Inequality and savings

This memo studies the impact of demographic shifts and income inequality on the evolution of savings rates in Denmark, and compares with evidence from the US. Income inequality has followed similar trends in Denmark as in the US, and savings rates vary in a similar way over the life cycle and along the income distribution in the two countries. Changes in savings behavior play an important role for the evolution of total savings.

Status on the Danish economy, green government bonds and responsible investing of the FX reserve

On 29 September 2022, Governor Signe Krogstrup gave a presentation at Nykredit Capital Markets Day. She spoke about the latest inflation development and monetary policy response as well as Danmarks Nationalbank’s experience with issuing green government bonds and responsible investing of the FX reserve.

Large regional differences in loan-to-value ratios

Loan-to-value ratios for Danes' homes (sum of bank and mortgage loans relative to the value of the home) vary considerably across the country. The loan-to-value ratio is a measure of how exposed homeowners are to falling prices in the housing market.

Governor Per Callesen's speech at Nykredit Capital Markets Day for Banks 2022

On September 28, Governor Per Callesen held a presentation at Nykredit Capital Markets Day 2022. He presented the recent development and risks on the Danish housing market and gave his assessment of the effect on the first-year payment for different reforms (The presentation is in Danish only).

Foreign countries hold fewer Danish mortgage bonds

This year, foreign investors have net sold 30-year Danish convertible mortgage bonds for kr. 55 billion. The foreign share of ownership has thus fallen from 38.1 per cent in January to 36.1 per cent in August. The value of the 30-year bonds fell by kr. 87 billion in the same period, e.g. due to conversion of mortgage loans.

Assistant Governor Thomas Harr's speech for Finansforeningen

On 27 September, Assistant Governor Thomas Harr gave a presentation for Finansforeningen on the subject of inflation. In the presentation, he argues why inflation is likely to remain high short-term, why inflation will drop medium-term and why there are substantial differences to the situation in the 1970s. (The presentation is in Danish only).

Energy renovations of houses will pay for themselves by the heating bill – not by the sales price

The majority of energy renovations of houses cost more than they increase the sales price. This holds particularly in the metropolitan area and Aarhus, but also in a number of rural areas. Renovations that increase the sales price more than the renovation costs reduce CO2 emissions only marginally and are typically only possible for houses in and around the medium to large towns and more generally in the geographically more central parts of the country. (Memo available in Danish only).

Working Paper: Opportunities and risks in the residential sector during a green transition: House prices, energy renovations and rising energy prices

Higher energy prices reduce sales prices of houses without district heating in some rural areas. Most energy renovations do not increase sales prices beyond their costs. Those that do have little impact on CO2 emissions, are cheap, and are typically only possible for houses located in and around towns and mid-sized cities and more generally in the geographically more central parts of Denmark.

Outlook for the Danish economy - The pressure on the economy should be eased

Inflation is at 40-year high, and central banks across the world are currently tightening monetary policy. Together, these factors are dampening growth prospects for the Danish and international economies for the coming years. However, the combination of high inflation and a very tight Danish labour market carries the risk of self-reinforcing wage and price increases. Therefore, fiscal policy should help reduce the demand pressure as quickly as possible.

Inflation must be tamed

​Gas, electricity and food prices have risen significantly. This is contributing to current inflation reaching a 40-year high in Denmark and many other places in the world. Danmarks Nationalbank's new projection for the Danish economy estimates that inflation will be 8.6 per cent this year, 4.3 per cent in 2023 and 1.7 per cent in 2024.

Monetary and financial trends - Tighter monetary policy has made financing more expensive

High inflation and rising inflation expectations have brought about a need to tighten monetary policy for central banks worldwide. Danmarks Nationalbank has followed the ECB's interest rate hikes in accordance with the fixed exchange rate policy. The tightening of monetary policy and developments in the financial markets have increased loan rates for Danish households and companies.

Working Paper: What do negative policy rate economies have in common?

Five economies, Denmark, the euro area, Switzerland, Sweden and Japan, have conducted negative interest rate policies. In this paper, we document that these economies have high levels of public as well as private savings, not matched by high investments, relative to other high-income non-NIRP OECD economies.

Governor Per Callesen’s speech at Human House and Business Fredericia

On 15 September, Governor Per Callesen held a presentation at Human House and Business Fredericia. In his presentation, he gave his view on the Danish economy and which driving forces that will affect the economy in the short and long term. (The presentation is in Danish only).

