Danmarks Nationalbank Report and Accounts

Transcription

Report and
Accounts
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2005
Danmarks
Nationalbank
Report and Accounts 2005
REPORT AND ACCOUNTS 2005
At the meeting of the Board of Directors held on 20 March 2006 the Board of Governors
reported on the activities of Danmarks Nationalbank. The report was noted.
Danmarks Nationalbank's accounts for 2005 were submitted by the Board of Governors
for adoption on the recommendation of the Committee of Directors. The Board of
Directors and the Royal Bank Commissioner accepted the recommendation.
This Report is based on information available up to 2 March 2006.
The small picture on the front cover is a section of the fairy tale coin "The Little Mermaid",
which is the second coin in a series of five with fairy tales as their common theme. The
motif was designed by the sculptor Tina Maria Nielsen.
Text may be copied from this publication provided that Danmarks Nationalbank is specifically stated as the source. Changes to or misrepresentation of the content are not permitted.
The Report and Accounts is available on Danmarks Nationalbank's website:
www.nationalbanken.dk under Publications and can be ordered by filling in the form on
Danmarks Nationalbank's website.
The Report and Accounts 2005 is also available on request from:
Danmarks Nationalbank
Information Desk
Havnegade 5
DK-1093 Copenhagen K
Telephone: (+45) 33 63 70 00 (direct) or (+45) 33 63 63 63
Office hours: Monday-Friday 9.00 am-4.00 pm.
E-mail: [email protected]
Explanation of symbols:
-
Magnitude nil
0
Less than one half of unit employed
•
Category not applicable
… Data not available
Details may not add because of rounding.
Datagraf, Auning A/S
ISSN 1397-520x
ISSN (Online) 1398-3849
3
Contents
FOREWORD ...........................................................................................
9
REPORT OF THE BOARD OF GOVERNORS
SUMMARY ............................................................................................
13
THE DANISH ECONOMY
International background ...................................................................
The Danish economy ............................................................................
Wage and price trends ........................................................................
Credit expansion ..................................................................................
Economic prospects ..............................................................................
16
20
24
26
27
MONETARY AND EXCHANGE-RATE POLICY
The framework of the fixed-exchange-rate policy ............................
The ECB's monetary policy ..................................................................
The monetary and foreign-exchange policy
of Danmarks Nationalbank .................................................................
The money market and the short-term interest rates .......................
32
37
FINANCIAL MARKETS
Interest rates .........................................................................................
Foreign-exchange markets ..................................................................
Stock markets .......................................................................................
40
44
47
THE DOMESTIC FINANCIAL SYSTEM
Banks .....................................................................................................
Mortgage-credit institutes ..................................................................
Investment associations .......................................................................
Pension companies ...............................................................................
The bond market ..................................................................................
Agreement on new capital-adequacy rules in the EU .......................
Himmerlandsbanken ............................................................................
Memoranda of Understanding ...........................................................
51
53
53
54
55
56
57
58
29
31
4
BANKNOTES AND COINS
Banknotes and coins in circulation .....................................................
Upgrading of banknotes .....................................................................
New banknote series ............................................................................
Counterfeit banknotes .........................................................................
Fairy tale coins ......................................................................................
Tower coins ...........................................................................................
2005 coin set .........................................................................................
Faroese banknote series ......................................................................
60
61
62
62
63
64
64
65
PAYMENT SYSTEMS
Development in payment and settlement systems ............................
Oversight ...............................................................................................
Infrastructure for krone-denominated payments .............................
Infrastructure for euro-denominated payments ................................
67
69
70
70
INTERNATIONAL MONETARY COOPERATION
Period of reflection in the EU ..............................................................
Non-EMU member states .....................................................................
Future enlargements of the EU ...........................................................
The Stability and Growth Pact .............................................................
Discussion of the IMF's future development ......................................
Debt relief from IMF to poor countries ..............................................
Lending by the IMF ..............................................................................
The IMF's macroeconomic and financial surveillance of Denmark ...
73
74
76
76
80
81
83
85
ORGANISATION AND TASKS OF DANMARKS NATIONALBANK
Danmarks Nationalbank's objectives and values ...............................
Danmarks Nationalbank's management ............................................
Departments .........................................................................................
Staff .......................................................................................................
Lectures .................................................................................................
Other initiatives in 2005 ......................................................................
Representation on committees, etc. ...................................................
Representation in international organisations ..................................
Danmarks Nationalbank's Anniversary Foundation of 1968 ............
Danmarks Nationalbank's guest apartments at Nyhavn 18 ..............
The Erik Hoffmeyer Travel Grant Foundation ....................................
87
89
91
95
98
98
101
101
103
104
104
RISK MANAGEMENT
Operational risk ....................................................................................
Danmarks Nationalbank's management of financial risks ................
105
106
5
DANMARKS NATIONALBANK'S ACCOUNTS FOR THE YEAR 2005
REPORT ON DANMARKS NATIONALBANK'S ACCOUNTS
Presentation of Danmarks Nationalbank's accounts .........................
118
APPENDIX
Press releases ........................................................................................
Danmarks Nationalbank's publications ..............................................
Danish bank holidays other than Saturdays and Sundays ................
136
152
154
APPENDIX OF TABLES ..........................................................................
155
Charts
Chart
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Growth in the gross domestic product, GDP .....................
Contribution to growth ......................................................
The balance of payments ...................................................
Wage increases in Denmark and abroad ..........................
Nominal and real effective krone rates .............................
Increase in consumer prices and IMI ..................................
Growth in lending by banks and
mortgage-credit institutes ..................................................
Borrowing by households from Danish banks and
mortgage-credit institutes ..................................................
Krone vis-à-vis euro .............................................................
The ECB's interest rates and short-term money-market
interest rate in the euro area .............................................
Lending rates of the ECB and Danmarks Nationalbank ...
Capital imports related to portfolio investments .............
Net position of the monetary-policy counterparties
vis-à-vis Danmarks Nationalbank .......................................
Interest-rate spreads to the euro area
in the money market ..........................................................
17
21
23
24
25
25
26
27
30
31
32
33
36
37
6
Chart
15 The discount rate and the bank's average
lending rates ........................................................................ 38
16 10-year yields in the USA, the euro area, Japan and
the UK .................................................................................. 40
17 10-year yield spreads to the euro area .............................. 43
18 Credit spreads for bonds from the euro area ................... 43
19 Dollar and yen vis-à-vis euro .............................................. 45
20 Pound sterling, Norwegian krone and
Swedish krona vis-à-vis euro .............................................. 47
21 Stock indices for the USA, the euro area, the UK
and Japan ............................................................................ 48
22 Stock indices for Denmark, Sweden and Norway ............. 50
23 Annual growth in deposits and lending ............................ 52
24 Assets of investment associations
by fund type, year-end ....................................................... 54
25 Premature redemptions of mortgage-credit bonds
and bond yields ................................................................... 56
26 Banknotes in circulation ..................................................... 61
27 Counterfeit banknotes found in circulation ..................... 62
28 Estimated budget deficit and debt in EU member
states in 2005 ........................................................................ 79
29 Outstanding IMF lending, year-end ................................... 83
30 Gold price and exchange rates ........................................... 111
Tables in the text
Table
1 Key figures for the Danish economy .................................
2 The Danish labour market ..................................................
3 Intervention by Danmarks Nationalbank in
the foreign-exchange market ............................................
4 Lending to residents by mortgage-credit institutes
by loan type .........................................................................
5 Outstanding volume of listed domestic
krone-denominated bonds, nominal value .......................
6 Payments in kroner .............................................................
7 Payments in euro .................................................................
8 Staff turnover rate ..............................................................
20
23
34
53
55
68
68
96
7
Table
9
10
11
12
13
Staff groups .........................................................................
