Friday afternoon 20th april 2012 and weekend
- The Danish Central Bank received 7 day deposits of 200 bio. DKK (40-50 bio. USD) FROM undisclosed financial institutes banks in Denmark.
- The Danish Central Bank extended 3 year credits of 20 bio. DKK TO undisclosed banks in Denmark.
- During the weekend two bank were merged in two mergers with two other banks – none of the of any international significance.
In Denmark and information on a) and b) lifted from the Central Banks statistics on their web-site.
Apparently (guessing by the date) somebody placed 200 bio. DKK into the Central Banks short term deposits just before the mergers took place – during these mergers only a select few bank accounts were closed during the weekend – ordinary bank customers would not have noticed.
At the same time about 20 bio. DKK emergency credit was extended for 3 years.
Interpretation – or wild speculation whichever suits you.
That amount of cash hitting the CB with quicker than you can say “clerical error” is most probably in the context with mortgage banking. This leaves four possibilities.
- Danske Bank and its mortgage bank Realkredit Danmark. These institutions are highly unlikely in this context as around a month ago their problems were – if not solved, then postponed – through the ECB where the Central Bank had issued a guarantee of 40 bio. DKK for loans to Danske Bank. That should take care of Danske Bank for the moment.
- BRF is not large enough for moving that sort of money, as they have only less than 200 bio. DKK in outstanding loans. Furthermore a credit has been extended from the CB to Danske Bank presumably to buy BRF bonds and depositing these bonds as collateral in the Central Bank – a measly 15 bio. DKK. So it is not them.
- Nordea is unlikely, as it is a bank that has the Swedish State as an owner – besides they are not big enough on the mortgage market.
- This leaves Nykredit/Totalkredit which is actually the largest mortgage bank, though by far not the largest bank. Their bonds have been distributed among their more or less associate smaller banks.
During the last couple of years Nykredit has apparently been a constant pain in the posterior, as they have financed the smaller banks purchase of Nykredit bonds and have had debtors thrown down the gullet – financed by Nykredit. How do we know that? Well: In a case of one folding bank they actually lost some of their deposits in that bank. Furthermore: In another case there was some obscure backdating of transactions after the authorities moved in for the weekend kill of a bank.
Now the following is conjecture:
Nykredit probably got wind of something during the week – they have associated banks everywhere (spies) – but presumably the information was not accurate enough. The authorities were beastly enough to attack simultaneously twice – so Nykredit could not know there were only two commando raids. In consequence of that they would have called home all their distributed loans and the only place to leave them would be on a weekly deposit in the CB.
They could not have deposited them in foreign bank, as that would have involved severe speculation against the DDK – presumably to the degree of a criminal offence.
This naturally left some banks in an uncomfortable position – intolerable is a better word – thus the Central Bank had to advance these banks credit against the Nykredit bonds for an indefinite period (3 years is indefinite in this context).
What can possibly have been achieved?
- The authorities have been able to pick the time and place for their sanitation of a couple of sick banks. The urgency of the cases in hand could perhaps be debated, but rather than wait for a time pressed emergency rescue action the closing down of these distressed banks according to a schedule could minimize losses.
- The real reason – one suspects – is that the authorities found out precisely where and with what amounts each minor bank was in cahoots with – or rather to how badly these banks were dependent on – Nykredit.
What will happen?
It is very difficult to say:
- Presumably the official record will be corrected within a day or two – that has happened before: The Central Bank has unbelievably incompetent bookkeepers . This time the action has been taken before the closing of the books at the end of the month – and before the banks will have to transfer the full amount of the end-of-month transactions. This article might be the only record of the transaction – and they can always explain that away.
- Nykredit will perhaps be a bit more cooperative in the future after being caught with a smoking machine gun. Their official statements and initiatives has left something to be desired up to now.