Commissioner for Financial Stability,
Financial Services and Capital Market Union
Jonathan Hill
European Commission
Rue de la Loi
B – 1049 Bruxelles
Belgium
Parliament of Denmark
European Affairs Committee
Christiansborg
DK-1240 Copenhagen K
Tel. +45 33 37 55 00
Fax +45 33 32 85 36
www.ft.dk
Dear Commissioner Hill,
As chair of the European Affairs Committee of the Danish Parliament, allow
me to express my warmest welcome when you visit our Committee this com-
ing Friday. We look forward to an interesting exchange of views on a number
of items. I would like to stress one in particular, namely the new permanent
capital floor. As you know, the Basel Committee is considering setting a new
permanent capital floor based on a revised standardised approach. This new
permanent capital floor will apply evenly to all exposures including high quality
loans with low risk.
This will affect among other things the Danish mortgage credit system, which
over decades has proven to be a stable and successful framework for provid-
ing mortgage loans to Danes. Historically the Danish mortgage credit system
has experienced very low losses and its covered bonds have never led to
credit losses for investors – not even during the recent financial crisis.
The European Affairs Committee of the Danish Parliament (Folketinget) is
concerned that the Basel Committee’s expected proposal of setting a perma-
nent capital floor may jeopardize low risk banking models such as the Danish
mortgage credit system by imposing considerable and unjustified financial
burdens on these financial institutions.
Let me therefore on behalf of the European Affairs Committee urge you to
maintain the European Union’s risk sensitive approach to capital require-
ments, when implementing the Basel Committee’s recommendations into EU
legislation. I believe risk sensitivity is well suited for our many different local
business models in the European Union. Otherwise, I fear that we risk creat-
ing unnecessary obstacles for our financial institutions’ ability to finance eco-
nomic growth in the real economy of Europe.
Finally, I would like to thank the European Commission for having initiated a
broad consultation on the future of covered bonds in the European Union. I
believe that a European covered bonds system based on core elements of the
Danish mortgage credit system could facilitate an increased use of covered
29 February 2016
Ref. 15-000810-10
Contact
Nina Møller Porst
Committee Secretary
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