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Danish Covered Bond Market Insights 2022


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Danish Covered Bond Market Insights 2022

In this Covered Bond Market Insights report, S&P Global Ratings presents the local covered bond market, explains how the relevant legal framework works, provides an overview on the local mortgage market, and compares key characteristics of existing programs.

In our view, stable issuer ratings and outlooks and a strong sovereign will continue to support ratings stability for Danish covered bonds despite increasing interest rates and continued inflationary pressure.

Overview: Denmark, A Small Giant

Denmark has the largest covered bond market in the world, with outstanding issuance totaling €454.7 billion (approximately 135% of GDP) at the end of 2021. Euro-denominated benchmark covered bond issuance remains niche, with only €0.5 billion issued so far in 2022 (see chart 1). Overall, we expect Danish euro-denominated benchmark covered bond issuance in 2023 to be higher than in 2022 but remain lower than 2019 issuance levels. This is due to continued relatively cheap Danish krone (DKK) funding. At the same time, issuance of DKK-denominated covered bonds will likely remain elevated due to refinance activity. However, the interest to refinance is likely to be lower, leading to lower issuance levels in 2023.

Chart 1


Chart 2


Denmark has one of Europe's longest-running traditions of using secured mortgage bonds to fund property purchases. This system has deep roots in the Danish financial system and, historically, Danish banks, insurers, and pension funds have supported strong demand for the covered bond product. Further, a growing foreign investor base has invested in DKK-denominated covered bonds. Euro-denominated issuance depends on the price of derivatives and is generally less attractive compared to domestic issuance. At the same time, foreign investor appetite for DKK-denominated covered bonds has increased. This is boosting market turnover and liquidity, but also lowering reliance on euro-denominated issuance (see chart 3).

Chart 3


Chart 4


Implementation of the EU's Covered Bond Directive in 2021

Denmark completed the parliamentary process for transposition of the EU Covered Bond Directive into its covered bond legislation. The amendments to the affected law were published in more detail on March 16, 2022, and all secondary legislation has been finalized and is in effect from July 8, 2022. The main proposed amendments to the existing law are the introduction of a minimum nominal overcollateralization (OC) and 180 days' liquidity coverage, and clarification of existing rules for extensions and joint funding. Realkreditobligationer (RO; the previous covered bond designation) will be grandfathered unless issuance continues. In that case, the ROs must comply with updated valuation rules and OC requirements, and will be labeled as European covered bonds. Matched funded programs are exempt from the introduced liquidity requirements, while European-style saerligt daekkede obligation (SDO; the most common designation of issued Danish covered bonds) issuance must introduce new objective extension triggers for new issuance and outstanding covered bonds without extensions will be considered in the 180 days' liquidity calculation, which may increase liquidity requirements (see "European Covered Bonds Reach Harmonization Milestone As The Journey Continues," published on July 12, 2022).

Monetary policy tightens against high inflation

In line with global trends, inflation in Denmark increased to a 40-year high, reaching 10.1% in October 2022. Following the European Central Bank's (ECB) interest rate hikes in 2022, Danmarks Nationalbank raised its benchmark monetary policy rates in July and again in September 2022, up to the current 1.25% rate to curb soaring inflation. Market-based mortgage rates have increased even more. We expect that further rises in interest rates will put downward pressure on house prices in the coming years.

In September 2022, due to the current high inflation and a tight labor market, Danmarks Nationalbank recommended that the fiscal policy be tightened further to reduce the risk of a wage-price spiral with persistent high inflation.

Refinance auctions of particular interest

Approximately 50% of the Danish covered bond market comprises adjustable-rate mortgages financed by the continued issuance of 1-, 3-, or 5-year fixed-rate covered bonds. The interest-rate fixing takes place at adjustable-rate mortgage auctions on certain dates throughout the year with the results of the December auction taking effect in January 2023.

Historically, the average cost of adjustable-rate mortgages has been about 2%, but it has fluctuated over the years and has reached above 5% at times. Coming from historical low levels, the relative increase of this year's auctions combined with historical high CPI may add additional stress to Danish mortgage borrowers (chart 5).

Chart 5


The Covered Bond Framework: Uniquely Different

Legal framework

Different acts regulate Danish covered bonds depending on whether the issuer is a mortgage or universal bank. The Danish Mortgage-Credit Loans and Mortgage-Credit Bond etc. Act regulate the former, and The Danish Financial Business Act regulates the latter. Complementary regulation and executive orders regulate other covered bond aspects. The current acts came into force in 2007 and have been amended on several occasions. The most recent amendments came into effect on July 8, 2022.

All Danish covered bonds are secured by mortgage assets included in a capital center or register, which is the equivalent of a cover pool of assets. Covered bond issuers may have several capital centers or registers.