Interest-rate exposure of Danmarks Nationalbank ..........
Foreign-exchange exposure of Danmarks Nationalbank ...
Danmarks Nationalbank's value-at-risk .............................
Danmarks Nationalbank's loss in
stress scenarios, end-2005 ...................................................
14 Total credit exposure on the foreign-exchange reserve
and the domestic securities portfolio, etc., end-2005 ......
97
108
109
110
112
114
Boxes
Box
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
The international development in housing prices ............
Description of the current-account-limit system ..............
Danmarks Nationalbank's monetary-policy instruments ...
Revaluation of the Chinese currency .................................
Oil and petrol prices and energy-related stocks 2005 .........
Fairy tale coins .....................................................................
Tower coins ..........................................................................
Coin set for children ...........................................................
The complete Faroese banknote series .............................
Exchange-rate regimes and target dates for euro area
membership for non-EMU member states ........................
Overview of significant amendments to the Pact ............
The IMF's medium-term strategy .......................................
The Multilateral Debt Relief Initiative, MDRI ...................
Overview of IMF visits to Denmark in 2005 and 2006 ......
The Board of Directors of Danmarks Nationalbank,
1 March 2006 .......................................................................
The Committee of Directors of Danmarks
Nationalbank, 1 March 2006 ..............................................
22
35
36
46
49
63
64
65
66
75
78
81
82
85
90
91
8
Appendix of Tables
Table
1
Annual accounts and monthly balance sheets of
Danmarks Nationalbank ....................................................
2 Specification of banknotes in circulation .........................
3 Specification of coins in circulation ..................................
4 Loans financing decentralised banknote holdings ..........
5 The banks' and mortgage-credit institutes'
net position with Danmarks Nationalbank ......................
6 Money stock .......................................................................
7 The official interest rates of Danmarks Nationalbank ....
8a The official interest rates of the European
Central bank .......................................................................
8b Eurosystem monetary-policy operations allotted
through tenders .................................................................
9 The foreign-exchange reserve ...........................................
10 Denmark's account with the International
Monetary Fund ...................................................................
11 Central rate and fluctuation band vis-à-vis euro
in ERM II ..............................................................................
12 Exchange rates ...................................................................
156
160
160
161
162
163
164
165
165
166
167
167
168
9
Foreword
Danmarks Nationalbank is the central bank of Denmark. Danmarks
Nationalbank was established in 1818 and has been a self-governing
institution since 1936. The legal basis for Danmarks Nationalbank's
activities is the Danmarks Nationalbank Act of 1936, according to which
Danmarks Nationalbank's objective is to maintain a safe and secure
currency system in Denmark, and to facilitate and regulate the traffic in
money and the extension of credit. In its formulation of monetary policy
Danmarks Nationalbank is independent of the Folketing (Parliament)
and the Government.
The Report and Accounts of Danmarks Nationalbank comprise a
presentation and description of Danmarks Nationalbank's Accounts for
the year 2005, and the Report of the Board of Governors. The Report of
the Board of Governors presents recent trends in the Danish economy,
the monetary and foreign-exchange-rate policy and the development in
financial and foreign-exchange markets, as well as a review of international monetary cooperation, together with Danmarks Nationalbank's
other areas of operation and its organisation.
In the quarterly monetary reviews Danmarks Nationalbank publishes
articles on recent trends in a number of areas – including the Danish
economy, monetary policy, financial conditions, statistics, banknotes and
coins, payment systems, the euro and cooperation within the EU. Articles
related to research and development work, often still ongoing, are published electronically as Working Papers. Moreover, Danmarks Nationalbank assesses the stability of the Danish financial sector in the annual
Financial Stability publication.
Copenhagen, 2 March 2006
Nils Bernstein
Torben Nielsen
Jens Thomsen
Report of the Board
of Governors
13
Summary
The economic upswing in Denmark became even stronger in 2005. GDP
grew by 3.4 per cent, against 1.9 per cent in 2004. Private consumption
rose considerably as a result of higher disposable incomes, low interest
rates, new loan products and accelerating housing prices. Housing prices
increased by 22 per cent for the full year. Exports and imports rose
significantly, and the current-account surplus remained high. At 1.7 per
cent, inflation was still low.
The upswing is set to continue in 2006. Growth in private consumption is
likely to be high, and if property prices continue to rise this will stimulate consumption further. Residential and non-residential investments
will be at a high level, and exports will be positively affected by sound
growth in the export markets. Although Danmarks Nationalbank's raising of its interest rates in recent months may to some extent dampen
demand, there is still a risk of the economy overheating. If the positive
development is to continue, fiscal policy must not contribute to increasing demand.
There was a large government surplus in 2005 as a result of the favourable cyclical development, as well as extraordinarily high revenue from
the taxation of pension yields and from oil and gas activities in the
North Sea. Growth in government consumption diminished, but at 1.3
per cent still exceeded the government's target. The implementation of
the local-government reform in 2006 will require further management
of expenditure if the target for government consumption is to be met.
Since the surplus is partly of a temporary nature, and as there are
increasing capacity problems in the labour market, the surplus should be
used solely to reduce government debt.
Unemployment fell significantly during 2005, and by the end of the year
was back at the low level seen in 2001. Employment rose by approximately 17,000. Unemployment is expected to decline further. In the
construction industry and the financial sector there is already a considerable shortage of labour, and the labour market councils expect more
bottlenecks in 2006. So far, accelerating wage increases have not been
registered, but the labour market should be monitored closely.
14
The strong economy gives scope to expand the workforce, but without
labour-market reforms, including measures that take rapid effect, it will
be hard to achieve a sustained increase in employment. A solution would
be to employ labour from e.g. eastern Europe and Germany. This has
helped to ease the pressure on the labour markets in countries such as
Ireland, the UK and Norway.
The profits of the Danish banks and mortgage-credit institutes increased
substantially again in 2005. The largest banks achieved a return on
equity after tax of around 18 per cent, compared to 15 per cent in 2004.
This improvement is, among other things, attributable to the favourable
cyclical position, which contributed to high growth in lending and a
sustained low level of losses, as well as considerable remortgaging activity.
The upswing in the global economy continued in 2005, but at a lower
rate than in the preceding year. US growth was sound, while growth in
the euro area did not pick up until the 2nd half-year. The high rate of
global growth and China's integration into the global economy exerted
upward pressure on oil prices, but did not seriously affect the development in prices for other products or in wages.
The Federal Reserve continued to raise the fed funds target rate. It was
increased on nine occasions, from 2.25 per cent in January 2005 to 4.50
per cent in January 2006. Against expectations of higher inflationary
pressure in the future, the European Central Bank, ECB, raised its key
interest rate by 0.25 percentage points in December 2005 and in March
2006, to a total of 2.50 per cent.
Even though monetary policy was tightened in the USA, the US 10-year
yield remained by and large unchanged over the year. The equivalent
euro area yield fell as a consequence of uncertainty concerning the
future development of the European economy. The higher level of
interest rates in the USA contributed to strengthening the US dollar
against the euro, pound sterling and yen.
The krone remained stable vis-à-vis the euro again in 2005, at a level
close to its central rate. Danmarks Nationalbank sold foreign exchange
net for around kr. 18 billion in 2005 in connection with intervention to
stabilise the exchange rate. The foreign-exchange reserve was kr. 212
billion at the end of 2005, but fell to kr. 182 billion at the end of
February 2006 as a result of intervention.