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit and the lending rate by 0.75 percentage point with effect from 9 September 2022. In addition, the discount rate is raised by 0.65 percentage point.

Governor Signe Krogstrup's speech at Finance Denmark's Director Conference 2022

On 5 September, Governor Signe Krogstrup held a presentation at Finance Denmark’s Director Conference 2022. She gave her view on some of the global challenges we face, both today and in the longer term. She zoomed in on the latest inflation development and the monetary policy response, before giving some remarks on the development of the Danish economy. (The presentation is in Danish only).

Unlisted shares have outperformed listed this year

In the second quarter of 2022, the insurance and pension fund sector has had a return of 1 per cent on its unlisted shares. At the same time, the sector has lost 10 per cent on its listed shares. Unlisted shares account for 50 per cent of the sector’s total investment in shares and other equity.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2022

​In August 2022, the foreign-exchange reserve decreased by kr. 1.6 billion to kr. 531.7 billion.

Governor Lars Rohde retires

(Mis)matching in the post-pandemic Danish labour market

Since the beginning of the pandemic, matching in the Danish labour market seems to have become less efficient: a given number of job seekers and vacancies result in fewer matches than previously. This economic memo studies mismatch between job seekers and vacancies as a potential explanation. Mismatch was an important driver during the great financial crisis, but much less so during the pandemic.

Assistant Governor Thomas Harr's speech at Danske Asset Management's client seminar

On 1 September, Assistant Governor Thomas Harr gave a presentation for Danske Asset Management’s clients on the subject of inflation. In the presentation, he argues why inflation is currently so high in the US, the euro area and Denmark and where it is heading. (The presentation is in Danish only).

Regulatory adjustments are to contribute to more effective capital buffers

The interaction between requirements limits capital buffer usability in Denmark. Financial regulation should therefore be adjusted, so that banks are not allowed to use the same capital to meet both capital buffer requirements and other requirements at the same time. This will improve the usability of capital buffers.

Still potential of loan conversion

In 2022, many borrowers have used the higher interest rates and thus lower prices on the underlying bonds to convert their fixed-rate mortgages. One reason for this is to cut a chunk of their remaining debt.

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 27 September. The TIBER-EU Cyber Team will introduce the newly published TIBER-EU Purple Teaming Best Practices. Additionally, the usage of leg-ups in TIBER tests will be presented and discussed. Guidance on Targeted Threat Intelligence deliverables will also be introduced. Discussions and experience sharing will be facilitated. The initiative reflects the TCT’s wishes to strengthen the crucial dialogue with and between TI and RT providers.

Working Paper: Segmentation of the Housing Market with Internet Data: Evidence from Denmark

In this paper, we introduce a novel tool for housing market analysis developed on the basis of online listings data from the largest real estate listing site in Denmark. The tool uses a combination of machine learning techniques to provide a data-driven segmentation of the housing market into meaningful submarkets that differ from administrative classifications. We demonstrate how the tool can support monitoring and research of underlying housing market developments in Denmark.

Opening of 0.10 per cent inflation-linked bullet loan 2034

On 14 September 2022, 0.10 per cent inflation-linked government bond with maturity on 15 November 2034 will be opened (ISIN: DK0009924458). The government bond will be linked to the Danish consumer price index, CPI. The new bond will replace the 0.10 per cent inflation-linked bond 2030 as key on-the-run issue. After this the central government can conduct buy-backs in 0.10 per cent inflation-linked bullet loan 2030.

The rise in cash holdings of Danish companies

We show that the cash holdings of a typical Danish company have increased after the 2007/08 financial crisis. Especially the cash holdings of small companies have seen a strong increase. The increase in cash holdings coincides with a decrease in the use of loan financing for the typical company, which suggests a decrease in loan demand or supply to these companies. The development of cash holdings is also driven by a strong selection effect: companies with low cash holdings have been especially likely to exit during and after the financial crisis.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2022

​In July 2022, the foreign-exchange reserve decreased by kr. 0.5 billion to kr. 533.4 billion.

Interest rate increase

​Danmarks Nationalbank raises the current-account rate, the rate of interest on certificates of deposit and the lending rate by 0.50 percentage point with effect from 22 July 2022.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2022

​In June 2022, the foreign-exchange reserve decreased by kr. 0.2 billion to kr. 533.8 billion.

Danes’ financial wealth decreased by kr. 183 bn.

The Danes’ financial wealth, which is the difference between financial assets and debt, fell by kr. 183 billion in 1st quarter. This corresponds to a reduction of kr. 66 thousand for an average household. The decline comes after almost two years of economic upturn on the financial markets. Since 1st quarter 2020 the financial wealth has increased by kr. 2,409 billion.