The Danish Financial Supervisory Authority (DFSA) permits only one type of asset and one Danish covered bond type per capital center or cover pool.

Investors in covered bonds backed by a capital center have a preferential right over assets registered in the specific capital center. If the issuer defaults, an administrator is appointed to manage the capital centers on a standalone basis. We analyze capital centers individually and assign ratings independent of our ratings analysis of the issuer's other capital centers.

Chart 6


Chart 7


Table 1

Legal Framework Comparison
Denmark Sweden Norway Finland Germany Netherlands U.K.
Product Ros, SDOs, or SDROs Swedish Covered Bonds Norwegian Covered Bonds Finnish Covered Bonds Pfandbriefe Dutch registered covered bond program Regulated covered bonds (RCB)
Legislation The Danish Mortgage-Credit Loans and Mortgage-Credit Bonds etc. Act The Swedish Covered Bonds Issuance Act The Norwegian Act on Financial Institutions The Finnish Covered Bond Act, entered into force in July 8, 2022 PfandbriefAct (Pfandbriefgesetz) as amended Financial Supervision Act Regulated covered bond regulations 2008
Issuer Specialized credit institution or universal credit institution with a special license Universal credit institution with a special license Specialized credit institution Universal credit institution with a special license or specialized credit institution Universal credit institution with a special license Universal credit institution with a special license Universal credit institution with a special license
Owner of the cover assets Issuer Issuer Issuer Issuer Issuer SPE (guarantor of the covered bonds) SPE (guarantor of the covered bonds)
Cover asset type ROs/SDOs/SDROs: loans secured by real property and exposures to public authorities; SDOs: exposures to credit institutions and collateral in ships Mortgage loans, exposures to public sector entities, and exposures to credit institutions Residential mortgage loans, commercial mortgage loans, public sector loans, loans secured on other registered assets, substitute assets, and assets in the form of derivative agreements Residential mortgage loans, commercial mortgage loans, public sector loans, and substitute assets Public sector assets, mortgage loans, ship loans, aircraft loans, and credit institutions Mortgage loans, public sector exposures, ship loans, and credit institutions (but exisiting programs only feature residential mortgages) Mortgage loans and public sector exposures
Mortgage cover asset location Denmark, Faroe Islands, Greenland, Or outside of the above, if pre-approved by regulator EEA EEA EEA EEA, Switzerland, U.S., Canada, Japan, New Zealand, Australia, Singapore EEA (currently domestic only) EEA, Switzerland, U.S., Canada, Japan, New Zealand, Australia, Channel Islands, Isle of Man
Mortgage cover assets LTV limit Residential: 80%. Agricultural: 70%. Commercial: 60%. Holiday: 80%. Residential: 80%. Agricultural: Up to 70%. Commercial: Up to 70%. Residential: 80%. Commercial: 60%. The covered bondholders have recourse toward entire 100% of the value of residential and commercial properties. To determine OC: residential: 80%, and commercial: 60%. 60% Residential: 80% Residential: 80%, and program documents on Regulated Covered Bonds currently at 75%
Primary method for mitigating market risk Balancing principle Derivatives Derivatives Derivatives Natural hedging stress testing Natural hedging Derivatives
Mandatory OC 2% norminal or 8% risk-weighted assets 2% nominal 5% nominal 2% or 5% NPV if certain requirements of article 129 CRR are not fulfilled 2% nominal for mortgage and public sector covered bonds; 5% nominal for ship and aircraft covered bonds 5% nominal 8% nominal
Source: ECBC, S&P Global Ratings. Ros--Realkreditobligationer. SDO--Særligt Dækkede Obligationer. SDRO--Særligt Dækkede Realkreditobligationer. SPE--Special-purpose entity. EEA--European Economic Area. LTV--Loan to value. OC--Overcollateralization. NPV--Net present value.

Key features of the Danish domestic DKK-denominated covered bond market include the tap issuance format and continued matching of the covered bond to mortgage loan characteristics. Bonds are issued in an auction format and prices are agreed upon before the bond is issued.

Prepayment and mortgage loan refinance rates are important elements of the Danish covered bond market for borrowers and investors. The traditional 30-year fixed-rate mortgage allows borrowers to prepay at par value and take advantage of conversion to a loan with lower interest rates, or reduced debt at a higher interest rate. Adjustable-rate mortgages are normally funded by bonds with a maturity date matching the borrower's fixed interest period; the issuer commits to refinance until the loan matures.

Overcollateralization, extensions, and balance principle

The Danish Mortgage Credit Act requires mortgage banks to set aside 8% of their risk-weighted assets as reserves. This would have equated to a nominal minimum of about 4% OC under Basel rules before the introduction of internal ratings-based (IRB) models. However, the IRB models have changed both risk weightings and thereby the minimum regulatory requirements. Mortgage banks are also required to maintain a debt buffer of 2% of mortgage lending.

