Direct investments declined in 2018

After several years of progress, outward direct investments from Denmark fell by kr. 60 billion in 2018. The inward direct investments to Denmark fell by kr. 11 billion.

Foreign Exchange and Liquidity and Monthly Balance Sheet, January 2019

​In January 2019, the foreign-exchange reserve decreased by kr. 3.5 billion to kr. 455.5 billion. The decrease reflects Danmarks Nationalbank's net sale of foreign exchange for kr. 3.3 billion, and the central government's net repayment of foreign debt for kr. 0.1 billion, cf. table 1.

Nordic-Baltic financial crisis simulation

​The Nordic and Baltic financial stability authorities have conducted a joint financial crisis management exercise. The exercise was held from 22 to 23 January 2019 and involved 31 authorities from Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden as well as relevant European Union authorities. A staff member of the International Monetary Fund observed the simulation.

Bad year for investors in investment funds

2018 has been a bad year for investors in Danish investment funds. The investment funds yielded a negative return of 5.7 per cent for their investors. The losses affected most investors and most of the types of investment funds, they have invested in.

Danish government borrowing and debt 2018

Denmark's government debt policy has been characterised by four years of very low funding costs and declining debt. In 2018, the central government debt fell to 19 per cent of GDP. The central government saves considerable interest costs by granting on-lending and buying bonds to finance social housing. At the same time, it contributes to supporting the market for government securities. Market liquidity is also supported by the central government's activity in the secondary market and by a well-functioning primary dealer model.

Appointment of Head of Economics and Monetary Policy

​Danmarks Nationalbank has appointed Signe Krogstrup as the new Assistant Governor and Head of Economics and Monetary Policy with effect from 1 June 2019.

Working Paper: Macro-financial linkages in a SVAR model with application to Denmark

We analyse macro-financial linkages in the Danish economy by estimating a structural VAR model. We construct a new financial condition index for the Danish economy. We find that financial conditions stimulated GDP before the financial crisis and deepened the subsequent recession. In recent years, financial conditions have contributed to the expansion in Denmark.

Large purchase of foreign portfolio assets in 2018

In 2018 Danish investors purchased foreign portfolio shares and bonds totalling kr. 115 billion; the largest purchase since 2014. The foreign portfolio assets amount to kr. 3,020 billion corresponding to 138 per cent of the gross domestic product, GDP.

Dividends and share buy-backs for kr. 104 billion in 2018

In 2018, Danish listed companies disbursed kr. 104 billion to their shareholders through dividends and share buy-backs. The dividends amounted to kr. 63 billion and share buy-backs to kr. 41 billion.

Lower credit growth in growth areas

In 14 of the Danish municipalities with the highest price increases for owner-occupied homes (growth areas), mortgage lending to households was lower in 2018 compared with the previous year.

Large municipal differences in instalments

Household mortgage loan instalments averaged kr. 23,500 per borrowed million in 2018. The average figure covers large municipal differences in instalments. The differences have grown in recent years.

Working Paper: Housing wealth effects and mortgage borrowing

We investigate the co-movement of house prices, home equity extraction and consumption in Denmark. Using survey data we develop a measure for unanticipated house price changes which can be merged on Danish administrative data. Thus, we can show how home owners who experience an unexpected positive house price shock extract home equity and increase spending. We find that the effect is driven by home owners who could potentially benefit from refinancing existing mortgages. This indicates that the wealth effect is intimately connected to the functioning of the mortgage market.

Can texts in annual reports predict whether a firm will enter into distress?

Normally the numerical financial data of a firm is scrutinised when the soundness of the firm is assessed. But texts in the annual reports may also contain important information that can help to predict distress events.

Text-based machine learning improves distress modelling

Machine learning methods make data modelling more flexible and enable the use of unstructured data, which conventional statistical methods do not permit to the same extent. If such methods are used to include auditors' reports and managements' statements from firms' annual reports when calculating their probability of distress, the accuracy of the calculation is increased considerably. Especially the auditors' reports contribute useful information.

The krone rate has modest impact on the current account

The analysis examines the extent to which the krone exchange rate affects the current account. The krone rate turns out to have only a modest impact on the current account and it comes with a lag. Although globalisation has increased trade with the rest of the world and has resulted in production chains being split across countries, the impact of the krone rate to the current account has been stable over time. In the long term, the current account is driven by factors other than the krone rate.

Intra-EU labour mobility dampens cyclical pressures

The enlargements of the EU led to large labour migration flows from Eastern to Western Europe which expanded the labour force considerably in several of the countries currently experiencing labour shortages. The analysis indicates that when the unemployment gap narrows by 1 percentage point, inflows of EU labour increase the labour force in an EU country by 0.1 per cent p.a. This has a certain countercyclical impact. Large income differences exist between Eastern and Western Europe. As a result, Western European firms are still able to attract EU labour during boom periods.

Opening of 0.50 per cent bullet loan 2029

Loss on Danish stocks in 2018

Following several years with high returns, the return from Danish listed stocks was minus 4.3 per cent in the first 11 months of 2018. The main reason is losses on the 25 most traded stocks (the C25 index), which constitute around 85 per cent of the total market cap.

Foreign investors sold Danish portfolio shares

Since the beginning of the year foreign investors have sold Danish portfolio stocks for kr. 73 billion. This corresponds to a little over 5 per cent of the foreign holdings at the beginning of the year. For instance they have sold bank stocks amounting to kr. 20 billion of which kr. 2 billion in November.