15
In response to the ECB's raising of its interest rates, Danmarks Nationalbank raised its lending rate, discount rate and current-account rate by
0.25 percentage points in December 2005 and in March 2006. In addition,
the lending rate was raised by 0.10 percentage points in February 2006
following an outflow of foreign exchange. After the increase on 2 March,
the lending rate was 2.75 per cent, while the discount and currentaccount rates were 2.50 per cent.
Cyprus, Latvia, Malta and Slovakia joined ERM II in 2005, which means
that seven of the ten new EU member states are now ERM II participants.
The participation of the new currencies does not entail any adjustment of
the terms for the Danish krone.
The process to ratify the Constitutional Treaty for the EU was suspended
after the Treaty was rejected by referenda in France and the Netherlands
in the early summer of 2005. In March 2005 the EU member states agreed
on a reform of the Stability and Growth Pact. According to the European
Commission's estimate, 11 member states, including five euro area
member states, exceeded the Treaty's 3-per-cent limit for government
budget deficits in 2005.
By agreement with Denmark, the IMF began an assessment of the Danish
financial sector (FSAP), equivalent to the assessments performed in many
other member countries. The conclusions are expected to be published in
the autumn of 2006.
In 2006, Danmarks Nationalbank will initiate the process to design a new
Danish banknote series to replace the existing series from 1997. The first
banknote in the new series is expected to be issued in 2009.
To mark the bicentenary of the birth of Hans Christian Andersen, Danmarks Nationalbank began the issue of a new series of coins with fairy
tales as their common theme. In 2005 two fairy tale coins and two tower
coins were issued.
Danmarks Nationalbank's accounts for 2005 show a profit of kr. 4.9 billion,
compared to kr. 2.8 billion in 2004. This change is due primarily to an increase in value adjustments by kr. 1.9 billion and in other income by kr. 0.8
billion, while net income from interest fell by kr. 0.3 billion. Transfer of kr.
1.2 billion to the Value Adjustment Reserve leaves kr. 3.7 billion for distribution, of which kr. 0.7 billion (20 per cent) is allocated to the General Reserves and kr. 3.0 billion (80 per cent) is payable to the central government.
16
The Danish Economy
In 2005, Denmark achieved the highest economic growth for a number
of years. Especially domestic demand made a substantial contribution to
growth. At the same time, exports and imports increased considerably,
and the current-account surplus remained high. Employment rose, unemployment fell, and the labour market tightened. The rate of wage increase remained subdued, while inflation was pushed up by higher energy prices.
The favourable economic development, combined with extraordinarily
high revenue from the taxation of pension yields and from oil and gas
activities in the North Sea, resulted in a large government surplus.
The strong demand entails a risk of the economy overheating. If the
positive development is to be maintained, it is essential that fiscal policy
does not contribute to increasing demand. The strong economy gives
scope to expand the workforce, but without labour-market reforms it
will be hard to achieve a sustained increase in employment.
INTERNATIONAL BACKGROUND1
The upswing in the global economy continued in 2005, although at a
lower rate than in the preceding year, cf. Chart 1. Growth in the USA
and Japan was sound, while the euro area did not begin to pick up until
the 2nd half-year.
The high global growth increased demand for oil, and at end-2005 the
oil price in dollar terms was 50 per cent above the level one year before.
The oil price increase exerted upward pressure on global inflation, but
this was not fully reflected in prices for other products or in wages, and
inflation expectations also remained firm at a low level.
The USA saw a stable upswing in 2005 and GDP grew by 3.5 per cent. As
in the preceding years, growth was driven primarily by sound expansion
of private consumption and investments. Private consumption, stimulated by job growth and higher housing prices, rose more than real
disposable incomes, and the households' savings ratio was negative. The
high energy prices did not significantly affect consumption, and car sales
1
For a number of areas, official full-year figures for 2005 were not available at the time of going to
press. Unless otherwise stated, estimates from the OECD, Economic Outlook, no. 78, December 2005,
are used in these cases.
17
GROWTH IN THE GROSS DOMESTIC PRODUCT, GDP
Chart 1
Per cent
6
5
4
3
2
1
0
1996
Global
1997
1998
USA
1999
2000
Euro area
2001
2002
2003
2004
2005
Denmark
Note: Real growth in GDP.
Source: National statistics and IMF.
rose strongly over the summer. The hurricanes in the autumn only briefly dampened activity. Employment continued to rise, and unemployment
fell. Wage increases remained subdued.
Inflation, measured by the Consumer Price Index, CPI, accelerated as a
result of rising oil prices. In 2005, inflation was 3.4 per cent, against 2.7
per cent in 2004. Core inflation, defined as CPI excluding energy and
food, declined marginally during the year and was 2.2 per cent in 2005.
The Federal Reserve continued to raise the fed funds target rate in increments of 0.25 percentage points, from 2.25 per cent in January 2005
to 4.25 per cent at the end of the year, and further to 4.5 per cent in
January 2006. The tightening of monetary policy contributed to the dollar's strengthening.
Government finances improved in 2005, and the deficit was 3.7 per
cent of GDP, compared to 4.7 per cent in 2004. The main underlying
factor was higher tax revenue as a consequence of the favourable economic development. Government debt remained unchanged at around
64 per cent of GDP.
Imports were boosted by the strong domestic demand, and the total
current-account deficit increased to almost 6.5 per cent of GDP in 2005.
Strong demand for dollar-denominated financial assets, particularly from
countries in eastern Asia and from oil-producing countries, more than
18
compensated for the downward pressure on the dollar from the balanceof-payments deficit and contributed to low long-term yields.
Growth is expected to continue in the USA in 2006. Risks in relation to the
sustainability of the upswing mainly concern the housing market and the
imbalances in the US economy. The current balance-of-payments deficit reflects low savings, both in the public sector and for households. A slowdown in the rate of increase in housing prices may reduce consumption
growth, thereby contributing to improvement in the balance of payments.
In Japan, economic activity continued to pick up after many years of
stagnation. GDP growth of 2.8 per cent in 2005 was especially attributable to higher domestic demand. Rising employment underpinned private consumption, and business investments increased as a result of
sound business earnings. Price pressure was modest, and inflation was
-0.3 per cent in 2005. In the 4th quarter, core inflation became marginally positive. The Bank of Japan maintained its zero-interest-rate policy. The government deficit remained by and large unchanged at 6.5
per cent of GDP, and the debt rose to 170 per cent of GDP. As in many
other countries, the population of Japan is ageing, and in the longer
term it will be necessary to tighten fiscal policy.
In China, GDP grew by 9.9 per cent in 2005. The strong growth was
primarily driven by exports and investments and among other factors
reflects China's integration into the global economy. The high
investment level was set off by even higher savings, resulting in a large
current-account surplus. At the same time there was a substantial capital
inflow, e.g. as direct investments. In recent years, the People's Bank of
China has purchased US dollars in order to maintain a fixed exchange
rate vis-à-vis the dollar. In July, the fixed-exchange-rate policy was
adjusted in favour of a managed float based on a basket of currencies,
cf. Box 4 on p. 46. Subsequently, the renminbi strengthened slightly
against the dollar. In the long term, a stronger exchange rate may improve the households' purchasing power and increase the contribution
to China's growth from private consumption.
Viewed over the full year 2005, growth in the euro area was moderate,
and GDP increased by 1.3 per cent. In the 1st half-year, the weak economic development seen in 2004 continued, but growth picked up during
the 2nd half-year, primarily driven by exports and investments. Exports
were underpinned by sound growth in the global economy and weakening of the effective euro rate.
Unemployment fell by 0.4 percentage points during 2005, to 8.4 per
cent at the end of the year, and employment rose. The high unemployment in the euro area dampens household consumption.
