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CCPs will be eligible to become monetary policy counterparties
Danmarks Nationalbank will allow CCPs offering clearing services in Danish kroner to become monetary policy counterparties. This will enable them to better manage krone liquidity and collateral and thereby better support the effectiveness of broader Danish financial markets. This decision aims to support money market functioning and strengthen monetary policy transmission.
Danmarks Nationalbank will, from 01 October 2025, allow central counterparty clearing houses (CCPs)1 offering clearing services in Danish kroner to become monetary policy counterparties (MPCs)2.
As MPCs, CCPs will be able to access to monetary policy facilities and instruments under the same terms as existing MPCs.3 With these instruments, CCP’s will more effectively be able to manage the collateral they receive as margin on cleared trades in their role as intermediaries in key Danish markets.
This decision is consistent with actions taken by other central banks, which have also granted CCPs access to monetary policy instruments.
Background to the decision
CCPs act as intermediaries in financial market transactions by providing clearing services across various markets and have become widely integrated into the infrastructure of the Danish financial system. The role of CCPs as intermediaries distinguishes them from other non-bank financial institutions (NBFIs).
In recent years, several regulatory reforms and initiatives have been introduced that either require or incentivise financial market participants to clear some transactions through CCPs. Clearing such transactions increases the efficiency and stability of financial markets by netting exposures and lowering the risk of counterparty defaults.
As clearing has become more prevalent, CCPs have become more important to financial intermediation, particularly in key markets that are central to the transmission of monetary policy, such as the repurchase (repo) market4 and interest rate derivatives.5
In addition to intermediating money market activity, CCPs also use these markets to manage the liquidity obtained as margin requirements.6 Margin requirements are normally comprised of high-quality collateral and cash, which the CCPs hold for safe keeping. CCPs without assess to an account at the central bank will place cash collateral into short-term money markets.
Well-functioning krone money markets are essential for the effective transmission of monetary policy rates as well as the stability of broader markets in Danish kroner7. While these markets are well-functioning much of the time, they may, from time to time, become more volatile8.
During such episodes, CCPs may need to increase margin requirements on trades to protect against counterparty default risk9. Money market functioning may also deteriorate in tandem, making it more challenging for CCPs to place the additional liquidity without further amplifying volatility.
As an MPC at Danmarks Nationalbank, CCPs will have a backstop for placements of their krone liquidity. Such a backstop will protect against the potentially amplifying effects of CCP placements on krone money markets, thereby enhancing both day-to-day resilience and stability in times of turbulence.
Well-functioning and robust money markets, in turn, support effective monetary policy transmission and benefit both existing MPCs and the broader Danish financial system.
As with other MPCs, CCPs will be incentivised by the structure of Danmarks Nationalbank’s operational framework for monetary policy to place their krone liquidity into money markets when market rates exceed the current account rate. In their role as MPCs, CCPs will share responsibility to support money market functioning through their redistribution of liquidity10.
To be eligible to become an MPC, CCPs must be active in clearing transactions denominated in Danish kroner, and in the assessment of Danmarks Nationalbank, hold material significance for markets considered material to the transmission of monetary policy. CCPs not domiciled in Denmark must be subject to supervision in another EU member state.
CCPs interested in becoming monetary policy counterparties must obtain a TARGET DKK11 account and meet specific technical and operational requirements. Terms and Conditions for Account Holders contain a detailed description of the applicable rules for different types of participants, as well as the necessary forms for account holders and their administrators.
CCPs interested in applying are encouraged to contact payments@nationalbanken.dk to discuss the terms and conditions in more detail.