Foreign Exchange and Liquidity and Monthly Balance Sheet, December 2018

​In December 2018, the foreign-exchange reserve decreased by kr. 9.9 billion to kr. 457.4 billion.

Fewer new risky mortgage loans

In recent years, the proportion of fixed-rate mortgage loans and loans with instalments have increased whereas the proportion of loans with variable interest rate and without instalments has decreased. This also applies in 2018 where the development has been further supported by new guidelines from the Danish Ministry of Industry, Business and Financial Affairs as of 1 January 2018.

The financial assets behind pensions grow

The financial assets managed by Danish insurance companies and pension funds reached kr. 4,182 billion at the end of the 3rd quarter of 2018. It corresponds to approximately two times Denmark's gross domestic product, GDP, and more than a doubling over the past ten years. The increase is among other things due to the Danish pension system still being in the build-up phase, i.e. pension contribu-tions exceed pay-outs. In addition there have been large returns in recent years.

Business deposits grow despite negative interest

In October 2018 Danish sole proprietors and non-financial corporations increased their bank deposits to kr. 409 billion. This is an increase of 7 per cent compared to the year before. At the same time the share of business deposits with a negative interest increased from 43 to 55 per cent.

Denmark's international investment position rose in the 3rd quarter 2018

Denmark's international investment position, IIP, rose by kr. 56 billion in the 3rd quarter of 2018 to kr. 1,431 billion. It has more than doubled over the last three years and now amounts to 65 per cent of the gross domestic product, GDP.

Working Paper: Firm-level Entry and Exit over the Danish Business Cycle

We use micro level registry data to study firm dynamics in Denmark. Similar to findings for the US, young firms are more likely to exit and to grow faster over time but Danish firms also take longer to reach maturity. We do not observe any signs of a slowdown in the entry rate or long-run scarring effects on firms entering in recessions. However, fluctuations in the entry rate have persistent effects on the long-run aggregate volume of value added.

Tests are to increase cyber resilience in Denmark

Danmarks Nationalbank and the financial sector have joined forces to establish TIBER-DK, a programme for testing the most important Danish banks and essential parts of the financial infrastructure. The aim is to increase cyber resilience and promote financial stability.

Danish Government Debt Policy, Strategy 2019

The target for sales of domestic government bonds and T-bills in 2019 is kr. 65 billion and kr. 30 billion, respectively. This is unchanged from 2018. Issuance will be focused in the 2- and 10-year maturity segments. On 23 January, a new 10-year bond with maturity in 2029 will be opened. A new 2-year bond with maturity in 2022 will also be opened in the 1st half of the year.

New financing of social housing strengthens the market for Danish government securities

In 2018, the central government has purchased all government-guaranteed mortgage bonds issued for financing social housing. The government will also bid for such bonds in 2019. The purchases allow the central government to build up series of liquid government securities and maintain a broad range of on-the-run issues. The government’s interest rate risk is independent of the coupon and maturity of the bonds purchased.

Foreign Exchange and Liquidity and Monthly Balance Sheet, November 2018

​In November 2018, the foreign-exchange reserve decreased by kr. 0.3 billion to kr. 467.3 billion.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper autumn 2018

Speech by governor Lars Rohde at the annual meeting of Finance Denmark 2018

Speech by Governor Lars Rohde at the annual meeting of Finance Denmark 3 December 2018.

Working Paper: Consistency between household-level consumption data from registers and surveys

We explore the consistency at household-level between register-imputed and survey-based consumption figures for Denmark over the period 2002-15. We find that the marginal propensities to consume out of income estimated on the basis of register data are not significantly different to those estimated on the basis of survey data.

MREL for mortgage credit institutions: necessary and inexpensive

Despite the introduction of a minimum requirement of 8 per cent of total liabilities and own funds, the requirements for some SIFIs remain too low to enable recapitalisation and continuation in a crisis situation. A risk-sensitive MREL for mortgage credit institutions is necessary in order to ensure that there are sufficient funds to resolve them in a crisis situation. The cost of introducing an MREL for mortgage credit institutions is low. Converted into an increase in administration margins, it corresponds to an increase of less than 1 basis point on average.

Good chance that Christmas shopping will be contactless

In the 3rd quarter, the Danes made 251 million contactless card payments, corresponding to 61 per cent of all card payments in Danish stores. The proportion of contactless payments is increasing, and compared to last year there has been an increase of 24 percentage points. Accordingly, there is a good opportunity that this year's Christmas shopping will be contactless.

Medium-sized banks are expanding in growth areas

The medium-sized banks have expanded their activities in Aarhus and Copenhagen by opening branches and increasing their lending for housing purposes substantially. While the number of bank branches in Denmark has generally been falling for several years, the medium-sized banks have opened an additional 19 branches since 2012, most of them in growth areas such as Aarhus and Copenhagen.

Low interest rates and ample lending capacity put pressure on credit standards

Overall, lending growth is limited, but the medium-sized banks have opened new branches and substantially increased lending for housing purposes in growth areas. It is important for the banks to allow for potential risks associated with entering into new market areas and to refrain from using credit standards as a competition parameter. Money laundering problems have spelled out the need for increased focus on measures to combat illegal activities. Efficient anti-money laundering measures call for stronger cross-border cooperation.

