Assistant Governor Thomas Harr's speech at AP Pension's board and member meeting

On 24 May, Assistant Governor Thomas Harr gave a presentation for AP Pension on the subject of inflation. In the presentation, he argued why we expect that core inflation in Denmark will rise this year. He also explained why we expect that inflation will fall next year. (The presentation is in Danish only).

Working Paper: Wage Effects of Labor Market Tightness

In this Working Paper, I examine to what extent labor shortage leads to higher wages. If the shortage of the occupations demanded by a firm increases, wages will increase, too. The wages increases are, however, relatively modest.

Governor Per Callesen’s speech at the annual meeting of the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark

On 19 May 2022, Danmarks Nationalbank Governor Per Callesen gave a speech at the Local Banks' annual meeting on the housing market, inflation and capacity pressure. In addition, he touched on a number of current topics in the financial sector, including payments and cybersecurity. (The presentation is in Danish only).

Record dividends from investment funds

In the first quarter of 2022, private Danish investors received record dividends of kr. 19 billion from investment funds. The large dividends are related to large price increases in the financial markets last year. Dividends are mainly paid in the first quarter and predominantly in February.

Oversight of the financial infrastructure 2021

The report presents the conclusions of Danmarks Nationalbank’s oversight of the Danish payments infrastructure in 2021. The core payment and settlement systems and the key payment solutions extensively comply with international standards for safety and efficiency. Work is being done across the sector to strengthen cyber resilience. Changes in the risk outlook, including new derived risks, mean that this resilience must be continuously developed.

Foreign Exchange and Liquidity and Monthly Balance Sheet, April 2022

​In April 2022, the foreign-exchange reserve decreased by kr. 0.6 billion to kr. 535.1 billion.

Large dividend payments to foreign investors

Foreign investors received historically large dividend payments in March of kr. 31 billion from Danish listed companies. In March alone, dividend payments were on a par with the total annual dividends in previous years. Dividend payments are made mainly in March, but dividends are also paid out in other months. Since 2015, dividend payments to foreign investors in other months have been kr. 10-17 billion.

Decrease in the value of fixed-rate mortgage bonds

At the end of March, the market value of the 30-year fixed-rate mortgage bonds was kr. 134 billion lower than the nominal value. This means that borrowers with fixed-rate mortgages may potentially cut the outstanding debt by kr. 134 billion or 11 percent when refinancing their mortgage.

Looking beyond the impact of energy prices: What drives trend inflation in Denmark?

Before the pandemic, wage and price inflation remained low in Denmark and other advanced economies, despite falling unemployment rates. We attribute the subdued inflation to low competition among firms to hire employed workers. This same force may continue to constrain inflation once the current rise in energy and commodity prices has been passed through to consumer prices.

Record-breaking card turnover in 1st quarter of 2022

Despite the fact that Denmark was partly locked down in January 2022, the card turnover in the 1st quarter of 2022 reached kr. 176.4 billion. This is a new record compared to the corresponding quarter in previous years. The card turnover in the 1st quarter of 2022 was 10.8 per cent higher than the previous record in the 1st quarter of 2019, which was not affected by corona restrictions.

Appetite for loans with variable interest rate

In recent months, Danish homeowners have moved their preferences towards mortgage loans with variable interest rate as opposed to loans with fixed interest rate. Danish homeowners’ new loans with variable interest rate in March was kr. 33.9 billion. When deducting kr. 18.5 billion in early redemption payments, new loans amounted to kr. 15.3 billion, which is the highest level of new loans net since fall 2011. Simultaneously, fixed-rate mortgage loans decreased net by kr. 6.6 billion. A net reduction in fixed-rate mortgage debt was last seen eight years ago, not taking instalments into account.

Governor Lars Rohde's presentation at the Greater Copenhagen summit

Governor Lars Rohde participated in the Greater Copenhagen summit on 27 April 2022, where he gave a presentation on the Danish and Swedish economy, including developments in the labor and housing market. In addition, he touched on the economic consequences of the war in Ukraine and the expectations for the economic outlook. (The presentation is in Danish only).

Market concentration and the Danish rental market

This memo analyzes the evolution of firm ownership concentration in the private Danish rental market and its link to rental prices. We show that the overall increase in rental market concentration between 2010 and 2020 is mainly driven by the rental market in the Capital Region. Further, we document a positive empirical link between market concentration and rental prices.

Higher gas prices can lead to lower house prices in parts of Denmark

The price of natural gas has risen significantly since the summer of 2021. Higher heating costs may put downward pressure on homes heated with gas. Seen in isolation, the average price drop will be DKK 73,000 for a house with gas, if the gas price develops in line with the expectations of financial markets. (Memo available in Danish only).

A number of banks expect tighter credit standards

In Danmarks Nationalbank’s lending survey for 1st quarter 2022, 6 both large and medium-sized banks of the 16 surveyed report that they expect to tighten their credit standards for private customers from 1st to 2nd quarter 2022. The banks explain their responses by, among other things, their expectation of a weakening in the economic robustness of the private customers, including the risk of decreasing income after taxes and fixed expenses. The customers’ robustness is, among other things, affected by their expenses that increases following increasing interest rates and inflation driven by, among other things, increasing energy prices.

Foreign Exchange and Liquidity and Monthly Balance Sheet, March 2022

​In March 2022, the foreign-exchange reserve decreased by kr. 0.7 billion to kr. 535.7 billion.

Five suggestions for banks that want to use artificial intelligence

Banks and insurance and pension companies are increasingly developing systems that use artificial intelligence. This news outlines five suggestions from Danmarks Nationalbank’s data experts, which financial companies should have increased focus on in order to live up to both ethics and legislation when entering this area.

AI and machine learning in the financial sector: Five focus points

Artificial intelligence (AI) can improve the resiliency of both individual financial institutions and the financial sector as a whole. Yet, its users must balance benefits and risks of these technologies. This paper illustrates five focus points which financial institutions should consider when moving from traditional models to complex AI systems.

Denmark's IIP reached new heights in 2021

Denmark’s net international investment position (IIP) reached a record in the 4th quarter of 2021 with kr. 1,888 billion. The net IIP is the difference between Denmark's assets abroad and the foreign assets in Denmark, also called the liabilities. The value of both assets and liabilities increased significantly in 2021.