19
Inflation, measured by the EU Harmonised Index of Consumer Prices,
HICP, was pushed up by the rising oil prices and remained above 2 per
cent for most of 2005, and thus above the medium-term target of below
2 per cent set by the European Central Bank, ECB. Core inflation, determined as HICP excluding energy and food, was stable at around 1.5 per
cent all year. In December 2005 and in March 2006 the ECB raised its key
interest rate by 0.25 percentage points to 2.50 per cent in the light of
expectations of higher future inflationary pressure.
The government deficit in the euro area overall was 2.9 per cent of GDP
in 2005. In many member states, fiscal-policy consolidation is not sufficiently strong – particularly since the sustainability of fiscal policy is under
pressure in view of the ageing populations. According to the European
Commission, for the fourth consecutive year France and Germany exceeded the 3-per-cent limit stipulated in the EU Treaty, cf. p. 79.
At the beginning of 2006, the euro area's economy is recovering, but
the strength of the domestic demand is uncertain. Rising consumer and
business confidence in e.g. Germany and Italy indicate that the upswing
in consumption and investments will gain momentum. Structural reforms are still required, and it is uncertain whether there will be any significant increase in employment.
In the UK, GDP grew by 1.8 per cent in 2005, which was less than in
the preceding years. The tightening of monetary policy in 2004 brought
down the rate of increase in housing prices from a very high level and
thus dampened consumption growth. Against this background, the Bank
of England in August 2005 lowered its base rate from 4.75 per cent to
4.50 per cent. The government deficit was 3.1 per cent of GDP. The
labour market remained tight, and inflation excluding energy rose to 1.6
per cent in 2005, from 1.1 per cent in the preceding year.
The upswing in Sweden continued in 2005. GDP grew by 2.7 per cent,
driven mainly by strong domestic demand. Exports increased during the
2nd half-year. In spite of the solid level of activity, employment rose only
slightly, wage increases were subdued and inflation was low. In June
2005, Sveriges Riksbank lowered its repo rate from 2.00 per cent to 1.50
per cent. The easing of monetary policy contributed to a weakening of
the Swedish krona. The repo rate was raised to 1.75 per cent in January
2006, and to 2.00 per cent in February 2006.
In Norway, GDP growth was 2.4 per cent in 2005. Growth was mainly
domestically driven, but the growth in employment was moderate. Core
inflation was stable at around 1 per cent throughout the year which is
below the inflation target of 2.5 per cent. Referring to sound economic
growth and expectations of higher inflation, Norges Bank raised its sight
deposit rate from 1.75 per cent to 2.25 per cent in the 2nd half-year.
20
THE DANISH ECONOMY
The economic upswing in Denmark that set in during 2003 became even
stronger in 2005. Compared with the euro area, Denmark is further into
the economic cycle.
GDP grew by 3.4 per cent, cf. Table 1. Domestic demand made the
largest contribution to economic growth, cf. Chart 2. Private consumption
was driven by higher disposable incomes, low interest rates, new loan
products and accelerating housing prices. Car sales almost reached the
record high of 1998. As a result of the consumption growth, the privatesector savings ratio fell. Consumer confidence expanded to a higher level
in the autumn than during the upswing in the mid-1990s. Housing prices
rose by 22 per cent over the year. This stimulated residential investments,
which grew by 13.7 per cent. Equivalent increases in housing prices have
been seen in other countries, cf. Box 1.
Business investments rose in step with the expansion of capacity utilisation. The growth was especially related to investments in equipment, while
the decline in non-residential construction seen in recent years ceased. The
private savings surplus declined to 0.1 per cent of GDP in 2005.
KEY FIGURES FOR THE DANISH ECONOMY
Table 1
Real growth against the previous year, per cent
2001
2002
2003
2004
2005
Gross domestic product, GDP ...........................
0.7
0.5
0.7
1.9
3.4
Private consumption .........................................
Government consumption and investments ...
Business investments ........................................
Residential investments ....................................
0.1
2.8
-0.3
-9.3
1.5
1.5
0.8
0.8
1.6
-0.3
0.4
11.5
3.4
2.2
1.5
10.5
3.5
1.3
6.8
13.7
Domestic demand, excluding
stockbuilding ....................................................
1
Stockbuilding ...................................................
0.3
-0.3
1.4
0.3
1.3
-0.6
3.1
0.2
4.0
0.1
Domestic demand, total ...................................
0.0
1.7
0.6
3.3
4.1
Exports ...............................................................
Imports ..............................................................
1
Net exports .......................................................
3.1
1.9
0.7
4.1
7.5
-1.1
-1.2
-1.7
0.1
2.7
6.4
-1.3
7.9
10.0
-0.5
Unemployment, per cent of labour force .......
2
Consumer price index , percentage growth ...
3
Housing price index , percentage growth ......
5.2
2.3
6.6
5.2
2.4
2.5
6.2
2.0
5.4
6.4
0.9
9.7
5.7
1.7
21.6
Current account, per cent of GDP ...................
Government balance, per cent of GDP ...........
3.1
1.2
2.5
0.2
3.2
-0.1
2.3
1.7
3.4
3.3
4
2.0
2.3
3.3
0.6
0.1
Private savings surplus , per cent of GDP .........
Source: Statistics Denmark.
1
Contribution to growth in GDP.
2
The EU Harmonised Index of Consumer Prices, HICP.
3
Quarterly statistics for prices of single-family and terraced houses published by the Association of Danish Mortgage Banks.
4
Current account minus government budget (rounded).
21
CONTRIBUTION TO GROWTH
Chart 2
Per cent
4
3
2
1
0
-1
-2
2001
Net exports
Private investments
2002
2003
Private consumption
Stockbuilding
2004
2005
Government demand
GDP growth
Note:
Private investments comprise business and residential investments. The contributions to growth from the individual demand components add up to total GDP growth.
Source: Statistics Denmark and own calculations.
The government surplus rose from 1.7 per cent of GDP in 2004 to 3.3 per
cent in 2005. The large surplus reflects the favourable economic development, and not least the extraordinarily high revenue from taxation of
pension yields and from oil and gas activities in the North Sea. Since the
surplus is partly of a temporary nature, and as there are increasing capacity problems in the labour market, the surplus should be used solely
to reduce government debt. Growth in government consumption diminished, but at 1.3 per cent still exceeded the government's objective. The
implementation of the local-government reform in 2006 will require
further management of expenditure if the target for government consumption is to be met.
Growth in both exports and imports was substantial. Particularly manufactured exports rose significantly. In contrast to 2004, the surplus on
trade in goods excluding energy did not decline in 2005. Improved competitiveness, cf. p. 24, is presumably one factor behind Denmark's
gaining market shares in 2005. Import growth was fuelled by strong
domestic demand, but also by the considerable imported element in
manufactured exports.
The current-account surplus totalled kr. 53 billion in 2005, which is kr.
19 billion higher than in 2004, cf. Chart 3. The surplus has been less sensitive to domestic capacity issues than previously, e.g. as a result of the
improved terms of trade and rising exports in the shipping sector. The
22
THE INTERNATIONAL DEVELOPMENT IN HOUSING PRICES
Box 1
In recent years, housing prices have soared in a number of countries, at times by doubledigit annual growth rates. This applies to e.g. Denmark, France, Ireland, Norway,
Spain, Sweden, the UK and the USA. The households' increasing housing wealth contributes to explaining the rise in consumption in these countries and has presumably
been a significant factor behind the current global upswing.
The housing market has primarily been driven by the low level of interest rates, but
higher disposable incomes and new loan products have also exerted upward pressure
on prices. The price increases for housing have been most pronounced in the large
cities, where the supply of new building plots is limited.