The largest banks satisfy capital requirements in stress test

Danmarks Nationalbank's semi-annual stress test of the Danish banking sector shows that the largest banks satisfy all capital requirements in a severe recession scenario. The analysis also describes Danmarks Nationalbank's approach to making the adverse scenario countercyclical.

Low interest rates and ample lending capacity put pressure on credit standards

​Following a long period of low interest rates and accommodative financial conditions, there is a basis for banks to assume greater risks when granting loans. That is the conclusion in Danmarks Nationalbank's Financial Stability analysis.

Greenlandic economy - Strong growth and labour shortages

Economic growth in Greenland is high these years, and this is set to continue. The main reasons are high fish prices and larger catches. Fisheries are mainly sustainable. Unemployment is low and the risk of overheating high. Consequently, there is a need for tight fiscal policy, and large-scale investments in airports should preferably be implemented gradually. Long-term economic development requires a broader business sector, a labour force with higher qualifications and increased productivity.

Fixed rate mortgage bonds are popular abroad

Foreign investors continue to buy fixed rate mortgage bonds. In the last three months foreign investors have bought fixed rate mortgage bonds for kr. 11 billion. Foreigners now own 31 per cent of these bonds.

Fewer mortgage bonds are refinanced

During 2018, mortgage bonds totaling kr. 613 billion have been refinanced. The need for refinancing is expected to be lower in 2019, when mortgage bonds totaling kr. 539 billion mature.

Increased credit growth to Danish businesses

After several years of annual credit growth around zero, total lending by banks and mortgage institutions to Danish businesses has increased by 2.9 per cent so far in 2018. This is the largest increase over the first 10 months of the year since 2008. However, credit growth was several times larger in the years preceding the financial crisis.

Banks' business models determine their interest margin

In October 2018, the difference between large and medium-sized banks' lending and deposit rates, their interest margins, was around 1 percentage point. The medium-sized banks' interest margin was close to 3.5 per cent whereas the interest margin of large banks was around 2.6 per cent.

The banking union is not centred round joint liability

Neither the banking union nor the Economic and Monetary Union, EMU, is centred round joint liability. That is why concerns about ”footing the bill” for bank rescues in other member states should not be the key issue in an assessment of the pros and cons of Danish participation.

Speech by Governor Lars Rohde at the Macroprudential Policy Conference

Speech by Governor Lars Rohde at the Macroprudential Policy Conference in Copenhagen, 19 November 2018.

Impacts of 2016 guidelines on mortgaging of homes

Since the financial crisis, there has been increased focus on making the financial sector more resilient. One of the tools for achieving this objective is the Danish Financial Supervisory Authority's guidelines from 2016 on prudent credit assessment when granting housing loans in growth areas. These guidelines have made borrowers in growth areas borrow less than borrowers outside the growth areas, but the impact is modest. The modest impact may be due to slow implementation, scope for deviation from the guidelines and the fact that the guidelines were in line with best practice in the institutions.

Faroese economy - Mounting pressures in the labour market

The Faroese economy is booming, and labour market pressures are high. Fiscal policy should dampen demand in order to mitigate the risk of the economy overheating. Furthermore, the framework of local government finances should be tightened to ensure that the conditions are in place for fiscal policy to have a stabilising effect on the economy in future. The booming economy means that now is a good time to make public finances ready to tackle the higher expenditure associated with the ageing population in the coming decades.

Working paper: Predicting distresses using deep learning of text segments in annual reports

We develop a probability-of-default model for Danish corporate firms based on deep learning that employs the managements' statements and auditors' reports of the annual reports in addition to the numerical financial variables. Our results show that the text segments provide a statistically significant enhancement of the prediction accuracy compared to models that do not employ the text segments, in particular for large firms. Our results furthermore show that the auditors' reports contain more relevant information than the managements' statements.

Small decline in direct investments this year

Both outward and inward direct investments have declined slightly in the three first quarters of 2018. They were reduced by kr. 26 and 11 billion respectively after a number of years with progress in outward investments.

While the sun is shining, prepare for a rainy day

The financial crisis ten years ago brought large costs to society and – as a consequence – an increase in policymakers’ focus on risks to the financial system as a whole and how to prevent and mitigate them, i.e. macroprudential policy. This paper gives an overview of key features of the Danish financial system and points to current macroprudential policy challenges. The paper sets the stage for a conference on macroprudential policy on 19 November 2018 that Danmarks Nationalbank hosts together with the European Department of the International Monetary Fund (IMF), and the Center for Financial Frictions (FRIC) at Copenhagen Business School (CBS).

Foreign Exchange and Liquidity and Monthly Balance Sheet, October 2018

​In October 2018, the foreign-exchange reserve decreased by kr. 298 million to kr. 467.6 billion.

Working paper: Consumption Heterogeneity: Micro Drivers and Macro Implications

This paper aims to test the microfoundations of consumption models and quantify the macro implications of heterogeneity in consumption behavior. We propose a new empirical method to estimate the sensitivity of consumption to permanent and transitory income shocks and apply it to administrative data from Denmark. We find that households who stand to lose from an interest rate hike are more sensitive to income shocks than those who stand to gain. This interest rate exposure channel is potentially more important than the standard intertemporal substitution channel.

Increase in passive investment funds

In the first three quarters of the year, net invest-ments in passive equity funds totalled kr. 13.9 billion. In comparison, investments in active equity funds amounted to kr. 1.3 billion.