The interest rate on new mortgage loans has doubled

The interest rate on the Danes' new mortgage loans disbursed in February was on average 1.37 per cent (excl. administration fee). This is a doubling compared to the interest rate on the loans disbursed the year before. Most of this increase took place in the first two months of 2022 and continues into March. Although the interest rate on the new mortgage loans is higher, the average interest rate on the Danes' total mortgage loans remains very low, namely 0.76 per cent in February. The average interest rate has risen slightly since April 2021 due to the impact of the new loans (incl. conversions) and interest rate adjustments of existing loans.

Assistant Governor Thomas Harr's presentation for Finansforeningen (The Danish Finance Society)

On 17 March, Assistant Governor Thomas Harr gave a presentation for Finansforeningen on the subject of growth, inflation and economic policy in the light of Russia’s invasion of Ukraine. In the presentation, he argues that the war in Ukraine will have a significant impact on the Danish economy in the form of lower growth and higher inflation. (The presentation is in Danish only).

Outlook for the Danish economy - War in Ukraine dampens growth and increases inflation

War in Ukraine has in short time become a new and destabilising factor in Danish and global economy. It dampens growth and increase inflation at a time, when inflation and capacity utilisation is already high. Danish economy is in general robust and able to handle new challenges, and is expected to enter a pause in growth. However, there are risks of a fall in activity.

Monetary and financial trends - Rising inflation and Russian invasion have increased volatility

Rising inflation and Russia’s invasion of Ukraine have led to increased volatility in the financial markets over the past six months. Both short-term and long-term mortgage rates have increased significantly, and equity prices have fallen, leading to tighter financial conditions. (Released in Danish March, 16)

Russia's invasion of Ukraine means lower growth and higher inflation in Denmark

Danmarks Nationalbank assesses that the war will reduce GDP growth by approximately 1 percentage point and increase inflation by about 2 percentage points this year. In a new projection for the Danish economy, Danmarks Nationalbank concludes that, following gross domestic product growth of 4.1 per cent in 2021, GDP is expected to rise by 2.1 per cent this year and next year and by 1.7 per cent in 2024.

Annual Report 2021

Danmarks Nationalbank posted a profit of kr. 194 million in 2021 against a profit of kr. 1,616 million in 2020. Gold stock and equity exposure contributed significantly to the profit for the year.

Pressure on the labour market during the pandemic

The Danish labour market has tightened substantially during the recovery of the Danish economy. Pandemic-related labour demand can account for some of the employment growth. The majority of the movements on the labour market have occurred among marginal jobs, and cross-sectoral movements have been slightly higher than usual.

Governor Signe Krogstrup's discussion of fiscal policies for climate action at the annual conference of the European Fiscal Board

Governor Signe Krogstrup discussed how fiscal policy can ensure a net-zero transition. She described reasons for opposition to greenhouse gas taxation, as well as how central banks can contribute to the transition. The discussion took place on 25 February, 2022.

The use of cash in society

Danmarks Nationalbank has conducted a survey of the use of cash in Denmark. Danes are relying less and less on cash when paying for goods and services in stores, but cash is still used as a store of value and for person-to-person payments. For instance, more than one in three Danes hold cash savings.

Pension assets grew by kr. 1.000 billion in three years

The Danes’ pension assets reached kr. 4,460 billion in 2021. By the end of 2021, the assets had grown by kr. 1,011 billion over a three-year period, and the increase was mainly due to sizeable pension returns but also large pension contributions.

Foreign Exchange and Liquidity and Monthly Balance Sheet, February 2022

​In February 2022, the foreign-exchange reserve increased by kr. 5.7 billion to kr. 536.4 billion.

Foreign investors own 26 per cent of mortgage bonds

Foreign investors own Danish mortgage bonds for a total of kr. 827 billion in January 2022. This corresponds to 26 per cent of the total nominal value of kr. 3,218 billion. Over half – kr. 441 billion – of the foreign holdings of Danish mortgage bonds consists of 30-year fixed-rate bonds. Foreign investors contribute to a broad investor base and demand for Danish mortgage bonds, which has an impact on interest rates and thus homeowners' finances.

Companies borrow significantly more from the banks

With a growth of 12.6 per cent corresponding to kr. 54 billion, the past year has seen the largest increase in lending from the banks to Danish companies since 2008. Credit growth has accelerated since September after several years of subdued credit growth in the wake of the financial crisis and a decline in the months following the outbreak of covid-19. Bank lending to companies amounted to kr. 477 billion at the end of January 2022 and is thus approx. kr. 35 billion above the level before covid-19.

Denmark is among the most digitalised countries when it comes to payments

Danmarks Nationalbank has conducted a survey of the payment behaviour of Danish households. In Denmark, most payments in physical trade and person to person are digital. Digital behaviour is broadly anchored in the population, and the digital behaviour of senior citizens is a key element in making Denmark one of the most digitalised countries when it comes to payments.

Danmarks Nationalbank renews Statement of Commitment to FX Global Code

​Today all members of the ESCB, including Danmarks Nationalbank, have issued renewed Statements of Commitment to the Code.

Direct investment abroad sets a record

Danish direct equity investments abroad reached kr. 126 billion in 2021 which is its highest level so far. Direct investments in the form of group loans pulled in the opposite direction by kr. -39 billion, as intercompany loans were repaid to Denmark, or foreign companies lent money to Danish companies in the same group. In total, Danish direct investments abroad were kr. 87 billion in 2021, which is an increase of kr. 33 billion compared to 2020. At the global level, direct investments also increased in 2021.

Danish Government Borrowing and Debt 2021

A government budget surplus led to a decrease in central government debt by approximately kr. 100 billion to kr. 438 billion at the end of 2021, equal to just under 18 per cent of GDP. Central government debt, as a share of GDP, has thus fallen to its lowest level since 2009. Again in 2021, borrowing flexibility was crucial to the central government. The flexibility made it possible gradually to reduce issuances by the central government, in line with improvements in government finances.

The impact of digitalisation on Danish companies and workers

This memo explores the impact of digitalisation on Danish workers and companies. For this, we first build two complementary measures of digitalisation that leverage Danish administrative data. We then document a positive association between the level of digitalisation and sales of large companies. In the final part, we study the workers in the IT sector – the producers of the digital tools. We find that the workforce in the IT sector is more specialised than the rest of the Danish workforce, and that this specialisation has increased during the past decade.

Foreign Exchange and Liquidity and Monthly Balance Sheet, January 2022

​In January 2022, the foreign-exchange reserve decreased by kr. 4.4 billion to kr. 530.7 billion.

28 per cent return on global equity funds

Private Danish investors received an average return of 28 per cent on their investments in global equity funds in 2021. For comparison, the return on the widely used benchmark MSCI World was 31 per cent.