Significant housing price hikes have not been seen in all countries. In Japan, housing prices are still falling as a consequence of a protracted period of deflation, and in
Germany housing prices have by and large not risen for the last decade. After a
number of years with large housing price increases in the Netherlands, the price development has been relatively moderate since 2002, cf. the Chart.
In the UK, where growth in housing prices was previously at a very high level, the
tightening of monetary policy in 2004 led to price stabilisation. The tightening of US
monetary policy will probably dampen the price development in the USA, but if longterm yields do not rise significantly, prices are hardly likely to fall.
HOUSING PRICE INDEX
1996 = 100
300
280
260
240
220
200
180
160
140
120
100
80
1996
USA
1997
1998
UK
1999
2000
Netherlands
2001
2002
2003
2004
2005
Denmark
Note: Quarterly observations.
Source: EcoWin and the Association of Danish Mortgage Banks.
balance-of-payments statistics were restructured at the beginning of
2005, making comparisons with previous years subject to some uncertainty. The large current-account surpluses seen in recent years have reduced the external debt, which amounted to 5 per cent of GDP at the
end of the 3rd quarter of 2005.
23
THE BALANCE OF PAYMENTS
Chart 3
Kr. billion
80
60
40
20
0
-20
-40
-60
-80
1996
1997
1998
Current account, total
1999
2000
Goods
2001
Services
2002
2003
2004
2005
Interest and transfers, etc.
Note: Current sum of four quarters.
Source: Statistics Denmark.
The growth in employment that set in at the beginning of 2004 continued throughout 2005, and the labour market came under pressure.
Private-sector employment rose by 20,000, while public-sector employment diminished a little, cf. Table 2. The demand for labour was particularly strong in the service and construction sectors, while employment in manufacturing industry continued to recede. Unemployment
THE DANISH LABOUR MARKET
Table 2
1,000 persons, annual averages
2001
2002
2003
2004
2005
Wage and salary earners:
Private sector ..............................................
Public sector ................................................
Self-employed ...............................................
Total employment ........................................
Unemployed ..................................................
Labour force ..................................................
1,741
824
178
2,743
145
2,887
1,728
833
182
2,743
145
2,888
1,708
822
177
2,708
171
2,879
1,721
817
172
2,710
176
2,886
1,741
813
173
2,727
157
2,884
29
20
28
16
19
11
16
7
19
4
111
114
120
127
135
Activation by job centres .............................
Transitional allowance .................................
People under 65 receiving early
retirement benefit ........................................
Recipients of leave benefit, including
maternity/paternity leave ............................
Unemployment, per cent of labour force ...
Unemployment, EU definition,
per cent of labour force ...............................
43
40
42
41
39
5.2
5.2
6.2
6.4
5.7
4.5
4.6
5.4
5.5
4.9
Source: Statistics Denmark, Ministry of Finance, Eurostat and own calculations.
24
fell from 6.4 per cent in 2004 to 5.7 per cent in 2005 and by the end of
the year was back at the low level seen in 2001.
WAGE AND PRICE TRENDS
Seen in relation to the cyclical development, the development in wages
was subdued. The rate of wage increase in the private sector was 2.9 per
cent for the full year. Since the 2nd quarter of 2004, annual wage increases have been in the range of 3 per cent, compared to around 4 per
cent in 1995-2003. Wage increases in manufacturing industry, which is
the sector most exposed to competition, were higher than in the euro
area for the 10th consecutive year, cf. Chart 4.
Danish hourly wage costs are currently among the highest in the
world. If Danish enterprises are to be competitive, their product structure must differ from that of low-wage countries, and e.g. be more
knowledge-intensive, so that Danish goods and services do not compete
directly with output from such countries.
A decrease in the effective krone rate improved competitiveness. The
krone weakened vis-à-vis a number of currencies, including the US dollar, the pound sterling and the Norwegian krone, but strengthened
against the Swedish krona. At the end of 2005, the effective krone rate
was approximately 3 per cent below the level at the end of the preceding year, cf. Chart 5.
WAGE INCREASES IN DENMARK AND ABROAD
Chart 4
Per cent, year-on-year
6
5
4
3
2
1
0
1996
Denmark
Note:
1997
1998
Euro area
1999
2000
2001
2002
2003
2004
2005
Abroad, total
Abroad, total is the countries included in the effective krone rate index. The wage increases are weighted together using the weights of the index. Wage increases in the manufacturing sector.
Source: OECD, Statistics Denmark, Confederation of Danish Employers and own calculations.
25
NOMINAL AND REAL EFFECTIVE KRONE RATES
Chart 5
1980 = 100
112
110
108
106
104
102
100
98
96
94
92
1996
1997
Nominal
1998
1999
2000
2001
2002
2003
2004
2005
Real
Note:
The real effective krone rate based on hourly wages in manufacturing industry. The real effective krone rate
denotes the development in Danish wages compared in a common currency.
Source: OECD, Statistics Denmark, Confederation of Danish Employers and own calculations.
The oil price increases were reflected in inflation in Denmark, which, in
HICP terms, was 1.7 per cent in 2005, compared to 0.9 per cent in 2004,
cf. Chart 6. Domestic market-determined inflation (IMI), which expresses
INCREASE IN CONSUMER PRICES AND IMI
Chart 6
5
4
3
2
1
0
-1
-2
1996
Denmark
1997
1998
IMI
1999
2000
2001
2002
Euro area
Note: IMI is an expression of domestic market-determined inflation in Denmark.
Source: Statistics Denmark, Eurostat and own calculations.
2003
2004
2005
26
the development in business enterprises' payroll expenditure and profits,
was negative, since the higher prices for energy and certain other raw
materials were not fully passed on to consumer prices.
CREDIT EXPANSION
Total lending by banks and mortgage-credit institutes increased in 2005,
cf. Chart 7. In December, the annual growth was 15 per cent, against 9
per cent in December 2004. This is not quite as high as the growth in
lending seen during the strong upswing in the mid-1980s, but inflation
was higher then than today. The increase in lending has gone hand in
hand with higher deposits. This is reflected in the development in the
money stock, M2, which rose by 15 per cent in 2005 relative to 2004. M2
primarily comprises the deposits with banks of private individuals and
business enterprises, as well as their holdings of banknotes and coins.
Lending to households grew substantially in 2005 against the background of the escalating housing prices and the low level of interest
rates. In recent years the households' interest expenditure has become
more sensitive to changes in short-term interest rates as a consequence
of the increasing popularity of adjustable-rate loans and bank loans, cf.
Chart 8. A proportion of the adjustable-rate loans are capped-rate loans,
however, and this type of loan protects borrowers against excessive
GROWTH IN LENDING BY BANKS AND MORTGAGE-CREDIT INSTITUTES
Chart 7
25
20
15
10
5
0
-5
1985
Note:
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Total lending to households and the business sector, end of quarter. The most recent observations is from the 4th
quarter of 2005.
Source: Danmarks Nationalbank.
27
BORROWING BY HOUSEHOLDS FROM DANISH BANKS AND MORTGAGECREDIT INSTITUTES
Chart 8
Kr. billion
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2002
2003
Fixed-rate loans
Adjustable-rate loans
Bank loans for housing purposes
2004
2005
Fixed-rate deferred-amortisation loans
Adjustable-rate deferred-amortisation loans
Other bank loans
Note:
Year-end. Households include the self-employed. The breakdown by fixed-rate loans, adjustable-rate loans and
loans with and without deferred amortisation is partly estimated on the basis of the distribution of mortgagecredit loans by property category and loan type. Fixed-rate loans include index-linked loans. Adjustable-rate
loans include capped loans.
increases in interest rates. At the end of 2005, the value of outstanding
capped-rate bonds was equivalent to approximately 26 per cent of the
total lending at adjustable interest rates by the mortgage-credit institutes.