To reduce refinancing risk for mortgage banks, covered bonds issued after April 1, 2014, that do not match the maturity of the related mortgage loans may be extended by the issuer or assigned an insolvency administrator under certain circumstances. Extensions will occur in 12 months intervals until new bonds can be sold. Further, certain bonds funding adjustable-rate mortgages have an extension trigger, which can be applied if the interest rate increase above 5% from the previous interest reset.

The amendments (effective from July 8, 2022) to the Danish Mortgage Credit Act introduced a nominal statutory OC requirement of 2%. This does not include the cost of managing a cover pool that is winding down. It also introduced a formal requirement for coverage of 180 days of liquidity needs. Most Danish covered bond programs are matched-funded and are exempt from this requirement.

Balancing principle and supervision limits risk

Due to the balance principle and the tradition of matching mortgage characteristics to covered bonds, OC for mortgage banks comprises holding securities in a reserve fund. The reserve fund often comprises covered bonds and includes the capital center's own covered bonds, other Danish covered bonds, or highly liquid bonds, as opposed to mortgages.

The Danish balance principle is a legal requirement that limits mismatches between the terms of the mortgage loans and the bonds that fund them. The principle requires assets and liabilities to match, and many issuers simply match the characteristics of the covered bonds to those of the underlying assets ("matched funding"). Further, the balance principle defines limits on Danish covered bond issuers' market risk exposure to currency and interest rate risk.

The balance principle and the bonds' extension features support our analysis of the capital center's cash flows as matched, not just in terms of its interest rate and currency characteristics, but also in terms of amortization and principal payments.

As the balance principle reduces market risk, this has resulted in lower-than-average target credit enhancement levels (the amount of overcollateralization that is commensurate with the maximum collateral-based uplift) for Danish matched funded covered bonds.

Further, the DFSA's "supervisory diamond" set limits on yearly lending growth, interest rate risk, interest-only lending to retail customers, short-term funded loans, and large exposures for covered bond issuers.

Features Of Danish Covered Pools

While most capital centers are fairly homogeneous, the Danish covered bond market comprises covered bonds backed by a mix of mortgage assets: residential, commercial, multifamily, agriculture mortgage loans, and public sector guaranteed debt. Issuers are not limited by a single covered bond program (or capital center) but may manage several active and inactive capital centers.

Currently, most capital centers with active issuance of covered bonds are backed by a mix of two types of collateral: residential mortgage-backed and commercial mortgage-backed covered bonds. We analyze multifamily and cooperative associations and subsidized housing properties by applying our commercial real estate or public sector criteria respectively (see "Related Criteria").

Chart 8


Interest only: reemergence of an old nemesis

Since their introduction in October 2003, interest-only mortgages have been used extensively by Danish households. It took less than five years after launching for interest-only mortgages to comprise more than half of all Danish mortgage loans. This played a deciding role in house price increases before the great financial crisis. Following a slight decline due to limits on interest-only loans set by the Danish FSA the interest-only portion of Danish mortgages has increased again. Their popularity has been fueled by the COVID-19 pandemic, and the introduction of mortgage loan products with interest only for the full maturity of the loan. According to the FSA, higher house prices are increasingly attracting homeowners to loans with interest-only periods or variable rates.

Chart 9


The proportion of interest-only loans in the main Danish capital centers has marginally increased since the COVID-19 outbreak (see chart 10).

Chart 10


Since the previous financial crisis, the DFSA closely monitors and partly limits the use of interest-only loans. Despite increased scrutiny and better lending standards of the issuer, we continue to consider interest-only mortgage loans one of the main drivers of house prices in the Danish housing market

Mortgage loans with long interest-only periods

At the end of September 2022, the Danish systemic risk council claimed that the growing share of floating-rate mortgages with deferred amortization is threatening the stability of the mortgage market. The statement followed earlier warnings from the Danish financial authority based on an investigative report published in the beginning of 2021.

The main concern from the DFSA is the contractual language in the loan documentation, which allows the lender to require further amortization should the current LTV increase above 75% for two consecutive years--i.e. if house prices were to decrease by 15%. In this case, borrowers may experience a payment shock. Therefore, the systemic risk council has emphasized the need for borrowers with these types of loans to have additional income buffers.

In our credit analysis, we typically apply an upward adjustment to our foreclosure frequency assumptions unless the loan is underwritten on a full repayment basis, or the borrower has sufficient time to separately build equity to proceed with the final repayment.

Since the FSA's initial report, which promised to surveil developments in the borrower segment, long-term interest-only loans have increased. The approximate percentage of the total lending from the largest Danish capital centers with interest only for life is displayed in table 3.