Publication times change as a result of Target2-Securities connection

​As from today, publication of the daily net position and monthly foreign exchange reserve figures will take place at 5:00 pm instead of 4:00 pm as has so far been the case. The time is changed because of the Danish krone's connection as from today to Target2-Securities, T2S.

Working paper: Can machine learning models capture correlations in corporate distresses?

We implement a regularly top-performing machine learning model and find that the added complexity in the model does not imply that the model is better at capturing correlation in corporate distresses compared to traditional distress models. Instead, we propose a frailty model, which allows for correlations in distresses. This model demonstrates competitive performance in terms of ranking firms by their riskiness, while providing accurate risk measures of a corporate loan portfolio.

Moderation of capital flows since the financial crisis

Capital flows between Denmark and abroad decreased after the financial crisis erupted in the fall of 2008. The capital flows also decreased globally.

Increasing bond issues financing F5 mortgages

By end-September 2018, bonds totalling kr. 604 billion were issued to fund F5 mortgages. This is more than a twofold increase since September 2012. An F5 mortgage has an adjustable rate, which is fixed every five years. These bonds now fund more than half the Danish adjustable rate mortgages – and a third of adjustable rate mortgages and floaters combined (variable rate mortgage bonds).

Danes repay more on their mortgages

Danish households are increasingly repaying on their mortgage loans. Instalments paid on loans totaled kr. 26.2 billion in the first three quarters of 2018. The comparable figure for last year was kr. 24.3 billion; hence instalments have increased by 7.8 per cent.

Danes' money is primarily bank deposits

Nearly 95 per cent of the money that the private sector immediately can use for payments is ordinary bank deposits. The rest is cash. While cash payments occur physically, payments with deposits are digital, i.e. directly transfers from your own bank account to the recipient's account, for example by using debit cards or smartphones.

Banks' credit standards are unchanged for corporate customers

In Danmarks Nationalbank's lending survey for 3rd quarter 2018, banks report that credit standards are unchanged for corporate customers. At the same time, prices are decreasing due to the level of competition.

Foreign Exchange and Liquidity and Monthly Balance Sheet, September 2018

​In September 2018, the foreign-exchange reserve decreased by kr. 29 million to kr. 467.9 billion.

The costs of payments have fallen

The Danish Payments Council has surveyed the social costs of payments in Denmark. The social costs of payments between households and businesses have almost halved in seven years. No methods of payment have become more expensive, neither in physical nor in non-physical trade , and Danish households have access to several methods of payment with low social costs. The aggregate social costs for all types of payment were kr. 15.6 billion in 2016.

Danes deselect bonds

Households deselected to invest directly in Danish bonds during the past decade. In August 2018 investments in bonds amounted to kr. 35 billion corresponding to 4 per cent of the total stock of securities.

The pension sector holds kr. 1,879 billion worth of shares and bonds abroad

The pension sector holds foreign portfolio investments in shares and bonds worth kr. 1,879 billion. This corresponds to around kr. 400,000 for every adult Dane. The foreign portfolio investments account for a little more than half of the sector's total holdings of securities.

From foreign debt to large wealth in ten years

Since the financial crisis ten years ago Denmark has built up a considerable international net wealth position which amounted to kr. 1.390 billion in the 2nd quarter of 2018. This corresponds to 65 per cent of GDP and places Denmark as one of Europe's creditor nations. In contrast, Denmark had a foreign net debt corresponding to 8 per cent of GDP in the 2nd quarter of 2008.

Savings-eager danes

The financial net worth of Danish households – the difference between their financial assets and debt – increased by kr. 46 billion in the 1st half of 2018. This corresponds to an increase of kr. 17,000 for the average household, which now has a financial net worth of approximately kr. 1.42 million.

Ten years of fall in interest rates on mortgage loans

Interest rates on Danish mortgage loans have fallen since 2008. From an average interest rate including administration fee of close to 6 per cent in 2008 to under 2.2 per cent in August 2018. This is the lowest level since the beginning of the statistics in 2003.

30 per cent of mortgage loans are now with fixed rate and repayments

The proportion of fixed rate mortgage loans with repayments for owner-occupied housing and vacation homes reached almost 30 per cent by the end of August 2018. This is the highest share for this mortgage type since 2009.

Payments between households and firms have become significantly cheaper

​In 2016, social costs of payments between households and firms made up approximately kr. 11 billion, corresponding to 0.5 per cent of GDP. This is almost a 50 per cent reduction compared to 2009.

A balanced Danish economy during the boom

The Danish economy is now experiencing one of the longest periods of continuous growth. The upswing has been healthier and more balanced than it was in the mid-2000s, where the economy overheated. Although labour market pressures currently exist, they are not as strong as then. The economy may continue to expand without any imbalances, but experience also shows that it can overheat suddenly and violently.

Outlook for the danish economy - Boom with no signs of imbalances

The boom in the Danish economy continues, with robust growth and rising employment. Average growth in real GDP in 2017-18 is forecast at 1.8 per cent, with similar levels the next two years. Labour market pressures are mounting, and wage growth has accelerated a little. There is room for this in the economy. In good times it is important to prepare for the period after a cyclical reversal. Fiscal policy should contribute to a continually balanced upswing and should not stimulate demand further. Dampening of growth towards the end of the boom does not call for special economic policy measures.

