Danish Covered Bonds - Denmark

1	What type of assets may be included in the cover pool?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Exposures to public sector entities x x x Exposures to credit institutions x Residential mortgage loans x Commercial mortgage loans x Ship loans x Derivatives x Internal issued covered bonds x Collateral in ships is not an option for mortgage banks. For further information please see comments section at the end of the questionnaire.
2	What is the geographical scope of assets?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Domestic x x EU x x EEA x x UK x x CH x Australia x Canada x Japan x New Zealand x USA x OECD x G10 x Mortgages on real property situated abroad may form the basis of covered bond issuance.
3	Is there a maximum level for substitute assets in the statutory national framework?	Yes, please specifiy No limits apply in general. Limits in CRR, Article 129 on credit institutions.
4	Are there any reporting requirements for covered bond issuers to investors?	Yes, by law and in line with art. 14 of EU Covered Bond Directive
5	What is the frequency of reporting to investors?	Quarterly

1	What is the basis for property valuation	Market value
2	Is a regular update of the property value required?	Yes, new external physical apraisal within a specific time span Yes, automated / indexed valuation sufficient Monitoring and revalution of property values according to CRR Article 208, 3
3	What are the LTV limits (single asset based)? Please specify in %/n.a.	Residential Commercial Agricultural Ships Residential 80%; Commercial 60%; Agricultural 60%; Ships 60%. The LTV limit for commercial and agricultural can be raised to 70% if the bank adds additional collateral.
4	Are loans in excess of LTV limits eligible for inclusion in the cover pool?	Hard limit upon inclusion but soft limit accepted following inclusion

IV.1 Derivative contracts in the cover pool

1	Are derivative contracts eligible for the inclusion in the cover pool?	Yes, exclusively for hedging purposes (by law)
2	Are there requirements for derivative contracts (e.g. eligibility criteria for hedging counterparties)?	Yes, specified in law
3	Will derivative contracts remain in case of insolvency of the issuer?	Yes
4	If derivatives are permitted in the cover pool, what is their ranking?	Pari passu to covered bond holders

IV.2 Exposure to market risk

1	What is the primary method for the mitigation of market risk?	Natural' matching (i.e. match funding, matching without the use of off-balance sheet instruments) and stress testing Use of derivative hedging instruments Danish mortgage banks have in practice structured their mortgage lending business in such a way that they have nearly eliminated market risk.
2	Are there mitigating provisions for interest rate risk?	Yes, by legislation/regulation
3	Are there mitigating provisions for foreign exchange risk?	Yes, by legislation/regulation
4	Are there mitigating provisions for maturity mismatch risk?	Yes, by legislation/regulation
5	What type of coverage test is applied?	Nominal cover Other, please specify CDB coverage requirement plus CRR OC minimum requirement
6	Are there stress scenarios applied?	Yes, by law Balance principle which provides limits to the scope of differences allowed on one hand the payments from borrowers and on the other hand the payments to the holders of the covered bonds.

IV.3 Liquidity risk

1	Is exposure to liquidity risk mitigated?	Yes, by law
2	What liquidity risk mitigation requirements are in place (principal)?	180 days liquidity provisions Maturity extension provisions Matching requirements Stress testing requirements Other, please specify Other: LCR and for mortgage banks LCR national pillar 2 requirement, incl. stressed haircut on HQLA. 180 days requirement does not apply to covered bonds subject to match funding
3	What liquidity risk mitigation requirements are in place (interest)?	180 days liquidity provisions Maturity extension provisions Matching requirements Stress testing requirements Other, please specify Other: LCR and for mortgage banks LCR national pillar 2 requirement, incl. stressed haircut on HQLA. 180 days requirement does not apply to covered bonds subject to match funding,
4	What is the consequence of not fixing a breach of liquidity risk mitigants?	Administrative penalty
5	If 180 days liquidity provisions are in place, what types of liquid assets are eligible	LCR Level 1 LCR Level 2a LCR Level 2b
6	If 180 days liquidity provisions are in place, the calculation of principal is based on:	The (extended) legal final maturity date

IV.4. Maturity extension

1	Is maturity extension allowed by national law?	Yes, required Covered bonds issued by a specialised ship finance institute are not required by law to have an extension trigger (soft bullet structure)
2	Is it possible to issue…	Hard bullet Soft bullet
3	Which trigger plays a role for maturity extension according to law - independent or alone or in combination?	Other For the specialized mortgage bank it is a soft bullet mechanism controlled by two separate triggers: a refinancing failure trigger and an interest rate trigger. For banks issuing covered bonds there is a refinancing trigger.
4	Does any competent authority need to give its okay (or non-opposition)?	No The issuer must approve the Danish FSA that there were no other options.

IV.5 Overcollateralisation

1

Is mandatory overcollateralisation required in the law ?

CRR compliant covered bonds/Residential real estate - 2% - Nominal CRR compliant covered bonds/Commercial real estate - 2% - Nominal CRR compliant covered bonds/Ship loans - 2% - Nominal

V.1 Cover pool monitor (CPM)

1	Is there a cover pool monitor in addition to national competent authorities in the statutory law?	No
2	Is the CPM separate from the issuing credit institution?
3	Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law?

V.2 Banking supervision

1	Which are the national competent authorities designated to carry out covered bonds public supervision in the law?	Finanstilsynet (Danish Financial Supervisory Authority) - Website - National list
2	Is a special permission required for a covered bond programme according to national law?	Yes, licence for institution
3	Is there a covered bond issuance limit in law or regulation? If yes, please specify	No
4	Does the national statutory law provide for the appointment of a dedicated cover pool administrator in case of insolvency/resolution (transfer included acc. to BRRD [Bank Recovery and Resolution Directive])?	Yes
5	Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities?	Quarterly

1	Does the national statutory law meet the requirements laid down in the EU Covered Bond Directive?	Yes
2	Does the statutory law meet the requirements of Article 129 of CRR [Capital Requirement Regulation]? In this case, please specify the collateral types meeting the Art. 129 CRR.	Yes Loans secured by residential and commercial property, exposures to public authorities, exposures to credit institutions and collateral in ships (not an option for mortgage banks)
3	Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral	No
4	Are listed covered bonds eligible in repo transactions with the national central bank?	Yes

Primary Legislation

• Danish Financial Business Act (DK).pdf (Original language)
• Danish Mortgage-Credit Loans and Mortgage-Credit Bonds etc. Act (DK).pdf (Original language)
• Act on a Ship Financial Institute (DK).pdf (Original language)

European Covered Bond Label (Premium) list

• https://www.dfsa.dk/Fact-and-Figures/List-of-issuers-of-covered-bonds (English language)

Hypostat

• Denmark.pdf (English language)

Fact Book

• 3.12 Denmark.pdf (English language)

Intro CB Video

Any further comments/information?

Comments on Section II.1: Collateral in ships is not an option for mortgage banks. Exposures to "public sector entities" must be understood as "Exposures to public authorities". Public housing mortgage loans can have 100% state guarantess. Derivatives are used for hedging purposes. Internal issued covered bonds according to CBD Article 8 and after permission from Danish FSA.