ECONOMIC PROSPECTS
The cyclical upswing is set to continue in 2006. Growth in private
consumption will probably be high and if property prices continue to
rise consumption will be stimulated further. The level of residential and
business investments will be high, and exports will be stimulated by
sound expansion on export markets. However, Danmarks Nationalbank's
interest-rate increases in recent months may to some extent dampen
demand.
Unemployment is expected to decline further, reaching the lowest
level for 30 years. In the construction industry and the financial sector
there is already a considerable shortage of labour, and the labour
market councils expect more bottlenecks in 2006. So far, accelerating
wage increases have not been registered, but the labour market should
be monitored closely.
28
The strong economy gives scope to get more people into employment,
but without labour-market reforms, including measures that take rapid
effect, it will be hard to achieve a sustained increase in employment. A solution would be to employ labour from e.g. eastern Europe and Germany.
This has helped to ease the pressure on the labour markets in countries
such as Ireland, the UK and Norway. Increasing the supply of labour can
ease the pressure on the labour market and maintain Denmark's competitiveness.
The situation does not warrant any easing of fiscal policy. Experience
from other countries, including the Netherlands, shows that procyclical
fiscal policy may lead to a protracted recession. Consequently, extremely
tight management of government expenditure is required. Since the
large government budget surplus is partly of a temporary nature, and as
there are increasing capacity problems in the labour market, the surplus
should only be used to reduce government debt.
29
Monetary and Exchange-Rate Policy
Again in 2005, the krone was stable against the euro at a level close to
its central rate.
Danmarks Nationalbank sold foreign exchange net for around kr. 18
billion in 2005 in connection with intervention to stabilise the krone.
The foreign-exchange reserve was kr. 212 billion at the end of 2005.
In December 2005 and March 2006, the European Central Bank, ECB,
raised its key interest rates. In response to the ECB's interest-rate adjustments, Danmarks Nationalbank raised the lending rate, the discount rate
and the interest rate on the current accounts of the monetary-policy
counterparties by 0.25 percentage points in December 2005 and by a
further 0.25 percentage points in March 2006. In addition, the lending
rate was raised by 0.10 percentage points in February 2006 as a consequence of an outflow of foreign exchange. After interest rates were
raised on 2 March, the lending rate was 2.75 per cent, while the discount
and current-account rates were 2.50 per cent.
At the beginning of 2006, Danmarks Nationalbank made a slight adjustment to the framework for the current-account deposits of the
monetary-policy counterparties.
In 2005 four new member states joined ERM II, the European exchangerate mechanism. The enlargement of the group of ERM II participants
does not entail any adjustment of the terms for the Danish krone.
THE FRAMEWORK OF THE FIXED-EXCHANGE-RATE POLICY
The objective of Denmark's monetary and foreign-exchange policy is to
keep the krone stable against the euro. Under normal circumstances the
Danish monetary-policy interest rates follow those of the ECB, so that a
constant interest-rate spread is maintained. In the event of small fluctuations in the exchange rate, Danmarks Nationalbank can intervene in
the foreign-exchange market to buy and sell foreign exchange in order
to stabilise the krone. If there is a more prolonged tendency for the
krone to strengthen or weaken, Danmarks Nationalbank unilaterally adjusts its monetary-policy interest rates.
Denmark has conducted a fixed-exchange-rate policy since 1982, from
1999 within the framework of ERM II, the European exchange-rate
mechanism. ERM II stipulates a fluctuation band for the participating
currencies vis-à-vis the euro of +/- 15 per cent around the central rate. As
30
a consequence of Denmark's stability-oriented economic policy and the
high degree of economic convergence with the euro area, a narrower
fluctuation band was agreed when Denmark joined ERM II, whereby the
krone may fluctuate by +/- 2.25 per cent around the central rate of kr.
746.038 per 100 euro. For a number of years the krone has been stable
at a level close to its central rate, cf. Chart 9.
The fixed-exchange-rate policy entails a clear distribution of responsibility for economic policy. Danmarks Nationalbank must ensure the stability of the krone vis-à-vis the euro. The government conducts fiscal
policy and other economic policy with the aim of stabilising the economic development in accordance with the requirements of a fixed exchange rate.
In 2005, four new member states joined ERM II as part of their preparations to adopt the euro: Cyprus, Latvia and Malta joined in May, while
Slovakia joined in November, cf. p. 74. The enlargement of the group of
ERM II participants to eight does not entail any adjustment of the terms
for the Danish krone. The central rates of the participating currencies
are determined solely in relation to the euro. The obligation to intervene if a participating currency reaches one of its fluctuation limits rests
exclusively on the central bank of the relevant member state and the
ECB.
KRONE VIS-À-VIS EURO
Chart 9
Kroner pr. 100 euro
720
730
740
750
760
770
1999
2000
Krone vis-à-vis euro
Note: Daily observations. Reverse scale.
2001
2002
Central rate of the krone
2003
2004
Fluctuation band
2005
31
THE ECB's MONETARY POLICY
The primary objective of the ECB's monetary policy is to maintain price
stability. In addition, the monetary policy is to support the general economic policies in the euro area, provided that this does not conflict with the
primary objective. The ECB defines price stability as a year-on year increase
in the EU Harmonised Index of Consumer Prices, HICP, of below but close to
2 per cent in the medium term. Monetary-policy decisions are based on
economic and monetary analyses designed to assess the future risks to price
stability. The economic analysis is based on a number of indicators of the
real economy and the development in prices, while the monetary analysis
among other factors considers growth in lending and the money stock.
Monetary policy in 2005
Consumer prices in the euro area, measured in HICP terms, rose by 2.2
per cent in 2005. The increase was attributable to higher oil prices,
which passed through to prices in the autumn especially. Core inflation
(HICP excluding energy and food) was around 1.5 per cent in 2005. Economic activity in the euro area picked up in the 2nd half of 2005, after
weak development in the 1st half of the year. At its meeting on 1
December 2005, the Governing Council of the ECB decided to reduce
monetary-policy stimulation and raised the minimum bid rate from 2.00
per cent to 2.25 per cent, cf. Chart 10. At its meeting on 2 March 2006,
THE ECB'S INTEREST RATES AND SHORT-TERM MONEY-MARKET INTEREST
RATE IN THE EURO AREA
Chart 10
Per cent
2.7
2.6
2.5
2.4
2.3
2.2
2.1
2.0
1.9
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
2005
The ECB's minimum bid rate
Marginal rate
Note: The last observation for the ECB's marginal rate is 28 February 2006.
Source: ECB.
Oct
Nov
Dec
Jan
Feb
2006
3-month money-market interest rate
32
the Governing Council decided to raise the minimum bid rate by a further 0.25 percentage points to 2.50 per cent. The interest-rate increase
in December was the first in five years, and both increases had been
gradually incorporated into money-market interest rates in the preceding months. The ECB stated the risk of higher inflation expectations
as a consequence of high oil prices, improved prospects for economic
growth and robust rates of growth in the broad monetary aggregate
and in lending as the background to the interest-rate increases.
THE MONETARY AND FOREIGN-EXCHANGE POLICY OF DANMARKS
NATIONALBANK
In response to the ECB's decision to raise its minimum bid rate, on 1 December 2005 Danmarks Nationalbank announced that the lending rate
would be raised from 2.15 per cent to 2.40 per cent with effect from 2
December, cf. Chart 11. The discount and current-account rates were also
raised, from 2.00 per cent to 2.25 per cent.