Monetary and financial trends - September 2018

The krone has been stable, and it is the longest period without interventions in the currency market since adopting the fixed exchange rate regime in 1982. The ECB continues to normalise its monetary policy and expects to end net purchases of bonds after December 2018. In recent years, Danish households have shifted to loans with lower interest rate risk and loans with amortisation. This makes their disposable income less sensitive to interest rate changes.

Financial conditions are supporting the upswing

Housing and equity prices have increased significantly in recent years, while interest rates are exceptionally low. Based on a structural vector autoregressive model, these factors, combined with credit growth, are overall estimated to have contributed 0.3-0.5 percentage points per year to year-on-year GDP growth since 2016. In recent years, the contribution has been at its highest level since prior to the financial crisis in 2008. Financial conditions are expected to continue to stimulate economic growth during the 2018-20 forecast period.

The Danish economy is growing without signs of considerable imbalances

​The Danish economy is now experiencing one of the longest periods of continuous growth, and it has taken place without considerable imbalances building up. Since the spring of 2013, month after month more people have entered the labour market and unemployment has fallen. This has reinforced labour market pressures. Overall, employment has risen by 200,000 people, helped by previously adopted reforms and an influx of foreign labour.

The labour market is slowly tightening

The Danish labour market is faced with mounting capacity pressures, but is still not showing signs of overheating. The impression, based on a broad range of indicators, is one of balanced labour market developments so far during the upswing. Viewed in isolation, a change in the demographics of the working age population has reduced the labour supply since 2008. This emphasises the need for foreign labour to support the labour demand of the upswing.

Speech by Governor Per Callesen at Finance Denmarks Executive Conference

Speech by Governor Per Callesen at Finance Denmarks Executive Conference, 3 September 2018.

Cyber resilience in the financial sector

​Most of the key players in the financial sector assess that they have raised their levels of cyber resilience since 2016. A Few have not improved their level. That is the conclusion of a questionnaire survey which follows up a similar survey conducted in 2016.

Cyber resilience in the financial sector

Most of the core financial sector participants report that their levels of cyber resilience have been raised compared to 2016. A few core participants have not improved their level. That is one of the findings of a questionnaire survey conducted by Danmarks Nationalbank.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2018

​In August 2018, the foreign-exchange reserve decreased by kr. 174 million to kr. 467.9 billion.

Very low level of payment card fraud in shops, but change in pattern

In the 2nd quarter of 2018, the level of fraud with Danish payment cards in Danish shops was very low. The level has been low and stable over time. The number of frauds was 3,603 and amounted to kr. 3.2 million.

Today's delay of salary and transfer income payments

​The cause was a specific configuration setting in Danmarks Nationalbank's IT system Kronos.

Fixed rate mortgage bonds are attractive for foreigners

Foreign investors owned Danish fixed rate mortgage bonds for kr. 295 billion at the end of July 2018. This corresponds to 29 per cent of the total amount of the bonds. Foreign investors' interest in these bonds has been steadily increasing since the beginning of 2016 where they owned for kr. 154 billion, corresponding to 18 per cent.

Corporate bonds target foreign investors

In July 2018, Danish non-financial corporations had issued bonds for kr. 197 billion. Bonds issued in foreign currency amounted to 95 per cent and bonds issued in Danish kroner to 5 per cent. Compared to the total outstanding amount, bonds issued in euro have increased through the last decade. In July 2018, 65 per cent of the total amount was issued in euro compared to 50 per cent in July 2008.

MREL for mortgage banks reduces funding needs in times of crisis

Danmarks Nationalbank's calculations show that the mortgage banks' total funding need in periods of diving house prices will be smaller with an MREL than without an MREL. This is because an MREL will increase the mortgage banks' funding need in normal times, thereby ensuring that they are better prepared for periods of falling house prices and an increasing top-up collateral requirement. This will make the funding needs of the mortgage banks less sensitive to house price fluctuations.

Danmarks Nationalbank's new payment system for the financial sector has gone live

​This weekend Danmarks Nationalbank replaced the most critical payment system of the Danish financial infrastructure, and Monday 20 August is the first banking day with the new system.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2018

​In July 2018, the foreign-exchange reserve decreased by kr. 60 million to kr. 468.1 billion.

Private investors own one third of the total UCITS market

By the end of June, Danish private investors held UCITS investment fund shares corresponding to kr. 338 billion, or one third of the total UCITS market value of kr. 958 billion.

Danish investors bought both foreign shares and bonds

Danish investors have for a rather long time increased their stock of foreign shares. Hence, in the first half of 2018 they bought foreign shares etc. for kr. 59 billion. Since the beginning of 2016, they have bought shares etc. worth kr. 232 billion.

No return on stock market in first half-year

Danish listed stocks generated a return, including dividends, of 0 per cent during the first half of 2018. Overall, stock prices have fallen by 1.8 per cent. In contrast, the stock market decline offsets by large dividends.

History of bank lending and deposit rates

Since the second half of the 19th century, the average bank deposit and lending rates have varied considerably. However, common for both rates is that they peaked in 1980 at 12 and 20 per cent, respectively. Today, the two interest rates are at a record low level at close to 0 and 3.5 per cent, respectively.

The foreign exchange reserve in 200 years

For 200 years, one of Danmarks Nationalbank's main objectives has been to ensure stable prices – an objective which has been fulfilled through the fixed exchange rate policy since the 1980's. Historically, the fulfilment of the objective is reflected in the composition of the foreign exchange reserve.

