Danish housing banks chart

What has escaped the attention of the all is the fact that Nykredit (both bank and mortgage bank) was downgraded 3 notches and the very small DLR (mainly agricultural loans) a whole four notches.

The reason might be that there is a huge blind spot of about 40% of the market in so far as both Danske Bank’s mortgage bank: Realkredit Danmark and the small BRF have “broken of cooperation” with Moody’s Corporation (NYSE:MCO) about a year/½ a year ago. The reason was that Moody’s “didn’t understand” the Danish real estate mortgage system. Considering what has happened in the intervening period it is a safe bet, that an up to date rating would have been even worse than what made Danske Bank A/S (ADR) (PINK:DNSKY) and BRF sulk like schoolgirls without tickets at a rock concert.

So let’s forget about the banking side for the moment.

I do note the remarks of Barosso (chairman of the EU Commission) at the press conference yesterday. The PRIVATE debt in Denmark is huge 1672 bio. DKK seen in relation to a GDP of 1793 bio. DKK the private HOUSING debt is 93% of GDP.

We are here just talking people’s homes – and not that large part of the population that rents! So a debt the size of the GDP is resting on approximately half the population. Half of the loans are both adjustable rate and no service on principal

Secretary of Economics Margrethe Vestager commented in a TV interview that the government was “paying attention” to the problem.

Despite abysmal home sales and falling prices: The debt just continues to grow – at an annual rate of 2-2½%.

What Barosso in effect said: This can’t go on – something must be done.

Vestager’s response was in effect: We KNOW.

At the center of this stands the mortgage banks: Something will have to be done.

What will happen? I don’t know; but something. And I do think the Danish government is slightly better prepared than Spain is.

One thing is certain: Those real estate bonds can’t be sold at the open market. Apparently the CB has no problem selling sovereign bonds at usury prices. So in some way these mortgage banks will be brought under control.

When? Well an appropriate time would be when the chairmanship in the EU is handed over to Cyprus at the end of June. But things may move faster that!

Today Danske Bank announced the retirement of 2 CO’s – actually that the previously announced retirement/dismissal had been brought forward a fortnight. Something must have happened.

So might not so much be the banks that have moved to the top of the agenda – but the mortgage banks.