Large share buybacks and dividends in 2021

During 2021, Danish companies and banks repurchased shares and paid dividends for a historically high amount of almost kr. 114 billion. This took place on the backdrop of an upturn in both the global and Danish economy.

Record year for purchases of foreign securities

Danish private investors, i.e. employees and pensioners, have set a record with a purchase of foreign securities worth kr. 23 billion in 2021. This is on top of the very large purchases in 2020. Last time the purchases were in that order of magnitude was in 2004-06, when there were large price increases on the global stock market.

Investors pay a premium for green equities

This analysis examines whether investors are willing to pay a higher price for a company with low CO2e emissions relative to a corresponding company with higher emissions. The analysis finds, other things being equal, that companies with lower emissions have a higher equity price. The reason for the higher price is found to be that their future earnings are connected with lower risks than comparable companies with higher emissions e.g. due to the prospect of a future carbon tax.

Interest-only mortgage increased in 2021

Danish homeowners increased their mortgage debt without instalments by kr. 63 billion in 2021 corresponding to 8.1 per cent. That is the largest annual increase since 2009. The development has been supported by new interest-only mortgage products and increasing prices on real estate. The increase means that kr. 843 billion (46.7 per cent) of Danish homeowners' total mortgage debt was without instalments at the end of 2021.

Working Paper: Job Retention during the Covid-19 Pandemic

This paper examines the labor market effects of the Danish wage compensation scheme for employees during the covid-19 pandemic. The scheme prevented job losses, especially for low-tenured workers, but led to a decline in furloughed workers’ labor income. Labor market mobility was basically unaffected.

Governor Signe Krogstrup's presentation at the Danish Stockbrokers' Association’s New Year’s levee

Governor Signe Krogstrup's presentation "Danish economy - Where do we stand and what are the prospects?" held on 12 January 2022 at the Danish Stockbrokers' Association’s New Year’s levee. (The presentation is in Danish only).

Governor Lars Rohde's presentation at Insurance and Pension Denmark's member meeting

Governor Lars Rohde gave a presentation at the Insurance and Pension Denmark’s member meeting on 11 January. The presentation focused on the outlook for the Danish and global economy, as well as the long-term risks facing the pension sector. Among other things, governor Lars Rohde shared his thoughts on the dilemmas that low real interest rates pose to pension customers. (The presentation is in Danish only).

Commemorative coin to mark the Golden Jubilee of HM Queen Margrethe II of Denmark on 14 January 2022

Opening of 0.00 per cent green bullet loan 2031

Banks expect increased demand from corporates

In Danmarks Nationalbank’s lending survey for Q4 2021, several of the banks report that they expect increased lending demand from corporate clients in Q1 2022. Several explain their expectations with corona-related credits issued by the government (particularly postponed tax and VAT payments), which begin to expire by April 2022.

Open invitation to TIBER provider event

The TIBER-DK Cyber Team (TCT) cordially invites providers of Threat Intelligence (TI) and Red Team (RT) services to a provider event on 1 February. The newly released TIBER-DK Framework 3.0 will be presented and the upcoming TIBER-EU best practices on Purple Teaming will be introduced. Further discussion and feedback sessions will be facilitated. The intiative reflects the TCT’s wishes to strengthen the crucial dialogue with and between TI and RT providers.

Large purchases of foreign securities via funds

Danish private investors, i.e. employees and pensioners, have purchased foreign securities for a total of kr. 79 billion since the beginning of 2020. About half (kr. 38 billion) was bought indirectly via Danish investment funds, while kr. 22 billion of foreign shares and bonds was bought directly and kr. 19 billion was bought via foreign investment funds.

Foreign Exchange and Liquidity and Monthly Balance Sheet, December 2021

​In December, the foreign-exchange reserve increased by kr. 48.3 billion to kr. 529.8 billion. For settlement in December, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign exchange market amounted to kr. 47.0 billion.

Danish households invest a larger share of their assets

During the last two years, households have bought investment certificates for kr. 89.4 billion and shares for kr. 25.8 billion. Investments via shares and investment certificates have increased by 6.7 percentage points and now amount to 40.9 per cent of households' total financial assets.

Large increase in wealth in shares

Denmark's international investment position (IIP) was kr. 1,762 billion in the 3rd quarter of 2021, which is the same level as before the corona crisis began. On the other hand, the value of both Denmark's investments abroad and foreign investments in Denmark has increased during 2020 and 2021.

Central government borrowing strategy 2022

The target for sales of domestic government bonds and short-term loan programmes in 2022 is kr. 65 billion and kr. 35 billion, respectively. On 19 January, a green 10-year bond with maturity in 2031 will be opened. A new inflation-linked bond with maturity in 2034 will also be opened in the 2nd half of the year. Issuance will be focused in the 2-year and 10-year maturity segments.

Deposit growth has slowed down

For a number of years, Danes have increased their deposits in bank accounts. However, deposit growth has recently lost momentum. For the last year, deposits have thus increased by less than 1 per cent, and the annual change in Danes' deposits was even negative in October. It was the first time since 2014 that the annual change was negative. At the end of November 2021, the Danes' total balance was calculated at kr. 1,027 billion.

New inflation-linked bond helps to ensure a broad investor base

In the 2nd half of 2022, the Danish central government opens a new inflation-linked bond maturing in 2034. Inflation-linked bonds issued by the Danish central government enable investors to invest in a safe asset whose return tracks Danish consumer price inflation. The main reason why the central government continues to issue inflation-linked bonds is to ensure a broad and stable investor base.

The foreign exchange market for kroner is able to absorb large company acquisitions

In the recent years Danish companies have increasingly acquired foreign companies and vice versa. The size of some company acquisitions surpasses the daily turnover in the foreign exchange market for kroner. A case study in this Economic Memo shows that large company acquisitions have not exacerbated krone exchange rate movements over and above the normal daily variation. (Memo available in Danish only).

Governor Signe Krogstrup's introduction to the presentation of Denmark's first green government bonds

Governor Signe Krogstrup gave welcoming remarks at the first investor meeting regarding Danmarks Nationalbank's forthcoming issuance of green government bonds. She explained the background for the issuance. Green issuances contribute to the net-zero transition through the establishment of an efficient and transparent capital market, where green investments can find the right green projects.

Assessment of Kronos2

Danmarks Nationalbank has assessed Kronos2 against international principles for safe and efficient payment systems. Kronos2 is used for settlement of payments between banks etc. and is a central payment system in the Danish payments infrastructure. The main conclusion of the assessment is that Kronos2 to a large extent complies with the principles. A few areas with potential for improvement have been identified.