On 17 February 2006, Danmarks Nationalbank raised the lending rate
further, to 2.50 per cent. The background was an outflow of foreign exchange in the first weeks of February, among other things as a result of
Danish institutional investors' purchases of foreign shares and other securities.
LENDING RATES OF THE ECB AND DANMARKS NATIONALBANK
Chart 11
Per cent
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
1999
2000
The ECB's minimum bid rate
2001
2002
2003
2004
Danmarks Nationalbank's lending rate
Note: Prior to 28 June 2000, the ECB's fixed allotment rate.
Source: ECB and Danmarks Nationalbank.
2005
33
In response to the ECB's raising of the minimum bid rate, on 2 March
2006 Danmarks Nationalbank raised the lending rate from 2.50 per cent
to 2.75 per cent with effect from 3 March. At the same time, the discount rate and the current-account rate were raised from 2.25 per cent
to 2.50 per cent.
Prior to the raising of interest rates on 2 March, a number of banks
and mortgage-credit institutes deposited large amounts to their current
accounts with Danmarks Nationalbank. As this meant that the overall
limit for current-account deposits was exceeded, kr. 9.1 billion of the total
current-account balance was converted to certificates of deposit.
The krone was stable vis-à-vis the euro in 2005, cf. Chart 9. In the 1st
half-year the krone weakened slightly to a level close to its central rate.
Capital flows between Denmark and abroad often entail purchase and
sale of foreign exchange against kroner, which can affect the exchange
rate in the short term. The krone's weakening in the 1st half of 2005
coincided with an outflow of capital in connection with the insurance
and pension sector's purchases of foreign bonds, as well as other sectors'
purchases of foreign shares in 2005, cf. Chart 12. In addition, since May
2005 the yield spread between a 10-year Danish government bond and a
German government bond with an equivalent term to maturity has
mainly been negative. Net purchases of foreign bonds amounted to kr.
105 billion for the full year, while purchases of foreign shares totalled
kr. 79 billion. Non-residents purchased Danish bonds for a net kr. 149
CAPITAL IMPORTS RELATED TO PORTFOLIO INVESTMENTS
Chart 12
Kr. billion
60
40
20
0
-20
-40
-60
Q1
Q2
Q3
Q4
Q2
Q3
Q4
Q1
2004
2005
Net purchases of foreign shares by the insurance and pension sector
Net purchases of foreign bonds by the insurance and pension sector
Net purchases of foreign shares by other sectors
Net purchases of Danish bonds (issued in Danish kroner and foreign exchange) by non-residents
Note: Net capital imports are compiled on a net basis. Only selected items are included.
34
INTERVENTION BY DANMARKS NATIONALBANK IN THE
FOREIGN-EXCHANGE MARKET
Intervention purchase of foreign exchange,
kr. billion .......................................................
Intervention sale of foreign exchange,
kr. billion .......................................................
Net intervention purchase of foreign
exchange, kr. billion .....................................
Number of intervention days .......................
Table 3
1999
2000
2001
2002
2003
2004
2005
62
21
27
41
25
15
16
5
58
4
0
1
28
34
56
65
-37
55
24
11
41
35
24
20
-12
34
-18
35
Note: Compiled by settlement day.
billion in 2005, of which kr. 126 billion was denominated in foreign
exchange, however. Non-residents' net purchases of Danish kronedenominated bonds may have contributed to supporting the krone.
Typically, however, capital flows in connection with Danish bonds have
had a smaller impact on the exchange rate than residents' purchases of
foreign bonds and shares.1
Direct investments abroad by Danish business enterprises exceeded
non-residents' investments in Denmark by approximately kr. 17 billion in
2005. However, there is no direct correlation between the development
in the exchange rate and direct investments, among other things since
the impact on the exchange rate is often seen when the investment is
announced, not when it subsequently takes place.
In 2005, Danmarks Nationalbank sold foreign exchange net for around
kr. 18 billion in connection with intervention to stabilise the exchange
rate, cf. Table 3. After value adjustments, the foreign-exchange reserve
was kr. 212 billion at end-2005, but decreased to kr. 182 billion at the
end of February 2006 as a result of intervention.
Danmarks Nationalbank's monetary-policy instruments
On 2 January 2006, Danmarks Nationalbank adjusted the framework for
the current-account deposits of the monetary-policy counterparties. The
overall current-account limit was raised from approximately kr. 20 billion
to approximately kr. 25 billion. A large part of the increase was attributable to simplification of the system so that the counterparties are now
allocated standard limits. This entails that small counterparties are generally allocated higher limits than previously. The raising of the overall
current-account limit should also be viewed against the background of
the general economic development since the last adjustment of the
1
See Jakob Lage Hansen and Peter Ejler Storgaard, Capital Flows and the Exchange Rate of the Krone,
Danmarks Nationalbank, Monetary Review, 2nd Quarter 2005.
35
current-account limits in 2003. No counterparties' current-account limits
were reduced in connection with the adjustment. The current-accountlimit system is described in Box 2.
There have been no changes in the other monetary-policy instruments
in 2005. Danmarks Nationalbank's monetary-policy instruments are reviewed in Box 3.
The extent of monetary-policy lending has increased in recent years.
To a high degree the borrowing reflects an increase in the holdings of
certificates of deposit of the banks and mortgage-credit institutes, cf.
Chart 13. Interest in certificates of deposit has among other things increased in step with an increasing volume of payments related to the
refinancing of mortgage-credit loans. Certificates of deposit are
DESCRIPTION OF THE CURRENT-ACCOUNT-LIMIT SYSTEM
1
Box 2
In 1999, a ceiling (limit) was introduced for the monetary-policy counterparties' total
current-account deposits at the close of the day (i.e. at the close of the monetarypolicy day at 3.30 pm). The overall limit is approximately kr. 25 billion, broken down
as individual current-account limits for the counterparties. The standard currentaccount limit for the individual counterparties is kr. 100 million. Counterparties with
extensive activity in the money market, which therefore are key contributors to
smooth exchange of liquidity, have a supplement to the standard limit.
The purpose of the current-account limits is to prevent the build-up of large
current-account deposits that may be used for speculation in interest-rate and
exchange-rate changes if the krone is under pressure. The current-account limits also
contribute to ensuring a well-functioning money market since the counterparties are
encouraged to exchange liquidity among themselves.
The current-account limits only apply if the counterparties' total current-account
deposits exceed the overall limit. In other words, the monetary-policy counterparties
may exceed their individual limits, provided that the overall limit is not exceeded.
Deposits exceeding the individual limits also accrue interest at the current-account
rate for as long as the overall current-account limit is not exceeded.
If the overall limit is exceeded at the close of the day, deposits exceeding the
individual limits will be converted into certificates of deposit. Conversion is to the
certificate with the longest remaining term to maturity.
Via extraordinary operations in certificates of deposit, Danmarks Nationalbank
contributes to ensuring that the current-account limits do not present a problem in
relation to the daily settlement of payments. If there are indications during the day
that the current-account deposits at the close of the day will exceed the overall
current-account limits, Danmarks Nationalbank normally opens sale of certificates of
deposit. This allows the counterparties to adjust their current-account deposits so that
the total current-account limit is not exceeded.
1
The current-account limits applying at any time can be seen at Danmarks Nationalbank's website
(www.nationalbanken.dk).
36
1
DANMARKS NATIONALBANK'S MONETARY-POLICY INSTRUMENTS
Box 3
Danmarks Nationalbank makes two facilities available to the banks and mortgagecredit institutes that are monetary-policy counterparties.
Firstly, on the last banking day of each week, the counterparties can buy certificates
of deposit or raise loans against krone- and euro-denominated government and
mortgage-credit bonds as collateral. These transactions normally have a maturity of 14
days, and the relevant interest rates, called respectively the rate of interest on certificates of deposit and the lending rate, are identical. In addition, Danmarks Nationalbank purchases and sells certificates of deposit as needed, e.g. in connection with fluctuations in central-government payments.
