Securities eligible as collateral for credit facilities in Danish kroner
Traditional pledging of collateral can be broken down into:
- Securities issued by the Kingdom of Denmark.
- Bonds guaranteed by the Kingdom of Denmark.
- Bonds issued by KommuneKredit.
- Mortgage bonds (ROs), covered bonds (SDOs) and covered mortgage bonds (SDROs) issued by institutions subject to the Danish Financial Business Act.
- Bonds issued by Føroya Landstýri (the government of the Faroe Islands).
The securities must be registered with VP Securities and traded at NASDAQ OMX Copenhagen.
At the request of the account holders and subject to specific assessment, Danmarks Nationalbank may also include other assets in the collateral basis for credit facilities in Danish kroner.
Collateral value
The collateral value of the securities is calculated on the basis of their official price on NASDAQ OMX Copenhagen on the preceding day, including accrued interest, less a securities-specific valuation haircut. If an asset has not been traded on the previous banking days, a theoretical price set by Danmarks Nationalbank is used for the calculation of its collateral value.
When Danmarks Nationalbank determines the haircut, eligible securities are divided into four liquidity categories:
- Category 1: Securities issued by the Kingdom of Denmark.
- Category 2 (inactive at present): ROs, SDOs and SDROs with a circulating volume of more than 1 billion euro or the equivalent value in Danish kroner. The bonds must also be comprised by a price-quoting system approved by Danmarks Nationalbank for this purpose and have at least three price quoters.
- Category 3: Other ROs, SDOs and SDROs, as well as bonds guaranteed by the Kingdom of Denmark and bonds issued by KommuneKredit.
- Category 4: Bonds issued by the government of the Faroe Islands.
Securities with a fixed or variable coupon rate are assigned haircuts according to following table:
Remaining maturity | Category 1 | Category 2 | Category 3 | Category 4 |
0-1 year | 0.5 per cent | 1.0 per cent | 1.5 per cent | 4.0 per cent |
1-3 years | 1.0 per cent | 1.5 per cent | 2.0 per cent | 6.0 per cent |
3-5 years | 1.5 per cent | 2.5 per cent | 3.5 per cent | 8.0 per cent |
5-7 years | 2.0 per cent | 3.5 per cent | 4.5 per cent | 10.0 per cent |
7-10 years | 3.0 per cent | 4.5 per cent | 6.0 per cent | 12.0 per cent |
> 10 years | 5.0 per cent | 8.0 per cent | 9.0 per cent | 14.0 per cent |
When a theoretical price is used, an additional haircut of 5 per cent is deducted for all types of securities, except for securities issued by the Kingdom of Denmark. An exchange-rate haircut of 3 per cent is deducted when securities in euro are pledged as collateral for credit facilities in Danish kroner.