The pension sector in a historical perspective

The assets managed by Danish insurance and pension organisations are rapidly approaching 200 per cent of Denmark's gross domestic product, GDP. Over the last 40 years, pension funds have grown into a major role in the financial sector and the Danish economy. A role, that in a historical perspective has been dominated by banks and mortgage institutions.

Competitors' behaviour affects the banks' credit standard

In Danmarks Nationalbank's lending survey 2nd quarter 2018, 6 out of 17 responding banks report that the behaviour of competitors has contributed to an easing of their credit standards for corporate customers.

Denmark's international investment position at kr. 1,239 billion

Denmark's international investment position, IIP, was kr. 1,239 billion at the end of the 1st quarter of 2018. This corresponds to 57 per cent of GDP. The IIP is the value of Danish foreign assets worth kr. 6,713 billion less the value of Danes' external liabilities of kr. 5,474 billion.

Why is nominal wage growth so low?

Nominal wage growth has been low since 2010, albeit with decent real wage growth in recent years. This also applies to Denmark’s most important export markets, e.g. Germany. A lower average replacement ratio for unemployment benefits and weak inflation have been contributing to low nominal wage growth in Denmark since 2013.

Speech by Governor Lars Rohde at the 200th anniversary of Danmarks Nationalbank in 2018

Speech by Governor Lars Rohde at the 200th anniversary of Danmarks Nationalbank 4 July 2018.

Anniversary publication: Danmarks Nationalbank 1818-2018

Danmarks Nationalbank’s 200-year history has been characterised by long periods of a robust economy, but also by dramatic episodes during which the stability of prices, payment systems and the financial sector have been jeopardised. This anniversary book provides a brief overview of Danmarks Nationalbank’s 200-year history, stressing the elements that are particularly relevant for today’s readers.

Anniversary booklet: Danmarks Nationalbank 200 years

Danmarks Nationalbank is the central bank of Denmark. It was established 200 year ago. In this booklet you can read more about the main objectives of Danmarks Nationalbank. Back in 1818, it was a series of dramatic events that led to the establishment of Danmarks Nationalbank. The Napoleonic wars and the galloping inflation made it imperative to secure the currency system and place the responsibility for issuing banknotes with an independent institution. Today, Danmarks Nationalbank's tasks are mainly to ensure trust in the systems that enable the transfer of money between people. It is to oversee the stability of the financial sector and ensure stable prices via the fixed exchange rate policy. With the ultimate objective of ensuring a robust Danish economy.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2018

​In June 2018, the foreign-exchange reserve decreased by kr. 3 million to kr. 468.1 billion.

Low interest rates boost bank deposits

Citizens' bank deposits have increased substantially since 2011, currently accounting for 60 per cent of GDP. This is a natural development in view of the growth of the Danish economy and the narrower spread between bond yields and bank deposit rates. This means that citizens suffer a small interest rate loss only by holding deposits with banks at low or zero interest rates rather than holding bonds.

Refinancing needs significantly reduced

Mortgage bonds totaling kr. 562 billion will be refinanced in 2018. This is a significant decline since 2013, where bonds worth kr. 1,029 billion were refinanced. The recurring refinancing needs arise from the popular adjustable-rate mortgages and mortgages covering loans with reference rates.

Danish investors sold German government bonds in May

In May 2018, Danish investors sold German government bonds worth kr. 15.5 billion, while they bought government bonds from other euro area countries totalling kr. 6.9 billion. They bought other bonds from euro area countries worth kr. 0.7 billion.

Business deposits for kr. 450 billion get negative interest

Deposits with negative interest have become common among Danish banks and for many of their financial and non-financial business customers. In April 2018, deposits with negative interest rates amounted to kr. 450 billion.

Record low interest rates on private customers' deposits

The average interest rate on ordinary bank deposits from Danish private customers is now 0.08 per cent – the lowest rate ever. Ordinary deposits characterise deposits which can be withdrawn without notice or used as a means of payment.

Capital requirements for banks - myths and facts

Capital requirements increase the banks' ability to absorb losses, thereby contributing to the robustness of the banking system. The first part of the analysis looks at the significance of equity capital to banks' weighted funding costs and their ability to meet increased capital requirements. The second part of the analysis describes three new requirements for the banks' composition of liabilities: the countercyclical capital buffer, the minimum requirement for own funds and eligible liabilities, and the completion of Basel III.

Increasing equity by one krone does not cost one krone

The banks should have larger buffers so that they are more resilient in an economic crisis, which typically leads to losses on lending. That is why the banks have been met by stricter capital requirements since the financial crisis. From time to time it has been indicated that higher capital requirements will cost the banks an equivalent sum. That is not correct, Danmarks Nationalbank points out.

Danmarks Nationalbank hosts exhibition about its first 200 years

PhD Thesis: Essays on Debt and Pensions

The dissertation constitutes three empirical studies on how household savings behaviour is affected by pension and mortgage systems. Specifically, the thesis investigates the effects of tax incentives for saving in retirement accounts, housing wealth effects on home equity extraction, and early withdrawals from pension schemes.

Central government borrowing strategy in the 2nd half of 2018

The targets for sales of government bonds and the outstanding volume of T-bills are maintained at kr. 65 billion and kr. 30 billion, respectively, in the 2nd half of 2018. The expected average sale of government bonds per auction is around kr. 2.5 billion at market value. The on-the-run issues will remain unchanged and focus will be on issuance in the 2-year and 10-year nominal bonds.

