Frontpage News 2016 Danish MEPs joint ...

Danish MEPs joint letter to the European Commission - help Danish mortgage credit

1 February 2016

Press release

The Danish Bankers Association and the Danish Mortgage Banks’ Federation would like to thank Danish Members of the European Parliament for their support, which has been crucial in this matter. 
In a joint letter sent on Friday afternoon, Danish MEPs directly ask Commissioner Hill, who is responsible for financial circumstances in the EU, to help Danish mortgage credit. The upcoming capital requirements that are in the pipeline, Basel IV, are simply incompatible with Danish mortgage loans.
Denmark does not have speaking or voting rights in connection with the Basel accords. Only those who have speaking rights in the Basel Committee on Banking Supervision, such as the European Commission, can present Denmark’s case.

“We need all the help we can get to limit elements that will increase the cost of Danish mortgages. I would, therefore, like to thank the MEPs for their clear and important support via the letter to Commissioner Hill. Unfortunately, there is still a long way to go, but it is an important step, as this can only be solved within an EU context,” says the CEO of the Danish Bankers Association, Ulrik Nødgaard.
The letter, which is available on several of the MEPs websites, includes the following:
“Global standards which do not take national differences into account could increase the cost of finance and jeopardize an otherwise well-functioning banking model as in Denmark, …” 
“… we trust that the European Commission will present a European approach which avoids introducing banking regulation that is ill fitted to the specific conditions in European Member States”.

Fear of increases in new contribution payments

The Basel Committee on Banking Supervision suggests introducing risk-weighted floors and other parameters in the internal risk models that will be used for calculating capital requirements.
“Despite good intentions, floors have a paradoxical effect, as it hits loans with a documented low risk the hardest – in other words, Danish mortgage loans. Calculations from the Danish Bankers Association’s annual general meeting in December showed that Basel IV would lead to increased capital requirements of up to DKK 85 billion. That is a devastating amount,” says the CEO of the Danish Mortgage Banks’ Federation, Karsten Beltoft.
If we try to project the several billions down onto the individual debtor, it would mean an increase in contribution rates of 0.5 pct. points. With a mortgage loan of DKK 2.5 million, that is an increased expense of DKK 12,500 per year*, according to calculations by the Danish Bankers Association.
*Calculations are naturally subject to some uncertainty and are dependent on the final proposal from Basel, which is constantly changing. The calculations are also compiled based on an investor requirement of a 10 pct. interest rate after tax and the assumption that the entire bill would be passed onto the property customer. It is, of course, up to the individual institution to decide on the price composition.
Further information:
Communications Director of the Danish Bankers Association, Nina Munch-Perrin, tel.: +45 3016 1006
CEO of the Danish Mortgage Banks' Federation, Karsten Beltoft, tel.: +45 3016 1111
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