The Swedish CB is increasing its currency reserve with 100 bio. SEK (about 20 bio. USD) – also December 12th 2012:


Riksbanken has decided to strengthen the currency reserve equivalent of 100 bio. SEK. The decision has been made on the background of the increased risks to the Swedish financial system due to the insecure world situation the measures taken by the International Monetary Fund (IMF) have increased.


Riksbanken intends to borrow the foreign exchange through existing agreement with Riksgäldskontoret (Sovereign Debt Office). The reinforcement is incidental and should be wound down when deemed convenient.

Question: There is clearly a coincidence in time, but is there a connection?

Let’s do a quick estimate on the back of an envelope:

1)      The Danish real estate mortgage market is approximately 2,400 bio. DKK of this 1/3 is variable interest no service loans, equal to about 800 bio. DKK

2)      Nykredit market share is 40% and Nordea Bank AB (STO:NDA-SEK) is 16% (the figures are a couple of years old, but probably have not moved much due to petrifaction) – let be bold and say ½!

3)      Now ½ of 800 bio. DKK is 400 bio. DKK – which incidentally is the approximate holding “abroad” of Danish real estate mortgage bonds (all of them variable interest rate, as the convertible annuities – that are all-right – are locked up in Danish pension funds and insurance companies).

4)      Danske Bank is highly UNLIKELY to be a part of this, as they have borrowed 41 bio. DKK in the ECB with Danish CB guarantees (Nationalbanken) and has directly borrowed 15 bio. + 20 bio. DKK in Nationalbanken. The latter loans are possibly variable interest rate real estate mortgage bond left as collateral (own bonds don’t count) from the two smaller real estate mortgage institutions DLR (agricultural loans with an exceptionally high percentage of variable interest loans) and BRF – respectively.

5)      100 bio. SEK is approx. 86 bio. DKK or about 20% of the bonds “abroad”. But please note: This is in addition to what precautions the Riksbanken has already taken! But considering that Nordea Bank AB (STO:NDA-SEK) is about 1/3 of Nykredit it more or less adds up to the Nordea Bank AB (STO:NDA-SEK) share of the variable interest portion of the Danish real estate mortgages.

So yes: The figures add up reasonably, removing us a bit from pure guesswork.


It would be the way I would probably choose to disengage the Swedish Banks from the Danish real estate mortgage system. Note that this fattening of the currency reserve is to be wound down at convenience – that also implies the winding down of the variable interest rate mortgages in Denmark.

The other problem is how to save the Danish real estate mortgages in the context of an European Bank Inspection – one thing is an explicit paragraph in the agreement – which would turn over the Danish real estate mortgage system as such into the hands of the ECB.

The CB CEO Nils Bernstein retires February 1st 2013. His successor, Lars Rohde, CEO of ATP (pension fund) has this past week left office in ATP – notably no picture of Danske Bank CEO Eivind Kolding has been released from the reception. Lars Rohde has taken above mentioned Ane Arnth Jensen to task in the most public and embarrassing way for destroying the Danish real estate mortgage system at this time a couple of years ago. His intention was to save the Danish real estate bond; but said nothing about saving the mortgage banks.

With the 30 year convertible annuity hitting 3% interest rate this week and the variable interest hitting a similar 1/4%, probably to rescue as many variable interest debtors as possible – and their bonds as investment objects – chances are (I’m guessing here – assuming rational behaviour) that there will be a major “reform” either at the end of 2012 or before the European Bank Inspection starts work on March 1st 2013 – I might be wrong: But if you are not occasionally wrong all your correct predictions are worthless – as they most likely are made after the fact and on a false basis.