Domestic bond portfolio adjustments during duration jumps

This Memo investigates the bond portfolio reaction of key Danish institutional investors to duration jumps in callable mortgage bonds. It shows that the investors remain net buyers of Danish mortgage bonds during periods of jumps. In particular, they buy more than they do on average, supporting the Danish mortgage bond market, limiting a potential self-reinforcing mechanism of duration jumps.

Do strategic interaction effects drive excess capital financing of banks?

In this memo we find empirical evidence consistent with the hypothesis that banks act strategically to finance themselves through similar levels of excess capital to their competitors. We find that this channel is a significant driver of banks’ choice of excess capital but not the most important one.

Working Paper: House Prices, Increasing Returns, and the Effects of Government Spending Shocks

We report new regional evidence indicating that U.S. house prices increase after positive shocks to fiscal spending. In sharp contrast to this, house prices fall in conventional DSGE models. We construct a model featuring endogenous firm entry and taste for variety, which can generate a positive response of house prices to fiscal spending.

The Kingdom of Denmark will issue a green bond in 2022

Governor Lars Rohde's speech at the Annual Meeting of Finance Denmark

On 6 December, Governor Lars Rohde gave a speech at the Annual Meeting of Finance Denmark. The speech focused on the housing market, climate change, money laundering and capital adequacy requirements. Lars Rohde repeated Danmarks Nationalbank's recommendations for a more resilient housing market.

Market rate pensions grow

The Danes' savings in market rate pensions total kr. 1,624 billion, corresponding to approximately 32 per cent of the total balance of the insurance and pension companies. Since 2018, the share has risen by about 5 percentage points, while the share of average rate pensions has decreased similarly.

Foreign Exchange and Liquidity and Monthly Balance Sheet, November 2021

​In November 2021, the foreign-exchange reserve decreased by kr. 10.4 billion to kr. 481.5 billion.

Financial stability - Increased risks in credit institutions' housing lending

Credit institutions are granting more housing loans to highly indebted homeowners. High loan-to-value ratios may cause vulnerabilities to a sub-sequent fall in house prices. A general requirement for higher down payments and instalments on loans to homeowners with a high loan-to-value ratio may contribute to a more resilient housing market.

Gender differences in pension products

Men's pension savings consist to a greater extent of unsecured market interest rate products compared to women's. Market interest rate products can provide flexibility and more control over the risk profile. There is no guaranteed return in market interest rate products, which is offset by potentially higher capital gains in the long term. The products development is closely linked to fluctuations in the financial markets and thus more volatile.

More housing loans to highly indebted homeowners

​An increasing share of mortgage credit institutions' new loans are granted to highly indebted homeowners, especially in Greater Copenhagen and Aarhus, according to a new analysis from Danmarks Nationalbank. Danmarks Nationalbank believes that a requirement for a larger down payment and an amortisation requirement for highly indebted homeowners will contribute to a more resilient housing market.

A few of the largest banks are close to buffer requirements under stress

The stress test shows that the banks have sufficient capital to withstand a severe recession scenario, but a few of the systemic banks are close to their buffer requirements. However, the situation would be different for several of the systemic banks if their capital was on a par with their capital target on commencement of the stress test. In this case, several banks would experience significant breaches of the buffer requirements under stress.

Governor Per Callesen’s panel presentation at the Danish Economic Society’s member meeting

On 1 December, Governor Per Callesen participated in a panel debate on the housing market. The presentation argues for why and how the structures in the housing market should be strengthened, specifically through a requirement that highly indebted homeowners repay their debt and through a reduction of the tax deduction for interest payments. (The presentation is in Danish only)

Working Paper: Firm financing and public support measures during the pandemic

This paper studies Danish firms' debt financing decisions during covid-19 with a focus on the impact of government support measures. Credit growth has been modest during the pandemic. Public liquidity measures such as deferred tax and VAT payments served as a substitute for more traditional debt funding sources.

Nonbanks, credit provision and the transmission of monetary policy in Denmark

We analyse the role of nonbank lenders in corporate and consumer credit markets in Denmark and show that they affect the transmission of monetary policy to financial and real outcomes. Nonbanks increase their share of credit supply after an interest rate hike in both the consumer and corporate credit markets.

Foreign ownership of 30-year mortgages declines

Foreign investors' holdings of 30-year fixed-rate callable mortgage bonds have declined from 41 per cent to 37 per cent since mid-2020. The decline is counteracted by the fact that their ownership share of other fixed-rate callable mortgage bonds has increased from 17 per cent to 20 per cent in the same period.

Corporate deposits exceed bank debt

At the end of October, Danish companies had deposits for kr. 467 billion in the banks. At the same time, they had bank debt for kr. 435 billion. The deposits thereby exceed the debt by kr. 32 billion. This continues the trend since May 2020, where the deposits exceeded the debt for the first time.

Governor Lars Rohde's speech at the Distinguished Speakers Seminar

At the conference convened by the European Economics and Financial Centre on 23 November 2021, Governor Lars Rohde shared his thoughts on why the Danish economy has fared relatively well through the pandemic so far. The Danish economy is now operating above its potential, and is expected to find a balanced trajectory over the coming years, as current pressures are believed to be partly transitory.

Assistant Governor Thomas Harr's panel speech at Danske Bank's Summit 2021

On 23 November, Assistant Governor Thomas Harr participated in a panel discussion on the covid-19 recovery, fiscal and monetary policy and the outlook for inflation. In the presentation, it is argued that there are large differences between the US and the euro area, while Denmark is a special case. Inflation expectations and wage developments will be the key determinants of inflation in the coming years – both in Denmark and abroad.

Governor Lars Rohde's speech at the PwC Banking seminar

On 22 November, Governor Lars Rohde gave a presentation at the PwC banking seminar (PricewaterhouseCoopers) 2021. The presentation was about the current state of the Danish economy and the Danish banking sector. The Governor also pointed out signs of risk build-up in the financial system and the need to improve the resilience of the housing market. Moreover, the Governor addressed the European Commission's proposal for revised capital requirements, which offers several improvements.

The Faroese Economy – The boom has regained momentum

The Faroe Islands are experiencing widespread labour shortages, due to very low unemployment and an already high labour market participation rate. At the same time, the continued boom is supported by improved export prospects. Long-term fiscal planning will improve the resilience of the Faroese economy. Capital should be set aside in good times to draw upon in bad. With the ageing of the Faroese population, balance between expenditure and revenue is also important.