Speech by Governor Lars Rohde at the VL Summit 7 June 2018

Speech by Governor Lars Rohde at the VL Summit, 7 June 2018.

Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2018

​In May 2018, the foreign-exchange reserve increased by kr. 0.7 billion to kr. 468.1 billion.

Payment app tech triggers drop in Danish e-commerce

Use of Danish payment cards in Denmark decreased by 0.1 per cent in the 1st quarter of 2018 compared to the 1st quarter of 2017. Behind this modest decrease is a sharp 20 per cent drop in the point of use category e-commerce, etc. A drop caused by technical changes in the processing of transactions through the Danish payment app MobilePay. However, nothing indicates a real drop in Danish e-commerce.

Lengthy period of increasing risk appetite in parts of the banking sector

The times are good for the financial sector and the risk appetite is high. Credit standards are under pressure and have been eased for quite a while. Especially the medium-sized banks have been easing credit standards and have started gaining market shares. It is essential that the competitive pressure does not ultimately affect the risk appetite of the banking system overall. This development underscores the importance of having well-capitalised banks and of building up the countercyclical capital buffer so that the institutions have funds to mitigate the effects when the economy reverses.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, spring 2018

Private investors count on large foreign companies

Since the beginning of 2017, Danish private investors have directly invested in selected foreign shares worth kr. 6 billion. Their ten largest investments in foreign companies amounted to almost half of their total investments.

Large dividend payments to banks' shareholders

Danish listed banks have paid out kr. 11.5 billion in dividends in the first four months of the year. This is more or less the same as for the corresponding period last year. The dividends relate to the financial year 2017 and are typically paid out in relation to the general assemblies in March and April 2018.

Strong pressure on banks' credit standards

The favourable developments in the financial sector continue, and the banks have significant capacity to increase lending. Combined with limited growth in demand for loans, this has intensified the banks’ competition for customers. This means that there is a basis for the banks to lower their credit quality and ease credit conditions.

Increasing risk appetite in parts of the banking sector

​The medium-sized banks have been easing credit standards for corporate customers for quite a while, and lending growth is high in some medium-sized banks. That is the conclusion in Danmarks Nationalbank's Financial Stability analysis.

The largest banks are close to buffer requirements in stress test

Danmarks Nationalbank's semiannual stress test of the banking sector shows that the largest banks generally satisfy their buffer requirements in a severe recession scenario. The mortgage banking sector is for the first time included in the stress test, which now focuses on the banks' capital adequacy at the group level.

A year and a half with unchanged administration fees

The administration fee on Danes' mortgage loans was, on average, 0.88 per cent in April 2018. It is slightly lower than when it peaked in October 2016, where the latest changes in the fees had an impact. The minor decrease since October 2016 has happened as more Danes have chosen loans with fixed interest rates and / or instalments.

Danes now have kr. 870 billion deposited in banks

The bank deposits placed by Danish private customers continue to increase. In March and April alone deposits increased by kr. 22 billion, among other things due to large pay-outs from dividends, excess tax, and holiday pay.

Working Paper: Can Central Banks Boost Corporate Investment: Evidence from the ECB Liquidity Injections

Can monetary stimulus boost corporate investment? We answer this question by studying ECB's 2011-2012 Longer-Term Refinancing Operations (LTROs). While we find that the LTROs helped to decelerate the declined in Eurozone firms' investment our results also show that banks' use of LTRO funds is negatively associated with their clients' investment. Overall, the paper highlights the difficulty of boosting investment by injecting liquidity into the banking system.

Assessment of the Danish retail payment systems

Danmarks Nationalbank oversees payment and settlement systems in Denmark in order to promote a safe and efficient financial infrastructure. Danmarks Nationalbank has performed an assessment of whether the Danish retail payment systems observe international standards for payment systems. The assessment shows that the systems extensively observe the security and efficiency requirements. Nevertheless, Danmarks Nationalbank recommends improvements in a number of areas.

Governor Lars Rohde's statement regarding the Danish FSA's decision concerning Danske Bank's management and control in the Estonian money laundering case

Foreign Exchange and Liquidity and Monthly Balance Sheet, April 2018

​In April 2018, the foreign-exchange reserve increased by kr. 0.6 billion to kr. 467.5 billion.

Small decline in foreign ownership of Danish government securities

Foreign investors owned 38 per cent of Danish government securities in March 2018. It is a decrease compared to February where the ownership share was 42 per cent. Over a longer period of time, foreign investors' ownership share of Danish government securities has been stable around 40 per cent.

Large share repurchases among listed companies

Share repurchase programmes are popular among large listed companies as means of distributing income to investors. Danish companies have repurchased shares worth kr. 42.6 billion since last year's annual general meetings in March and April. Over the past ten years kr. 260.1 billion have been returned to investors in share repurchases.

Oversight of the financial infrastructure

This report presents the conclusions of Danmarks Nationalbank's oversight in 2017 of the core payment and settlement systems in Denmark and the most important payment solutions. The core systems and solutions extensively comply with international standards for efficiency and security, though there is still room for improvement. Cyber risks and risks arising from interdependencies remain a focus of Danmarks Nationalbank's oversight. Not all systems have made the same headway in the work regarding cyber security. This work is also carried out at sector level.

Housing loans have never been cheaper

The average interest rate incl. administration fees on Danish housing loans declined to 2.19 per cent in March 2018. This is the lowest level ever recorded. Housing loans comprise credit from mortgage institutions and banks, primarily collateralized by real estate.

