Heimdallr, Nykredit and Danish Banking Reform

By Tom
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Heimdallr, Nykredit and Danish Banking Reform

There is a character in Norse mythology called Heimdallr– he is not quite a god, but more of a janitor to divinity. He guards the rainbow bridge to Valhalla (sort of up-market Beverly Hills only accessible over the bridge to keep riff-raff OUT) where the dead warriors practise banging heads in all the time and having lots of roast pork for supper.

Heimdallr has foresight and can hear the grass grow so he will sound his bugle and get the gods with their entourage of head bangers on their feet when doomsday comes. Sort of marine master sergeant.

The following made me think of Heimdallr:


These are the slides from the workshop held by Nykredit mortgage bank and the contribution of CEO of the Bank Inspection Ulrik Nødgaard. Skip to page 25.

Here is the explanation for the rather rotten 2nd quarter 2012 of some banks.

New impairment rules based on the value of the property put up for collateral, not previous debtor behaviour as an insolvent debtor is by definition in distress. Now how do you evaluate when there is no market?

–          E.g. on Commercial property and property value assessment

rate of return

rental income (contractual terms, estimated rent value etc.)

cash flow and profitability

idle capacity

sales expenses

alternative property employment

–          Sustainability of contractual rental income


In short: No more banking hot air.

That was the bugle, now to the grass growing portion – what will the consequences be for the banks that will suffer?

–          •More patience in application of the solvency need as long as the solvency is above 8 percent

–          •Counter cyclical in timing of implementation

–          •Capital requirements above 8 percent to be fulfilled with CET1 (equivalent to the CRD-buffers)

–          •Banks whose capital fall below the buffers will be subject to sanctions :

–          •Banks will have to submit capital restoration plans

–          •Restrictions on the distribution of profits, payments on Tier 1 and Tier 2 instruments

–          •Restrictions on early repayment of capital

–          •Other

–          •Withdrawal of license even if above 8 percent if not sufficient progress towards capital restoration


A task force has had been set up:

–          •New task force will suggest methods to make the Danish banks and mortgage credit institutions both more resistant towards future price bubbles in the property market and hamper their contribution to such bubbles

–          •Lessons to be learned from comparable countries?

–          •Considering effects from recent adjustments already made by the mortgage credit institutions

–          •Possible categories of tools/methods covering both mortgage credit institutions and universal banks

–          •Considering possible effects/effectiveness of the different tools

–          •If needed proposals for new legislation, new executive orders or new reporting requirements

–          •The first meeting took place on the 10th of October 2012 and the task force will submit its report at the beginning of 2013


The so-called Macro Prudential Council, where the banks are NOT represented:

Proposal to be put before Parliament in November 2012 in order for the Council to be set up in the first half of 2013.




Denmark is not a member of the Euro-zone? Or is she?


Where do you think they get all these brilliant ideas from?


Up to now efforts have been concentrated on the small banks in distress; but this is forming up for the attack on the major banks. That is going on not only in Denmark; but all over the continent, if I’m not wrong.


I think there is a basic misconception in the finance sector as to their importance and indispensability.


–          Do the banks really think that the European nations will just let the banks drag their economies into the abyss?

–          Do the banks think that the Japanese zombie existence is attractive to Europe?

Angela Merkel told Barack Obama with respect to Greece: “I will NOT repeat the bankruptcy of Lehman Brothers and throw the world into another disaster!”

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