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Covered Bond Fight Sidelines Basel’s Bank Goals: Nordic Credit 

May 13, 2014
Peter Levring, Christian Weinberg, Bloomberg

A 3 1/2 year lobbying tour de force by Danish bankers and politicians is bearing fruit as Scandinavia’s smallest economy looks poised to persuade the European Union to sidestep Basel III liquidity rules.

At stake is Denmark’s $550 billion mortgage-backed covered bond market, the world’s largest per capita, which the government in Copenhagen says would be penalized by Basel rules that limit bank holdings of the securities. Denmark has argued it doesn’t have enough government bonds, favored by Basel, to make up for the shortfall in banks’ liquidity buffers.

On Friday, Denmark said the European Commission had listened to its concerns and will now recommend letting banks hold 75 percent more in covered bonds than Basel rules allow. Though the commission still has until June 30 to reveal its final decision, the development marks a victory for Denmark, which doesn’t hold a seat on the 27-member Basel Committee for Banking Supervision.

Read more: Bloomberg

 
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