The reference rate DESTR will be launched on 1 April 2022

​Danmarks Nationalbank starts publishing DESTR, Denmark Short-Term Rate, on 4 April 2022. The first publication will reflect trading activity on 1 April 2022. Thus, DESTR will be available for use in financial contracts with effect from 1 April 2022.

Statement by Danmarks Nationalbank in connection with COP26

Climate change and the transition to a green economy can challenge Danmarks Nationalbank's objectives of price and financial stability. Danmarks Nationalbank publishes a statement on its climate-related work, in connection with COP26. Danmarks Nationalbank increased the work upon joining the Network for Greening the Financial System in 2019.

Greenlandic economy - Booming economy and severe labour shortages

Greenland has fared better than most countries in weathering the covid-19 pandemic. Labour shortages are severe, and the risk of overheating of the economy has increased. Nuuk is experiencing the strongest labour market pressures, while South and East Greenland are experiencing the lowest. Large-scale infrastructure investments will cause debts of the government of Greenland, local government and government-owned companies to grow considerably over the coming years.

Foreign Exchange and Liquidity and Monthly Balance Sheet, October 2021

​In October 2021, the foreign-exchange reserve decreased by kr. 9.8 billion to kr. 491.9 billion. For settlement in October, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exhcange market amounted to kr. 1.5 billion.

Limited interest-rate sensitivity amongst homeowners

The interest-rate sensitivity of Danish homeowners has decreased in the period from 2009 to 2019. These are among the conclusions of a new Working Paper in which Stine Ludvig Bech, Simon Juul Hviid og Jakob Guldbæk Mikkelsen from Danmarks Nationalbank have analysed, how homeowners will be affected by an interest-rate increase.

Working Paper: Measuring household interest-rate sensitivity in Denmark

We evaluate homeowners’ interest-rate sensitivity on cash flows and balance sheets of a 1 percentage point increase in interest rates. Overall, the interest-rate sensitivity is limited. However, for a subgroup of homeowners, an increase in interest rates will have a substantial effect on their cash flows and balance sheets.

Card payments in physical stores are back

Since the last reopening, Danes have returned to shopping in physical stores. This can be seen in the card turnover, which in the second quarter of 2021 was back at the pre-corona level. While card turnover in physical stores have been negatively affected by the closures, it has performed better in e-commerce.

Major stock buys via funds

In the first three quarters of 2021, private Danish investors have purchased more investment fund shares than in the past three years combined. In a year with rising stock markets and negative deposit interest, they have so far invested kr. 30 billion in investment funds, while they invested kr. 26 billion in the years leading up to 2021.

Growing foreign ownership of Danish shares

The value of foreign investors' holdings of Danish listed shares has increased by kr. 412 billion since the turn of the year to kr. 2,453 billion. Most of the increase is due to increases in value, but foreign investors also bought Danish shares for kr. 42 billion. The foreign investors’ ownership in listed Danish shares has thus increased from 55 per cent at the turn of the year to 57 per cent in September.

Danes are buying foreign shares like never before

Overall, private Danish investors have bought foreign shares and foreign investment fund shares for approximately kr. 40 billion since January 2020. Such large purchases of foreign shares etc. from private Danish investors have not been seen before. The purchases coincide with the fact that the banks have introduced negative deposit rates and the fact that the Danes have had their frozen holiday money paid out. In the first three quarters of 2021 alone, the purchase was approx. kr. 20 billion. This is on a par with the current record for the entire year 2020.

Working Paper: Corporate Investment and Cash Holdings under Financing Shocks

I analyze to which extent corporate cash holdings protect firms from the adverse consequences of shocks to their borrowing costs. Despite firms self-insuring against spikes in their borrowing costs by holding cash, an aggregate shock to borrowing conditions similar to that seen during the Global Financial Crisis can significantly contract aggregate investment, especially for firms with low cash holdings.

Deposit rate for danes continues to fall

In September 2021, the average rate on Danish private customers' ordinary deposits was -0.31 per cent per annum. This corresponds to the Danes paying kr. 65 million in interest on their ordinary deposits in September. Recently, several of the larger banks have lowered their deposit rates from -0.6 per cent to -0.7 per cent, which is expected to lower the average deposit rate further in the coming months.

Flood risk discounts in the Danish housing market

We investigate the effects of the risk of flooding on the prices of single-family homes in Denmark. Houses that are exposed to flood risk today, as well as houses that will be exposed to flood risk in the future due to rising sea levels, are priced at a discount.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, autumn 2021

Danmarks Nationalbank's gold – a historical overview

There is still public interest in Danmarks Nationalbank's gold stock, although it has been many years since gold played an important role in the cash system and more generally in monetary and foreign exchange policies. The analysis provides an overview of the historical background of the gold stock based on source material from Danmarks Nationalbank's archives at the Danish National Archives.

Danmarks Nationalbank's gold

Danmarks Nationalbank has around 66.5 tonnes of gold. A new analysis provides a general overview of the historical background for Danmarks Nationalbank's gold stock based on source material from Danmarks Nationalbank's archive at the Danish National Archives.

Loan demand from private customers is flattening

In Danmarks Nationalbank’s lending survey for 3rd quarter 2021 a few of the banks and mortgage institutions report that loan demand from private customers – after a longer period with growth – decreased a bit from 2nd to 3rd quarter 2021. The institutions mention, among other things, less activity in the housing market as a possible explanation of the development. At the same time, almost all the institutions expect that the demand from private customers will be unchanged in 4th quarter as regards loan demand from both existing and new private customers.

Assistant Governor Thomas Harr's panel speech at Danish Finance Institute Annual Conference 2021

On 7 October, Assistant Governor Thomas Harr participated in a panel discussion on where interest rates are heading and the implications. The presentation argues that interest rates can be expected to remain low going forward. Moreover, the presentation discusses how negative interest rates have affected households, firms and banks so far.

FDI abroad reached its highest level in 2020

Denmark's foreign direct investments (FDI) abroad (outward) amounted to kr. 1,505 billion. This is shown in Danmarks Nationalbank's annual stock statistics for FDI, which are published today. It is kr. 31 billion more than in 2019. Among other things, the Ørsted Group has made significant investments abroad in 2020.

Governor Lars Rohde's speech about the housing market situation at the Association of Danish Mortgage Banks' theme day

At the theme day of the Association of Danish Mortgage Banks, Lars Rohde addressed the housing market situation. He reiterated Danmarks Nationalbank's recommendations on the Danish housing market. Housing market resilience can and should be strengthened. One way of doing so is by restricting loans with deferred amortisation to the most resilient homeowners.

