Denmark Is Biggest Loser in Basel Plan Redefining Assets
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Denmark’s mortgage system, already fighting global liquidity rules the industry warns would spell its demise, is now battling a plan to redefine trading assets it says ignores the Nordic country’s centuries-old framework.
A proposal by the Basel Committee on Banking Supervision would require banks to shift all mark-to-market assets to trading books. That would force Denmark’s $480 billion mortgage industry to reclassify home loans as traded assets, even though they’re not resold. The plan also ignores the fact that a mortgage’s interest-rate risk is passed on to the bondholder, leaving issuers with a capital shortfall as big as $61 billion, according to the Association of Danish Mortgage Banks.