruption.

A Response Team, consisting of employees of Danmarks Nationalbank, has been established to undertake the current management of the contingency plan for the sector. The Team has two key functions:

1. A vigilance function
2. A function as secretariat to the coordination committee.

Within normal working hours, members of the Response Team are, as a main rule, physically present at Danmarks Nationalbank, but outside normal working hours, members are on call.

The implementation is expected to be finalised in the autumn of 2008.

Covered bonds
The legislation on covered bonds entered into force on 1 July 2007. It enables mortgage-credit institutes to continue to issue covered bonds as previously. The good qualities of the Danish mortgage-credit system are thus retained. At the same time, the access to issue covered bonds has been extended to include Danish banks.

In connection with implementation of the legislation, Danmarks Nationalbank has expanded the range of bonds eligible as collateral for loans from Danmarks Nationalbank to include covered bonds issued by Danish credit institutions.

Covered bonds are a new and stable source of financing for the banks, which could contribute to enhancing financial stability.

Adoption of changes to the Guarantee Fund for Depositors and Investors
On 6 June 2007, the Folketing (Parliament) adopted legislative amendments providing for establishment of voluntary schemes for the winding up of an ailing banking institution.

On 13 June 2007, the Danish Bankers Association established a private contingency facility for winding-up of ailing banks, savings banks and cooperative banks. The objective is to contribute to the winding up – as an alternative to compulsory liquidation – of ailing banks, savings banks and cooperative banks by enabling another institution to take over the assets and liabilities of the ailing institution. The facility can contribute to this by supplying funds to or providing guarantees to the acquiring institution to cover the ailing institution's non-subordinate creditors.