Temporary credit facility on the basis of excess capital adequacy

Danmarks Nationalbank extends the temporary credit facility offering loans to banks and mortgage-credit institutes on the basis of their excess capital adequacy until 26 February 2011. From 1 October 2010 Danmarks Nationalbank's lending rate plus 2 percentage points applies.

Information about the facility
Danmarks Nationalbank has introduced a temporary credit facility offering loans to banks and mortgage-credit institutes on the basis of their excess capital adequacy. The facility runs until 30 September 2010.

Excess capital adequacy is calculated as the difference between base capital and capital need, less a margin of 1 percentage point. Financial institutions may borrow an amount corresponding their excess capital adequacy, usually up to a limit of DKK 800 million (see "Example of calculation of credit line"). In its application, the institution must state the excess capital adequacy of both the parent company and the group. The credit line will be based on the lower of the two. Calculation of the excess capital adequacy must take into account the additional solvency requirements imposed on financial institutions applying the IRB approach during the transitional period until 2012.

Any bank or mortgage-credit institute that is approved by the Danish Financial Supervisory Authority, resident in the Kingdom of Denmark and a monetary-policy counterparty of Danmarks Nationalbank may apply for credit under the new facility. The Danish FSA has stated that credit lines at Danmarks Nationalbank can be included in a financial institution's liquidity, cf. section 152 of the Financial Business Act, until one month before the expiry of this credit facility.

Under normal circumstances, Danmarks Nationalbank finishes considering a credit application within 10 working days from receipt of the application. The credit decision is made by the Board of Governors of Danmarks Nationalbank.

Danmarks Nationalbank's lending rate plus 1 percentage points applies. From 1 October 2010 the interest rate will be Danmarks Nationalbank's lending rate plus 2 percentage points.

Credit is granted on the last banking day of the week, maturing on the last banking day of the following week. If an institution is approved for credit under this facility, it may determine weekly the amount it wishes to borrow within the credit line.

When applying for a credit line
If a financial institution wishes to apply for a credit line from Danmarks Nationalbank on the basis of excess capital adequacy, it must initially contact Danmarks Nationalbank, Accounting, tel. (+45) 33 63 69 39, cf. the Terms and Conditions for Credit Facilities at Danmarks Nationalbank on the Basis of Excess Capital Adequacy


Subsequently, a number of documents must be submitted to Danmarks Nationalbank. To maintain a credit line, the financial institution must submit a monthly liquidity budget with an appended letter. Within four months from the granting of the credit line, the financial institution must also submit a new statement by the management and a statement by the auditors with a high degree of certainty. A list of these documents can be found under "Documents to be submitted when applying for and maintaining a credit line.

Please contact assistant Governor Hugo Frey Jensen, Head of Financial Markets, tel. +45 3363 6101.