Table 2

Share Of Residential Interest-Only Loans By Capital Center
Jyske Realkredit A/S (Capital Center E Mortgage Covered Bonds) Nordea Kredit Realkredit A/S (Capital Center 2 Mortgage Covered Bonds) Realkredit Danmark A/S (Capital Center S Mortgage Covered Bond Program) Realkredit Danmark A/S (Capital Center T Mortgage Covered Bond Program) Nykredit Realkredit A/S Capital Center E (Mortgage Covered Bonds Program) Nykredit Realkredit A/S Capital Center H (Mortgage Covered Bonds Program)
Interest-only loans 5.5% 11.0% 10.0% 25.0% 3.0% 3.0%

According to the lenders, certain discretion is allowed as to the requirement for amortization, and the amortization requirement can be spread out over another 30-year amortizing mortgage, which may help mitigate payment shock risk for the borrower. Further, the reliance on the borrower to maintain the property may result in higher losses given default as the loan does not amortize.

Currently, we have not observed any performance differences of the interest-only for life mortgage loan product (as compared to other mortgage products), and we continue to assign our standard upward risk adjustments in our analysis of interest-only loans. We will continue to follow developments closely. We expect the interest-only for life product to increase expected (asset and liability) duration of the capital centers.

Tax change looming

In 2024, the Danish government will introduce a new valuation system that will serve as the basis for calculating property tax. Existing owners will not be charged more tax than they currently pay, but new owners will pay taxes based on the updated valuations. Therefore, areas currently undervalued in the tax valuation will see an increase in charges going forward. This may make an onward sale of these properties more challenging and affect house prices in those locations. We expect most of the upward adjustments to tax valuations to occur around the major Danish cities, while rural areas may even get a discount. Given the implementation time, we expect homebuyers and sellers to adapt, but we will follow any effects on demand closely.

Green covered bonds and ESG considerations

Growth in Danish green covered bonds has been limited. Nykredit Realkredit A/S helped pave the way for green covered bonds, while Realkredit Danmark A/S, Nordea Kredit Realkredit A/S, and recently Jyske Realkredit A/S have since followed suit. This is in part due to the perceived advantageous funding conditions for green and social covered bonds but, more importantly, issuers say there is interest from both borrowers and investors. That said, the green covered bond market remains limited in size. The long-term nature of residential mortgages and the availability of environmental certification has proven a challenge for the issuance of green covered bonds backed by residential mortgages. However, with increasing local covered bond investor interest, we expect Danish covered bond issuers to continue to meet demand.

Environmental and social credit factors are typically credit neutral in our analysis of Danish mortgage covered bonds. We consider social factors to positively affect the rating in Danish programs where assets in the cover pool are loans backed by subsidized housing. These provide affordable housing for the general population and benefit from guarantees from the public sector (see "ESG Credit Indicator Report Card: Covered Bonds," published on April 7, 2022).

In terms of governance, Danish issuers are not committed to maintain a minimum level of OC. Consequently, Available credit enhancement could potentially decrease in the future to levels that are not commensurate with the current rating. This reduces the achievable ratings or the number of unused notches available to the covered bond program. On a net basis, we believe the matched funding in most Danish covered bond programs offsets the risk of the lack of a committed OC, while it remains a risk for soft-bullet issuers.

Danish housing market slows down as interest rates and inflation rise

Following a significant uptick during the COVID-19 pandemic fueled by low interest rates and high demand, house price growth slowed down to 2.9% (year-on-year) in June 2022 from 11.0% (year-on-year) in September 2021. In recent months, mortgage activity has slowed due to rising interest rates, and there is evidence of lower house prices in some segments.

Chart 11


According to Danmarks Nationalbank, the interest rates on new mortgage loans disbursed in September 2022 (excluding administration fees) was on average 3%, which is 3.5 times higher than the interest rates on the loans disbursed the year before. The higher interest rate and inflation combined with slower economic growth prospects contributes to the slow-down in household demand for housing. After two years of historically high sales volumes, the number of housing transactions has fallen across the country for both single family houses and owner-occupied flats, and is more pronounced in and around the capital.

Chart 12


Rising interest rates, high inflation, and a weaker trading activity will likely put downward pressure on house prices, and we therefore expect price declines. On the other hand, the higher nominal wage increases, and the current rising construction costs will help to retain construction activity and support house price growth in the long term, in our opinion.

Despite a significant decreases after the financial crisis, Danish housing debt relative to disposable income remains higher than in other Scandinavian countries.

Chart 13


The credit analysis in our rated Danish programs considers our view of potential overvaluation of the housing market.

Mortgage Market Overview: Limited Effects From The Russia-Ukraine Conflict On The Danish Economy

The Danish economy has proven resilient to the adverse economic impact of the conflict in Ukraine because of its limited direct exposure. Weaker external demand from key trading partners will reduce exports, while surging inflation will erode household purchasing power and restrict consumption, and the monetary policy shift will likely weigh on investment activity. However, the Danish economy is coming from a strong position, characterized by high household wealth and pent-up demand, as well as a solid public finance position. We expect the GDP growth rate of 2.8% in 2022, following a strong recovery of 4.9% in 2021, and we forecast growth to average 1.5% in 2023-2025.