The market for green bonds is booming

Since the first green bond was issued in Denmark in 2015, the market has risen to kr. 169 billion as of May 2022.

Steep increase in interest rates on new mortgages

The interest rate on the Danes’ new mortgage loans has increased. The average interest rate on mortgage loans disbursed in May is 1.99 per cent (excl. administration fee). The interest rate has more than doubled since the beginning of the year where new loans were disbursed at 0.88 per cent. The development reflects large interest rate increases, which have defined the first five months of 2022.

New types of digital money

The money we currently use in Denmark is well-functioning, and new types of digital money are likely to gain a foothold if they offer benefits for citizens and society. Danmarks Nationalbank is working to ensure access to secure and efficient money and payment solutions that are available to the whole society, also in the future. This applies regardless of the solution, provider or technology that may form the basis of new types of digital money. Danmarks Nationalbank is planning to organise a conference on new types of digital money in the 4th quarter of 2022.

Governor Signe Krogstrup's presentation on FRIC'22 Conference on Financial Frictions at CBS

On 10 June 2022, Danmarks Nationalbank Governor Signe Krogstrup gave a presentation on the FRIC'22 Conference on Financial Frictions at CBS. Signe Krogstrup touched upon the topics of climate change and green government bonds.

Financial stability - Rising interest rates and prices can challenge banks’ customers

Housing lending is still driven by loans with deferred amortisation, and variable interest rate have become more prevalent. An amortisation requirement for homeowners with a high loan-to-value ratio may contribute to a more resilient housing market. The ability of some companies to service their debt is put under pressure by higher energy and commodity prices and an interest rate hike. (Appendix 1 has been revised 16. June 2022).

Rising interest rates and prices can challenge banks' customers

Central government borrowing strategy in the 2nd half of 2022

The target for sales of domestic government bonds and short-term loan programmes in 2022 is kept at kr. 65 billion and kr. 35 billion, respectively. The on-the-run issues remain unchanged and focus will continue to be on issuance in the 2-year and 10-year nominal bonds including the green bond. In September, a new inflation-linked government bond will open.

Rising interest rates result in value losses

The value of the insurance and pension fund sector’s investments fell by kr. 273 billion in the first quarter of 2022. This is a larger loss than in the first quarter of 2020, which marked the start of the corona crisis. The losses in the first quarter of 2022 are primarily attributable to rising interest rates, while the market value loss during the corona crisis was largely driven by significant stock market declines.

Governor Signe Krogstrup's presentation to Danish institutional customers at Nordea

On 2 June 2022, Danmarks Nationalbank Governor Signe Krogstrup gave a presentation to Danish institutional customers at Nordea on the current situation in the Danish economy. In addition, she touched on current issues in the financial sector, including the green transition and the development of digital currencies. (The presentation is in Danish only).

Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2022

​In May 2022, the foreign-exchange reserve decreased by kr. 1.1 billion to kr. 534.0 billion.

Explaining the Danish-German sovereign yield spread

This economic memo investigates the drivers of the Danish-German 10-year yield spread, which has widened 25 basis points since January 2020. The widening is found to be driven mainly by larger collateral scarcity of German sovereign bonds due to the ECB’s significant bond purchases and a substantial increase in duration on callable Danish mortgage bonds.

Fewer mortgage bonds with low interest rates

From January to April, there has been a reduction in the value of 30-year fixed-rate mortgages with low interest rates as a result of a significant rise in the market interest rates, which has given borrowers an opportunity to cut a part of their outstanding debt by converting to a new mortgage loan with a higher interest rate. Thus, the value of 30-year fixed-rate mortgage bonds with an interest rate of 1.5 percent or less has fallen by kr. 95 billion. The value of bonds with a higher interest rate has increased by kr. 79 billion, corresponding to a net decrease in the total value of 30-year bonds of kr. 16 billion.

Every third opt out fixed-rate on conversion

39,400 homeowners with fixed-rate mortgage loans have used the opportunity for conversion created by rising interest rate in the first quarter of 2022. In total, converted mortgage loans amounts to kr. 51 billion. At the end of 1st quarter, 779,000 homeowners had a convertible mortgage loan with a coupon up to 1.5 per cent amounting to kr. 717 billion.

Lars Mayland Nielsen is leaving Danmarks Nationalbank to become CEO of LD Pensions

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.

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.