Foreign Exchange and Liquidity and Monthly Balance Sheet, September 2021

​In September 2021, the foreign-exchange reserve increased by kr. 18.4 billion to kr. 501.7 billion. The increase reflects Danmarks Nationalbank's net purchase of foreign exchange for kr. 23.5 billion, and the central government's net repayment of foreign debt for kr. 5.1 billion, cf. table 1.

Public consultation on the transition from Tom/Next to DESTR

On behalf of the working group on short term reference-rates Danmarks Nationalbank publishes a public consultation on the proposed transition from the Tom/Next reference rate to the new Danish reference rate DESTR.

Interest rate reduction

​Effective from 1 October 2021, Danmarks Nationalbank's current account rate, interest rate on certificates of deposit and lending rate is reduced by 0.10 percentage point.

IIP is mainly driven by the balance of payments

Denmark's international investment position (IIP) has almost regained what it has lost since the major price and exchange rate changes in 2020. It is primarily the persistent surpluses on the balance of payments that have contributed, and the IIP amounts to kr. 1,759 billion at the end of the 2nd quarter of 2021. In popular terms, this corresponds to the net wealth abroad being kr. 360,000 per adult Dane.

Danes invest over half of their available funds

In the past year, Danish households have made good returns on rising global stock markets. At the same time, the low interest rates have increasingly been reflected in the form of negative deposit rates for private customers. These factors have contributed to households over the past year investing more than half of their available funds in investment certificates or directly as purchases of stocks and bonds.

Foreign banks dominate the Danish money market

Foreign banks are active in the market for borrowing and lending between banks, which is a market with a total daily turnover of kr. 72 billion. More than two thirds of the borrowing and lending of domestic banks in the money market is with foreign banks. This is evident from Danmarks Nationalbank's yearly money market survey, which covers the turnover in deposits and interest rate derivatives among the banks during Q2.

Green bonds are growing

Companies are utilising new opportunities for green mortgage finance in Denmark. This means that green mortgage bonds have risen to kr. 43 billion and amounts to 1.3 per cent of the Danish mortgage bonds. In addition to Danish mortgage banks, Danish companies also issue green bonds. In total, Danish green bonds amount to kr. 109 billion at the end of August 2021.

Governor Signe Krogstrup's panel speech at BSP-RBWC International Research Conference

Governor Signe Krogstrup participated in a panel discussion on central banking and dealing with the enduring impact of covid-19 on 27 September 2021. The presentation argues that interest rates may stay low for an extended period, and that macro prudential policy therefore may be relevant.

Mortgage debt in the big cities is younger

Major conversions, restructuring and a busy housing market have meant that more than half of the Danes' current mortgage debt has been paid off within the past two years. The age of the debt, like the interest rate level, has an effect on how large the instalment payments are on the part of the debt that is repaid. This is because mortgage loans with instalments are typically annuity loans, where installment payments make up a smaller part of the payment at the beginning of the loan's life.

Outlook for the Danish economy - The economy heading back towards a moderate boom

Rapid recovery after the lockdowns has resulted in recruitment difficulties for companies. Economic growth is expected to continue, with the economy moving into a moderate boom. Bottlenecks are not expected to develop into an actual overheating of the economy, but several prerequisites are present for a scenario with significantly stronger growth. The Government should therefore be prepared to tighten its economic policy more than planned.

Rapid recovery increases pressure in several parts of the Danish economy

​The Danish economy is heading back towards a moderate boom after strong growth in the wake of the reopening of the economy in the spring. In a new projection for the Danish economy, Danmarks Nationalbank estimates that the gross domestic product (GDP) will increase by 3.8 per cent this year. In 2022 and 2023, GDP is expected to increase by 3.1 per cent and 2.4 per cent, respectively.

Monetary and financial trends - Accommodative financial conditions strengthen the upswing

The recovery of the western economies has contributed to higher corporate earnings in Denmark and higher equity prices. Danish long-term bond yields have edged up slightly since March, but remain low. Overall, financial conditions are accommodative for the growth in GDP.

The pension sector's alternative investments

The pension sectors alternative investments of kr. 500 billion have provided diversification and stable returns. Most companies have room to invest even more in alternatives if deemed appropriate in terms of risk and return. An increased share of alternatives can impact both solvency and liquidity, where especially liquidity can become tight if e.g. interest rates increase. Strong management of short- and long-term risks is thus important.

Working Paper: Government spending and retail prices: Regional evidence from the United States

In this Working Paper, I study the effects of local government spending on local retail prices using retail scanner data from the United States. Estimates show that retail prices increase following an increase in government spending. I provide evidence which indicates that this cannot be accounted for by changes in marginal costs.

Governor Per Callesen’s presentation at Finance Denmark’s Director’s Conference 2021

On 6 September, Governor Per Callesen held a presentation at Finance Denmark’s Director Conference 2021. The presentation describes the current situation for the Danish economy. The presentation also includes the decision of the Minister for Industry, Business and Financial Affairs to raise the countercyclical buffer and describes negative interest rates and the phase-out of government liquidity support. (The presentation is in Danish only).

New ECB strategy and the Danish economy

The ECB's new monetary policy strategy was published on 8 July 2021. The analysis presents the changes and their potential impacts on the Danish economy. ECB's new monetary policy strategy does not influence the way in which Danmarks Nationalbank conducts monetary policy. Overall, the changes are assessed to have small potential positive impacts on the Danish economy.

Background seminar on new digital retail payments

Danmarks Nationalbank held a seminar on new digital retail payments September 3, 2021, where Head of Payment Systems, Nathalie Pauline Tuxen, inter alia elaborated on cryptoassets, stablecoins and CBDC (Cental Bank Digital Currencies) and their mutual similarities and differences. (The presentation is in Danish only).

Bonds account for less in pension investments

The insurance and pension sector’s total investments consist of fewer bonds than before. Since the corona lock down in March 2020, the share of bonds in the portfolio has decreased from 58 per cent to 51 per cent in June 2021.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2021

​In August 2021, the foreign-exchange reserve increased by kr. 24.8 billion to kr. 483.4 billion.

Assistant Governor Thomas Harr's panel speech at the conference “The Long-run Outlook for Interest Rates”

Assistant Governor Thomas Harr participated in a panel discussion on 1 September 2021 on how long-term interest rates influence economic policy discussions in Denmark. The presentation argues that Danish long-term interest rates are likely to remain low for some time, but the fixed exchange rate regime constrains how expansive a fiscal policy pursued over time can be.