The labor market has benefited from the rapid economic recovery and supporting government measures. We estimate unemployment at 4.6% in 2022, the lowest level in more than a decade, before a slight increase to an average of 5.0% in 2023-2025. In our view, the labor market will benefit from the influx of Ukrainian refugees, and at a more structural level from gradual increases in the retirement age.

Table 3

Economic Indicators
Year Real GDP growth (%) Unemployment rate (%)
2020 (2.0) 5.60
2021 4.9 5.10
2022f 2.8 4.60
2023f 0.7 4.90
2024f 1.9 5.10
2025f 2.0 5.00
Source: S&P Global Ratings. f--Forecast.

Chart 14


Comparison Of Danish Covered Bond Programs

Over 2022, the indexed weighted-average LTV ratio in our rated programs has decreased thanks to house price growth. The credit coverage (foreclosure frequency and loss severity) has improved in most of our rated programs, mainly due to the lower LTV ratio, although it was partially offset by the revision of our overvaluation assumptions of the Danish residential real estate market in January 2022.

Chart 15


Ratings Outlook: Danish Covered Bonds Remain Well Protected From The Risk Of Bank Downgrades

Charts 16 and 17 show that most Danish covered bond issuers are assigned high issuer credit ratings (ICRs). These allow most rated issuers' covered bonds to reach the 'AAA' rating based on jurisdictional support alone. The programs benefit from different numbers of unused notches by which the ICR can be lowered without affecting the covered bond program's ratings, all else being equal.

Chart 16


Chart 17


Danish programs on average have lower credit and market risk compared to peer countries thanks to relatively low mortgage LTV ratios and the Danish matched funded covered bond feature (see chart 18). Consequently, the available credit enhancement is also lower relative to peer countries.

Chart 18


Scenario Analysis: Danish Covered Bonds Can Withstand Substantial House-Price Corrections

We have carried out a scenario analysis with large drops in house prices to gauge whether these would affect the OC commensurate with our rating or the rating itself. In our current credit model, we consider that Danish house prices reflect an overvaluation of 16.8%. We have tested the effect of house-price drops of 20% and 30%, which is more severe than the 18% drop we observed in Denmark in the 2008-2012 crisis.

The OC in line with the current rating does not increase significantly in the most stressful scenario (see table 6). These hypothetical house price drops do not affect the achievable rating on any of the programs either. Furthermore, in some programs the required credit enhancement for the rating is still floored by the largest obligor test (default of the 10 largest commercial borrowers). The portion of loans with LTVs above the regulatory 80% limit would increase in such scenarios, and, if so, issuers would need to add additional collateral according to the law.

Table 4  |  View Expanded Table

Effect Of House Price Decline On Rated Danish Covered Bond Programs
Base case Stress Scenario 1 - 20% Stress Scenario 2 - 30%
AAA' credit risk (%) Target credit enhancement (%) OC commensurate with rating (%) AAA' credit risk (%) Target credit enhancement (%) OC commensurate with rating (%) AAA' credit risk (%) Target credit enhancement (%) OC commensurate with rating (%)
Danske Bank D 2.5§ 6.37 2.5§ 2.5§ 6.84 2.5§ 2.5§ 8.16 2.5§
DLR Kredit General 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§
Jyske Realkredit B 5.87* 5.87* 5.87* 5.87* 5.87* 5.87* 5.87* 5.87* 5.87*
Jyske Realkredit E 2.5§ 3.4 2.5§ 2.5§ 3.64 2.5§ 2.61 4.14 2.61
Nordea Kredit Realkredit 1 2.5§ 4.44 2.5§ 2.52 4.55 2.52 2.79 4.82 2.79
Nordea Kredit Realkredit 2 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 3.2 2.5§
Nykredit C 8.56* 8.56* 8.56* 8.56* 8.56* 8.56* 8.56* 8.56* 8.56*
Nykredit D 17.25* 17.25* 17.25* 17.25* 17.25* 17.25* 17.25* 17.25* 17.25*
Nykredit E 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§
Nykredit H 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§
Realkredit Danmark S 2.5§ 3.53 2.5§ 2.77 3.83 2.77 3.41 4.48 3.41
Realkredit Danmark T 2.5§ 2.5§ 2.5§ 2.5§ 2.64 2.5§ 2.5§ 3.11 2.5§
Realkredit Danmark General 13.37* 13.37* 13.37* 13.37* 13.37* 13.37* 13.37* 13.37* 13.37*
Totalkredit C 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§ 2.5§
Note: We did not test the following seven programs either because their residential mortgage share was less than 15% or the pool includes 100% of Norwegian and Swedish mortgages: Jyske Realkredit A/S - General Capital Center, DLR Kredit A/S - Capital Center B, Nykredit Realkredit A/S - Capital Center G, Nykredit Realkredit A/S - Capital Center General, Nykredit Realkredit A/S - Capital Center I, Danske Bank A/S - Pool C and Danske Bank A/S - Pool I. *Floored by the largest obligor test. §2.5% credit floor. ^ We floor the residential pool-level WALS at 2% according to "Global Methodology And Assumptions: Assessing Pools Of Residential Loans". WALS--Weighted-average loss severity. OC--Overcollateralization.