Fixed-rate loans are gaining ground

Danes' have moved further towards of fixed rate loans. In all 98 municipalities, the proportion of mortgage loans with fixed rate has increased in the recent year. The movement towards fixed rate has been most significant outside the larger cities.

Tighter credit standards for housing loans

Almost half of the credit institutions in the lending survey report tightening of credit standards for private customers in the 1st quarter of 2018.

Speech by Governor Lars Rohde at Finance and Consulting Club Aarhus

Speech by Governor Lars Rohde at Finance and Consulting Club Aarhus, 4 April 2018.

Foreign Exchange and Liquidity and Monthly Balance Sheet, March 2018

​In March 2018, the foreign-exchange reserve decreased by kr. 80 million to kr. 466.9 billion.

Increased interest rate sensitivity in the mortgage market

By the end of February, an interest rate increase of 1 per cent would result in an estimated depreciation of kr. 60 billion in the market of fixed mortgage bonds with an embedded option. This was the highest interest rate sensitivity in over two years.

Market fluctuations had large impact on the IIP in 2017

Denmark's international investment position, IIP, rose by kr. 31 billion in 2017 to kr. 1,169 billion. The balance of payments surplus of kr. 165 billion added to the IIP while negative value adjustments of kr. 134 billion exerted a drag.

Households' average financial net wealth is kr. 1.4 million

Danish households' financial net wealth – the difference between financial assets and liabilities – reached kr. 3,750 billion by the end of 2017. This corresponds to approximately kr. 1.4 million per household, which includes both sole proprietors and employees etc.

The Danish economy is well prepared for a boom

The Danish economy is well prepared for the boom that it is now entering. The economy may continue to expand without any imbalances, but experience also shows that it can overheat suddenly and violently.

Outlook for the Danish economy - Moderate boom in the coming years

The upswing continued in the 2nd half of 2017 and the Danish economy has entered a boom phase with mounting pressures on the labour market. The expansion has been balanced so far, partly supported by previous reforms that have increased the supply of labour. Growth in GDP is forecast at 1.9 per cent this year and slightly less in the next two years. The economy is well prepared for the boom, which may develop without the build-up of imbalances, but experience shows that the economy can overheat suddenly and violently. The government should be prepared to introduce preventive fiscal tightening with a view to dampening growth in demand if there are signs of overheating.

Monetary and financial trends – March 2018

The Danish krone has been stable, on the strong side of the central rate vis-à-vis the euro. Danmarks Nationalbank has not intervened in the foreign exchange market in the past eleven months up to the end of February. Government bond yields in Denmark increased towards the end of 2017 and at the beginning of 2018. Companies and households increased their borrowing at a stable, but subdued, rate.

Annual report 2017

Danmarks Nationalbank's accounts for 2017 show a loss of kr. 254 million, compared with a profit of kr. 3,928 million in 2016. Much of the loss is attributable to the fact that a large part of the foreign exchange reserve earns negative interest.

Danmarks Nationalbank's annual report and Committee of Directors

​Danmarks Nationalbank's accounts for 2017 show a loss of kr. 254 million, compared with a profit of kr. 3,928 million in 2016.

Moderate boom in the Danish economy - mounting labour market pressures

​The upswing continued in the 2nd half of 2017 and the Danish economy has now entered a boom phase. Labour market pressures have increased, but so far the upswing has been balanced.

Foreign Exchange and Liquidity and Monthly Balance Sheet, February 2018

​In February 2018, the foreign-exchange reserve increased by kr. 3.1 billion to kr. 467.0 billion.

Speech by Governor Lars Rohde at the National Asset-Liability Management Europe conference

Speech by Governor Lars Rohde at the National Asset-Liability Management Europe conference, 1 March 2018.

Danes adopt contactless payments

New technology embedded in payment cards is rapidly becoming popular. In the 4th quarter of 2017, the share of contactless card payments in shops and self-service checkouts was 44 per cent. In comparison, this share was merely 4 per cent in the 1st quarter of 2016.

Institutional investors assign more weight to foreign portfolio equity

Danish institutional investors – pension, insurance and investment funds – have purchased foreign portfolio equity and investment fund shares for kr. 168 billion since the beginning of 2016.

More mortgage loans are financed by 2 per cent bonds

Fixed rate, convertible mortgage bonds have gained ground over the recent years and the low interest rate level has made bonds with at low coupon rate more popular.

The new supplier of Danish banknotes has been chosen

Comments on the draft delegated act amending the commission delegated regulation on the Liquidity Coverage Ratio (LCR)

The European Commission has asked for comments on the proposed amendments to the short-term liquidity rules for EU banks known as Liquidity Coverage Ratio, LCR. Danmarks Nationalbank supports the amendments which solve the unwind problem for repos with central banks in a systemic crisis. Danmarks Nationalbank is still concerned about the framework for secured transactions, which can have some unintended consequences. Danmarks Nationalbank encourages the Commission to continue the work towards a general solution of the unwind problem for secured transactions.

Working Paper: Corporate debt maturity and investment over the business cycle

In this paper I study the business cycle dynamics of the maturity structure of the debt of U.S. non-financial firms. To account for the documented facts, I construct a quantitative dynamic equilibrium model in which firms optimally choose their debt maturity structure. The model can match stylized facts about the level and dynamics of the maturity structure of debt, both in the aggregate and along the firm size distribution.