Governor Lars Rohde's speech on ultra low interest rates at the conference "Long run outlook for interest rates"

At the conference on 1 September 2021, Governor Lars Rohde addressed the very low interest rates that characterise a large number of countries, including Denmark. He argued that they are driven by a number of global factors. They have implications for households, companies as well as financial institutions.

How cyber resilient is the Danish financial sector?

Key financial sector participants have strong external defences and have improved their capability to detect and respond to cyber attacks. Increased focus is required on the protection of critical data and the capability for safe and effective recovery of core systems. This is demonstrated by Danmarks Nationalbank's cyber resilience surveys.

Increase in 30-year mortgage bonds with 1.5 per cent interest rate

The total value of 30-year fixed-rate mortgage bonds with a coupon interest rate of 1.5 per cent reached its highest level ever in July with kr. 165 billion. However, bonds with a coupon rate of 1 per cent still dominate with a total value of kr. 641 billion.

Fixed rate on increasing part of corporate debt

Danish companies have increased the share of their bank and mortgage debt with fixed interest rates over a number of years. It now accounts for 28.9 per cent of their total bank and mortgage debt of DKK 1,727 billion, against 19.3 per cent in 2014. Fixed-rate loans amount to DKK 499 billion, of which 41 billion are bank loans.

New general SDR allocation increases Danmarks Nationalbank's foreign-exchange reserve

​A new general allocation of Special Drawing Rights, SDRs, from the International Monetary Fund, IMF, becomes effective on 23 August. The SDR allocation is equivalent to 650 billion dollars. Denmark will receive SDR 3.3 billion, equivalent to approximately kr. 30 billion. Denmark's SDR holdings are included in Danmarks Nationalbank's foreign-exchange reserve, which therefore increases by approximately kr. 30 billion with the allocation.*)

Digitalised economies have performed better during the pandemic

The pandemic has accelerated the digital transition in many countries. This Economic Memo finds that the degree of digitalisation has had an impact on the magnitude of economic losses during the pandemic. Differences in the EU countries' objectives for digital transition can imply greater digital inequality in the future and a deeper economic gap between the countries. (Memo available in Danish only).

Three lessons from the Danish wage compensation scheme

This memo aims to take the first steps in analysing the use of the wage compensation scheme in Denmark and its effectiveness to preserve job matches. We find that firms used the furlough programme extensively to save at-risk workers. This focus has been particularly on saving full-time workers and workers with higher tenure.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2021

​In July 2021, the foreign-exchange reserve increased by kr. 0.2 billion to 458,6 billion. In July, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 5.2 billion.

Large-scale purchase of investment fund shares

Danish households' purchase of Danish investment fund shares is gaining momentum. Since August 2020 alone, households have purchased kr. 32 billion worth of investment fund shares.

The Danes’ deposit rate averaging -0.21 per cent

In May 2021, the average interest rate on Danish private customers’ ordinary deposits was -0.21 per cent per annum. The deposit rate has thus decreased 0.14 percentage points in 2021. The large decrease in the average rate must be seen in light of the fact that the share of private customers’ deposits with negative rate increased from 13 per cent to 30 per cent in the same period. This corresponds to kr. 310 billion of the Danes’ total deposits earning negative interest in May 2021.

New ECB monetary policy strategy does not alter Danmarks Nationalbank's monetary policy

Banks report lower losses and loan impairments

In Danmarks Nationalbank's lending survey for the 2nd quarter of 2021, almost half of the 17 banks surveyed report a decrease in the share of loan impairments and losses from the first to the second quarter. This is the case for both private and corporate customers. The decrease is in contrast to the banks' responses in the first quarter, where they expected the losses to remain unchanged.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2021

​In June 2021, the foreign-exchange reserve increased by kr. 2.5 billion to 458.4 billion. In June, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 2.6 billion.

3 month extraordinary loans are no longer offered

Housing market robustness should be strengthened

The pandemic has led to high trading activity and house price increases. This creates extraordinary uncertainty about future house prices. By the end of 2023, house prices are expected to have risen significantly. Measures are needed now, such as increased amortisation requirements and lower interest deductions that can strengthen the robustness of the Danish economy – both now and in the future.

Climate change and the role of central banks

For the first time, Danmarks Nationalbank takes an overall stand on its role in relation to climate change and the transition to a green economy. Climate change and the transition may pose challenges to the objectives of price and financial stability. Central banks have a task in adapting to the new challenges.

Danmarks Nationalbank’s comments on media reports about SolarWinds

The allegations about Danmarks Nationalbank was hacked and a back door to IT systems was open for 7 months are not correct.

Consistent recovery and resolution of small and large banks in Europe

In 2014, the EU adopted a new framework for recovery and resolution in order to sever the tie between banks and government, so that the taxpayers no longer had to pick up the tab for failing banks. In Denmark, the framework for recovery and resolution constituted a minor innovation because Denmark already had a framework ensuring that the creditors of failing banks absorbed losses. The European framework is still evolving. The Danish experiences are useful in a European context.

The Danes' net financial wealth is highest in the EU

Danish households' net financial wealth was kr. 6,453 billion at the end of 2020. Net financial wealth is the difference between households' financial assets (e.g. pensions and deposits) and liabilities (debt) and corresponds to kr. 1.3 million per Dane. In the EU, the average Dane's financial net wealth is currently in first place, followed by the Netherlands, Sweden, Luxembourg and Belgium. The EU-average is approximately kr. 450,000.

International investment position back to pre-corona level

Denmark's international investment position (IIP) took a big dive in 2020, but has increased by kr. 170 billion since the beginning of the year and amounts to kr. 1,765 billion at the end of the first quarter of 2021, corresponding to 77 per cent of GDP. Denmark's IIP is thus back to the pre-corona level.

Working Paper: Securitization and House Price Growth

From 2000-2006 US house prices and mortgage credit grew while the relative cost of mortgage credit fell particularly for privately securitized mortgages suggesting a credit supply expansion. This paper explores two (credit supply) shocks: an increased inflow of global savings into the US, and innovations in the securitization of mortgage credit. Only innovation in securitization matches mortgage market dynamics.

Working Paper: The Portfolio Balance Channel of Quantitative Easing in a DSGE Model with Financial Frictions

Investors who arbitrage between long term government debt and corporate debt expand the Portfolio Balance Channel in that the effects of Quantitative Easing (QE) spill over to the overall cost of corporate borrowing. I find that overall the Federal Reserve’s second round of QE boosts output between 0.5 - 1.7%.

Fewer mortgage bonds change interest rates in 2021

The value of mortgage bonds, which are subject to refinancing over the course of a year, has fallen from approximately kr. 1,047 billion in 2013 to kr. 453 billion in 2021. Fewer borrowers are thus facing changed interest payments on their mortgages in 2021. The decline is primarily driven by the fact that there are fewer bonds behind the short-term adjusta-ble-rate loans (F1 loans).