Table 5

Danish Mortgage Covered Bond Programs--Overview
Program Covered bond type Long-term issuer credit rating Covered bond rating Outstanding covered bonds (mil. DKK)* Program type Collateral type Link to surveillance report Link to transaction update
Danske Bank A/S - Pool C LCB/SDO A+/Negative/A-1 AAA/Stable/-- 35,756 Soft bullet 100% mortgages Link Link
Danske Bank A/S - Pool D LCB/SDO A+/Negative/A-1 AAA/Stable/-- 23,515 Soft bullet 100% mortgages Link Link
Danske Bank A/S - Pool I LCB/SDO A+/Negative/A-1 AAA/Stable/-- 88,982 Soft bullet 100% mortgages Link Link
DLR Kredit A/S - Capital Center B LCB/SDO A-/Stable/A-2 AAA/Stable/-- 181,277 Soft and hard bullet 88.8% mortgages, 11.2% substitute assets Link Link
DLR Kredit A/S - General Capital Center LCB/RO A-/Stable/A-2 AAA/Stable/-- 768 Hard bullet 89.26% mortgages, 10.74% substitute assets N/A N/A
Jyske Realkredit A/S - Capital Center B LCB/RO A/Stable/A-1 AAA/Stable/A-1+ 2,835 Soft and hard bullet 80.02% mortgages, 19.98% substitute assets N/A N/A
Jyske Realkredit A/S - Capital Center E LCB/SDO A/Stable/A-1 AAA/Stable/A-1+ 303,111 Soft and hard bullet 90.14% mortgages, 3.9% subsidized housing, 5.96% substitute assets Link Link
Jyske Realkredit A/S - General Capital Center LCB/RO A/Stable/A-1 AAA/Stable/A-1+ 3,263 Soft and hard bullet 14.83% mortgages, 85.17% subsidized housing N/A N/A
Nordea Kredit Realkredit A/S - Capital Center 1 LCB/RO AA-/Stable/A-1+ AAA/Stable/A-1+ 1,367 Hard bullet 52.23% mortgages, 47.77% substitute assets Link Link
Nordea Kredit Realkredit A/S - Capital Center 2 LCB/SDRO AA-/Stable/A-1+ AAA/Stable/A-1+ 468,104 Soft and hard bullet 91.54% mortgages, 8.46% substitute assets Link Link
Nykredit Realkredit A/S - Capital Center C LCB/RO A+/Stable/A-1 AAA/Stable/-- 278 Soft and hard bullet 75.97% mortgages, 14.61% subsidized housing, 9.42% substitute assets N/A Link
Nykredit Realkredit A/S - Capital Center D LCB/RO A+/Stable/A-1 AAA/Stable/-- 12,464 Soft and hard bullet 76.3% mortgages, 23.7% substitute assets Link Link
Nykredit Realkredit A/S - Capital Center E LCB/SDO A+/Stable/A-1 AAA/Stable/-- 627,007 Soft and hard bullet 94.01% mortgages, 2.45% subsidized housing, 3.54% substitute assets Link Link
Nykredit Realkredit A/S - Capital Center G LCB/RO A+/Stable/A-1 AAA/Stable/-- 64,216 Soft and hard bullet 83.9% mortgages, 0.13% subsidized housing, 15.97% substitute assets Link Link
Nykredit Realkredit A/S - Capital Center General LCB/RO A+/Stable/A-1 AAA/Stable/-- 192 Hard bullet 0.68% mortgages, 0.14% subsidized housing, 99.18% substitute assets N/A Link
Nykredit Realkredit A/S - Capital Center H LCB/SDO A+/Stable/A-1 AAA/Stable/-- 639,350 Soft and hard bullet 96.09% mortgages, 3.8% subsidized housing, 0.11% substitute assets Link Link
Nykredit Realkredit A/S - Capital Center I LCB/RO A+/Stable/A-1 AAA/Stable/-- 7,593 Soft and hard bullet 59.27% mortgages, 0.34% subsidized housing, 40.39% substitute assets Link Link
Realkredit Danmark A/S - Capital Center S LCB/SDRO A+/Negative/A-1 AAA/Stable/A-1+ 307,000 Soft and hard bullet 89.44% mortgages, 10.06% subsidized housing, 0.5% substitute assets Link Link
Realkredit Danmark A/S - Capital Center T LCB/SDRO A+/Negative/A-1 AAA/Stable/A-1+ 423,000 Soft and hard bullet 91.31% mortgages, 6.99% subsidized housing, 1.7% substitute assets Link Link
Realkredit Danmark A/S - General Capital Center LCB/RO A+/Negative/A-1 AAA/Stable/-- 18,016 Soft and hard bullet 51.77% mortgages, 28.2% subsidized housing, 20.03% substitute assets N/A N/A
Totalkredit A/S - Capital Center C LCB/RO A+/Stable/A-1 AAA/Stable/-- 2,955 Soft and hard bullet 45.68% mortgages, 54.32% substitute assets N/A Link
*As reported by the issuer in the June 2022 Harmonised Transparency Template (HTT) report/cash flow profile. LCB--Legislation-enabled covered bonds. RO--Realkreditobligationer. SDO--Saerligt daekkede obligationer. SDRO--Saerligt daekkede realkredit obligationer. DKK--Danish krone. N/A--Not applicable.

