New parameters for liquidity and leverage proposed by the Basel committee could threaten the Danish market in mortgage credit bonds. But the instruments’ business model is very safe and already tightly regulated.
Denmark’s mortgage credit bonds are a unique product in Europe. Similar to (and governed by the EU rules on) covered bonds, they are issued by a specific pool of mortgage credit institutions (MCIs). These are separate from conventional banks, and provide loans only to homeowners by issuing bonds to investors.
But new Basel definitions of...