Female company owners pay higher interest rates

Using microdata, the analysis demonstrates that female company owners pay higher interest rates on corporate loans than their male counterparts. The interest rate differential is both economically and statistically significant, and does not disappear when adjusting for relevant company and loan characteristics using sophisticated statistical methods.

Working Paper: Female business owners pay higher interest rates on corporate loans

Female owners of small and medium-sized enterprises, on average, pay almost 1 percent higher interest rates than male owners. Firm and loan characteristics explain most of this difference. Nonetheless, a 26 basis point gap cannot be explained, suggesting that female business owners tend to leave a disproportionate share of money on the table during negotiations with credit institutions.

Mortgage debt in holiday homes grew during corona

In the past year, Danes have increased their mortgage debt with collateral in holiday homes by kr. 6.9 billion to kr. 90.6 billion. This is an increase of 8.3 per cent, which is primarily driven by an increase in fixed-rate debt. In comparison, mortgage debt with collateral in owner-occupied housing has increased by 3.6 per cent the past year. Mortgage debt with collateral in holiday homes now amounts to 5.2 per cent of homeowners' total mortgage debt of kr. 1,757 billion.

New head of the Financial Stability department

​Danmarks Nationalbank has appointed Peter E. Storgaard the new head of the Financial Stability department.

Outlook for the Danish economy - Danish economy is heading for a mild boom

The reopening of the Danish society is in full swing characterised by high private demand. Growth is expected to continue, and there are already large price increases in the housing market as well as signs of bottlenecks building up. The Government should prepare tightening fiscal policy more than planned, and there is a need for measures to strengthen robustness in the housing market.

Central bank cooperation and instant payments

Central banks continue cooperation to improve instant cross-border payments across multiple currencies.

Strong growth ahead for the Danish economy in the coming years

​The reopening of the Danish economy is in full swing. Overall activity has all more or less recovered to pre-pandemic levels, and the Danish economy is supported by a strong expansion in private demand. This is the conclusion drawn by Danmarks Nationalbank in a projection for the Danish economy, in which the gross domestic product (GDP) is forecast to increase by 3.3 per cent. In 2022 and 2023, GDP is expected to grow by 3.7 per cent and 2.2 per cent.

Central government borrowing strategy in the 2nd half of 2021

The target for sales of domestic government bonds in 2021 is lowered to kr. 110 billion from kr. 125 billion. The on-the-run issues remain unchanged and focus will continue to be on issuance in the 2-year and 10-year nominal bonds. Issuance of short-term papers is increased and the total outstanding amount of T-bills and commercial papers is expected to be kr. 95 billion by the end of 2021, of which up to kr. 60 billion in T-bills.

Bank for International Settlements (BIS) and Nordic central banks launch Innovation Hub Nordic Centre

Governor Signe Krogstrup's presentation for Finansforeningen on Fixed-exchange rates regimes and Quantitative Easing

Governor Signe Krogstrup held a presentation for Finansforeningen (CFA Society Denmark) on 11 June 2021 on the subject: ‘Monetary policy is not easy: Fixed-exchange rate regimes and Quantitative Easing’. The presentation provides the background for central banks use of unconventional monetary policy tools, including negative policy rates and quantitative easing. Following, it is discussed how the Danish fixed-exchange rate regimes is affected by the widespread use of unconventional monetary policy by central banks. Finally, possible side effects of unconventional monetary policy are examined. (The presentation is in Danish only).

Flood risk can potentially affect a large share of credit institutions' exposure

Danish credit institutions have substantial exposures collateralised by real estate at risk of flooding in future climate scenarios. These exposures could amount to kr. 200 billion by the end of this century. Some credit institutions have a large share of the exposures at risk concentrated in the same geographical area.

The pension sector adds to equity investments

The insurance and pension sector is increasingly buying equities. The sector's equity holdings rose from constituting 35 per cent of its total investments in January 2018 to 42 per cent in March 2021. In the same period, the share of bonds was reduced from 56 to 51 per cent, while foreign investment fund certificates etc. decreased from 9 to 7 per cent.

Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2021

​In May 2021, the foreign-exchange reserve increased by kr. 17.2 billion to kr. 455.9 billion.

Record-breaking firm dividends despite corona

Notwithstanding the banks, Danish listed firms paid out almost kr. 38 billion worth of dividends to their shareholders during the first four months of 2021. That is a new record. Banks' dividends were still limited compared to the years before 2020.

Decline in foreign ownership of mortgage bonds

For a number of years, foreign investors have bought large amounts of Danish mortgage bonds and today they own more than a quarter of the entire Danish mortgage bond market. However, since last term month, foreign investors have sold both fixed and variable rate mortgage bonds (incl. adjustable rate mortgage bonds, ARM) for a total of kr. 19 billion. A significant part of the amount is due to the maturities of ARM bonds.

Danmarks Nationalbank's comments on The Economic Council's discussion paper, Spring 2021

Danmarks Nationalbank's comments on The Economic Council's discussion paper, Spring 2021.

Interest-only mortgage debt at kr. 800 billion

In the first four months of 2021, kr. 30.3 billion was added to the Danish homeowners' total mortgage debt. Interest-only debt accounts for two thirds of the increase. Out of homeowners' total mortgage debt of kr. 1,757 billion, kr. 800 billion is now interest-only debt.

Financial stability - Build-up of risks in credit institutions

The banks are ready for the ongoing economic recovery: Their lending to hard-hit corporations is limited, and provisions have been made to handle losses. But the booming housing market gives cause for concern. Higher down payment requirement and amortisation requirement for highly indebted homeowners are among the measures that should be considered in order to limit vulnerability in connection with a subsequent drop in house prices.

Build-up of risks in credit institutions

​There are signs of increased risks in the institutions' housing lending. Danish homeowners' gross debt relative to their income is among the highest in the world, and lending to homeowners is still increasing. The credit institutions have also granted more home buyers deferred amortisation. In 2020, loans with deferred amortisation constituted just under half of all new lending to highly indebted homeowners.

A few systemic banks have capital shortfall in severe recession

A stress test of the banking sector shows that a few systemic banks fall short of their risk-based capital requirements in a severe recession scenario. Most banks are generally better capitalised than previously, but they are challenged in the stress test by weaker earnings, which means they are less resilient under stress. The stress test also shows that the banks must continuously ensure sufficient surplus relative to the MREL.