Table 6

Danish Mortgage Covered Bond Programs--Key Characteristics
Program Assets (mil. DKK)* No. of loans WA LTV (%) WA seasoning (months) Interest rate type Repayment type WAFF (%) WALS (%)
Danske Bank A/S - Pool C 43,540 4,851 47.5 20.9 62.4% floating, 37.6% fixed 75.5% amortizing, 23.8% bullet/IO, 0.7% other 24.17 43.33
Danske Bank A/S - Pool D 25,342 41,040 45.0 99.4 56.4% floating, 43.6% fixed 77.4% amortizing, 17.2% bullet/IO, 5.4% other 7.36 33.05
Danske Bank A/S - Pool I 105,204 61,096 52.0 48.5 92.2% floating, 7.8% fixed 79.2% amortizing, 19.7% bullet/IO, 1.1% other 11.65 32.02
DLR Kredit A/S - Capital Center B 201,271 70,692 52.6 249.0 43.5% floating, 56.5% fixed 64.4% amortizing, 35.6% bullet/IO 24.84 52.51
DLR Kredit A/S - General Capital Center 839 2,079 27.3 317 63.3% floating, 36.8% fixed 100% amortizing 14.85 9.49
Jyske Realkredit A/S - Capital Center B 3,452 5,254 46.1 250 84.1% floating, 15.9% fixed 98.9% amortizing, 1.1% bullet/IO 8.27 20.92
Jyske Realkredit A/S - Capital Center E 322,717 133,023 48.0 126.2 33.5% floating, 66.5% fixed 48.7% amortizing, 51.3% bullet/IO 14.93 35.08
Jyske Realkredit A/S - General Capital Center 4,403 1,873 27.6 320 100% fixed 100% amortizing 22.42 42.85
Nordea Kredit Realkredit A/S - Capital Center 1 2,651 3,533 34.0 237 36.6% floating, 63.4% fixed 100% amortizing 11.27 8.24
Nordea Kredit Realkredit A/S - Capital Center 2 499,016 251,811 51.6 143.4 22.8% floating, 77.2% fixed 47.4% amortizing, 52.7% bullet/IO 14.56 34.54
Nykredit Realkredit A/S - Capital Center C 308 2,103 13.4 25 100% fixed 100% amortizing 12.04 8.33
Nykredit Realkredit A/S - Capital Center D 19,125 18,498 39.7 21 85.3% other, 14.7% fixed 67.9% amortizing, 32.1% bullet/IO 15.68 19.31
Nykredit Realkredit A/S - Capital Center E 647,910 409,203 58.4 132.6 0.2% other, 99.8% fixed 67.6% amortizing, 32.4% bullet/IO 9.69 28.95
Nykredit Realkredit A/S - Capital Center G 76,282 18,060 59.2 190 100% other 76.5% amortizing, 23.5% bullet/IO 26.44 60.49
Nykredit Realkredit A/S - Capital Center General 28,614 1,213 22.1 269 100% fixed 100% amortizing 14.17 15.56
Nykredit Realkredit A/S - Capital Center H 662,765 329,478 53.6 150.6 98.4% other, 1.6% fixed 35.3% amortizing, 64.7% bullet/IO 13.27 27.78
Nykredit Realkredit A/S - Capital Center I 12,596 3,252 59.0 242 100% fixed 100% amortizing 27.64 70.15
Realkredit Danmark A/S - Capital Center S 324,511 169,720 43.4 149.0 0.5% floating, 99.5% fixed 66.5% amortizing, 33.5% bullet/IO 14.29 30.31
Realkredit Danmark A/S - Capital Center T 452,927 198,396 46.8 146.0 99.9% floating, 0.1% fixed 34.8% amortizing, 65.2% bullet/IO 15.55 29.23
Realkredit Danmark A/S - General Capital Center 22,264 20,070 35.8 194 70.7% floating, 29.3% fixed 99% amortizing, 1% bullet/IO 15.45 20.51
Totalkredit A/S - Capital Center C 4,439 - 27.1 230 100% fixed 100% amortizing 5.2 2
*As reported by the issuer in the June 2022 Harmonised Transparency Template (HTT) report/cash flow profile. WA--Weighted-average. LTV--Loan to value. IO--Interest only. WAFF--Weighted-average foreclosure frequency. WALS--Weighted-average loss severity. DKK--Danish krone.

