Danmarks Nationalbank's role in the Danish Payments System

Abstract icon Danmarks Nationalbank plays several key roles in the Danish payments infrastructure. From the general public's point of view, its most visible task is to issue Danish banknotes and coins which are primarily used for small retail payments.

​Danmarks Nationalbank acts as settlement bank for a number of financial institutions that hold accounts at Danmarks Nationalbank. Via these accounts and Danmarks Nationalbank's payment system, Kronos2, the financial institutions settle their mutual accounts and their accounts with Danmarks Nationalbank. The financial institutions also use their accounts at Danmarks Nationalbank to settle payments in various Danish and international payment and settlement systems.

Danmarks Nationalbank grants credits for settlement of payments
In relation to payment systems, Danmarks Nationalbank helps to ensure that there is always adequate intraday liquidity within the financial system to settle payments. To that end Danmarks Nationalbank extends intraday credit in kroner to the financial institutions. This credit must be covered by the end of the day.

Credit lines in Danmarks Nationalbank based on collateral
For all types of credit, Danmarks Nationalbank requires securities that meets certain criteria as collateral. This is provided via traditional pledging of securities in a safekeeping account with VP Securities. In addition, the financial institutions may pledge collateral for intraday credit in kroner via two supplementary arrangements: automatic collateralisation and the Scandinavian Cash Pool.

Settlement bank

Settlement of payments is the process from a payment is debited to one account until it is credited to another. On settlement of securities and foreign-exchange transactions, securities or foreign exchange is transferred from one owner to another. In many systemically important payment and settlement systems, payments are exchanged via the participants' centralbank accounts, i.e. the central bank acts as settlement for the system.