Table 7

Danish Mortgage Covered Bond Programs--Credit Enhancement
Program Covered bond type Country Asset type Covered bond rating Available credit enhancement (%) Target credit enhancement (%) 'AAA' credit risk (%) OC consistent with the current rating (%) Unused notches
Danske Bank A/S - Pool C LCB/SDO Denmark Mortgage AAA/Stable/-- 22.83 17.37 11.68 11.68 3
Danske Bank A/S - Pool D LCB/SDO Denmark Mortgage AAA/Stable/-- 7.49 6.37 2.5 2.5 3
Danske Bank A/S - Pool I LCB/SDO Denmark Mortgage AAA/Stable/-- 11.82 18.02 4.55 4.55 2
DLR Kredit A/S - Capital Center B LCB/SDO Denmark Mortgage AAA/Stable/-- 12.66 9.8 8.02 8.91 2
Jyske Realkredit A/S - Capital Center E LCB/SDO Denmark Mortgage AAA/Stable/A-1+ 6.44 3.4 2.5 2.5 2
Nordea Kredit Realkredit A/S - Capital Center 2 LCB/SDRO Denmark Mortgage AAA/Stable/A-1+ 9.25 2.5 2.5 2.5 5
Nykredit Realkredit A/S - Capital Center E LCB/SDO Denmark Mortgage AAA/Stable/-- 3.67 2.5 2.5 2.5 4
Nykredit Realkredit A/S - Capital Center H LCB/SDO Denmark Mortgage AAA/Stable/-- 3.63 2.5 2.5 2.5 4
Realkredit Danmark A/S - Capital Center S LCB/SDRO Denmark Mortgage AAA/Stable/A-1+ 5.08 3.53 2.5 2.5 4
Realkredit Danmark A/S - Capital Center T LCB/SDRO Denmark Mortgage AAA/Stable/A-1+ 7.23 2.5 2.5 2.5 4
DLR Kredit A/S - General Capital Center LCB/RO Denmark Mortgage AAA/Stable/-- 12.04 2.5 2.5 2.5 2
Jyske Realkredit A/S - Capital Center B LCB/RO Denmark Mortgage AAA/Stable/A-1+ 22.3 5.87 2.5 5.87 3
Jyske Realkredit A/S - General Capital Center LCB/RO Denmark Mortgage AAA/Stable/A-1+ 63.14 13.28 9.17 9.17 3
Nordea Kredit Realkredit A/S - Capital Center 1 LCB/RO Denmark Mortgage AAA/Stable/A-1+ 98 4.52 2.5 2.5 5
Nykredit Realkredit A/S - Capital Center C LCB/RO Denmark Mortgage AAA/Stable/-- 10.39 8.56 8.56 8.56 4
Nykredit Realkredit A/S - Capital Center D LCB/RO Denmark Mortgage AAA/Stable/-- 28.98 17.25 17.25 17.25 4
Nykredit Realkredit A/S - Capital Center G LCB/RO Denmark Mortgage AAA/Stable/-- 19.01 16.85 16.09 16.09 4
Nykredit Realkredit A/S - Capital Center General LCB/RO Denmark Mortgage AAA/Stable/-- 12625 10.68 2.5 10.68 4
Nykredit Realkredit A/S - Capital Center I LCB/RO Denmark Mortgage AAA/Stable/-- 72.27 33.9 33.9 33.9 4
Realkredit Danmark A/S - General Capital Center LCB/RO Denmark Mortgage AAA/Stable/-- 23.58 13.37 13.37 13.37 4
Totalkredit A/S - Capital Center C LCB/RO Denmark Mortgage AAA/Stable/-- 118.91 2.5 2.5 2.5 4
LCB--Legislation-enabled covered bonds. RO--Realkreditobligationer. SDO--Saerligt daekkede obligationer. SDRO--Saerligt daekkede realkredit obligationer. OC--Overcollateralization

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The Danish Mortgage Sector Solved The Immediate Problem Of Interest-Only Mortgages, But Remains Vulnerable To Housing Slumps, Sept. 12, 2017

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