Secondly, the counterparties can place funds as overnight current-account deposits.
Current-account deposits accrue interest at the current-account rate, which is lower
than the rate of interest on certificates of deposit. There is a limit to the counterparties' total current-account deposits, and each counterparty has been allocated a
share of the overall current-account limit.
The discount rate is a signal rate indicating the overall level of the monetary-policy
interest rates. None of the monetary-policy instruments directly accrue interest at the
discount rate. Since 1992, when the key principles for the current monetary-policy
instruments were introduced, the current-account rate has, however, been identical to
the discount rate.
1
For a detailed description of the monetary-policy and foreign-exchange-policy instruments, see Danmarks
Nationalbank, Monetary Policy in Denmark, 2nd edition, 2003, and Danmarks Nationalbank's website
(www.nationalbanken.dk).
NET POSITION OF THE MONEATRY-POLICY COUNTERPARTIES VIS-À-VIS
DANMARKS NATIONALBANK
Chart 13
Kr. billion
250
200
150
100
50
0
-50
-100
-150
2001
2002
Monetary-policy lending
2003
Certificates of deposit
2004
Current-account deposits
2005
Net position
37
INTEREST-RATE SPREADS TO THE EURO AREA IN THE MONEY MARKET
Chart 14
Basis points
16
14
12
10
8
6
4
2
0
-2
2004
1 month
2 months
2005
3 months
Note: Daily observations. Spread between Cibor and Euribor rates.
part of the liquidity reserve of the banks and mortgage-credit institutes.
Danmarks Nationalbank thus contributes liquidity in connection with
extraordinary market operations by repurchasing certificates of deposit.
Certificates of deposit may also be traded among or mortgaged by the
banks and mortgage-credit institutes in order to obtain liquidity via the
money market. Since the lending rate and the rate of interest on certificates of deposit are identical, there are no interest costs on borrowing
to finance purchase of certificates of deposit.
THE MONEY MARKET AND THE SHORT-TERM INTEREST RATES
In 2005, interest rates in the Danish money market1 generally followed
the money-market interest rates of the euro area. The average spread
between the short-term Danish money-market interest rates and those
of the euro area was around 5 basis points, cf. Chart 14. This was slightly
below the spread between Danmarks Nationalbank's lending rate and
the ECB's marginal rate. As in previous years, the spread was influenced
by the fact that many euro area banks adjusted their balance sheets at
1
The Danish money market is the interbank market for loan agreements and interest-rate derivatives
in kroner with a maturity of up to one year.
38
THE DISCOUNT RATE AND THE BANKS' AVERAGE LENDING RATES
Chart 15
Per cent
12
10
8
6
4
2
0
1999
2000
Discount rate
Deposit, business
2001
2002
Lending, business
Deposit, households
2003
2004
2005
Lending, households
Note:
The discount rate is on a daily basis. The other rates are quarterly average rates. The most recent observations are
from the 4th quarter of 2005 for average rates and from end-2005 for the discount rate.
Source: Danmarks Nationalbank and Statistics Denmark.
year-end. Consequently, the euro-area money-market interest rates rose
towards the end of the year as maturities began to extend into the next
year.1 However, the effect was less pronounced in 2005 than in 2004.
The spread widened in February 2006 after Danmarks Nationalbank
raised the lending rate and the rate of interest on certificates of deposit
by 0.10 percentage points.
The short-term money-market interest rates in the euro area were
stable until the end of September. Due to expectations of higher interest rates, the yield curve in the euro money market steepened towards
the end of 2005.
Cibor (Copenhagen Interbank Offered Rate) is a reference interest
rate for uncollateralised krone-denominated lending in the inter-bank
market. A number of banks report interest rates to Danmarks Nationalbank, which calculates and announces Cibor on a daily basis. The rates
reported by the individual banks are published by the Danish Bankers
Association. In April 2005, the group of banks participating in the
fixing of Cibor was extended to include four foreign banks, i.e. a total
of 12 banks, and the number of maturities for which Cibor rates are
1
See Kim Abildgren, Jacob Lindewald and Michal Chr. Nielsen, The 10-Year Yield Spread between
Denmark and Germany, Danmarks Nationalbank, Monetary Review, 1st Quarter 2005.
39
fixed was increased by six to a total of 14 maturities. The purpose was
to ensure the continued credibility and recognition of Cibor.
The banks' interest rates
Over the year, the banks' average lending rates fell by around 0.4 per
cent, while the deposit rates were virtually unchanged, cf. Chart 15. The
narrowing of the spread between the lending and deposit rates reflects
the increasing volume of loans against real property as collateral, among
other factors.
40
Financial Markets
Even though monetary policy was tightened in the USA the US 10-year
yield remained by and large unchanged over the year. The equivalent
euro area yield fell as a consequence of uncertainty concerning the future
development of the European economy.
The US dollar strengthened vis-à-vis the euro, pound sterling and yen in
2005. Among other things, this reflected the higher level of interest rates
in the USA.
US stocks increased moderately, while euro area stocks rose substantially, and Japanese stocks rose even more in 2005. As in the preceding
two years, the Scandinavian stock markets performed better than the
euro area.
INTEREST RATES
The yield on the benchmark 10-year US government bond increased
from approximately 4.3 per cent at the beginning of 2005 to approximately 4.4 per cent at end-2005, cf. Chart 16. In the 2nd quarter, the 10year yield fell, inter alia due to unrest in the market for credit bonds in
10-YEAR YIELDS IN THE USA, THE EURO AREA, JAPAN AND THE UK
Chart 16
Per cent
6
5
4
3
2
1
0
2003
USA
Euro area
2004
Japan
2005
UK
Note: Weekly observations. For the euro area, the yield on a 10-year German government bond is used.
Source: EcoWin.
41
the wake of the downgradings of General Motors and Ford, see below.
The unrest led to increasing demand for secure government bonds. At
the beginning of the 3rd quarter, the tide turned and the yield began to
rise, partly in reaction to stronger key indicators and increasing fears of
higher inflation as oil prices continued to rise.
The Federal Reserve tightened monetary policy on eight occasions in
2005. This raised the fed funds target rate by 2 percentage points in the
course of the year, to 4.25 per cent at end-2005. However, this did not
have any significant impact on long-term US yields and consequently the
yield curve for US government bonds flattened during the year. The
spread between the 10- and 2-year yields narrowed by approximately
120 basis points in 2005. The spread continued to narrow and by the end
of February 2006 the 10-year yield had fallen below the 2-year yield. In
January 2006, the fed funds target rate was raised by a further 0.25 percentage points to 4.50 per cent.
In the euro area, the yield on the benchmark 10-year German government bond fell from approximately 3.6 per cent at the beginning of 2005
to approximately 3.3 per cent at end-2005, cf. Chart 16. This led to a
widening of the 10-year yield spread to the USA by approximately 50 basis
points, to around 110 basis points. The falling yield in the euro area is
attributable to uncertainty regarding future economic growth, among
other factors. Towards the end of the year there were clearer indications
of an upswing. This strengthened the expectations of future inflationary
pressure, which contributed to the decision by the European Central Bank,
ECB, to raise its key interest rate by 0.25 percentage points in December
2005 and by a further 0.25 percentage points in March 2006.
Even though US monetary policy was tightened repeatedly, long-term
yields in the USA and in the euro area are still considered to be low. The
background includes globalisation effects, low and stable inflation expectations and purchases of government bonds by pension funds and Asian
central banks.1
The yield on the benchmark 10-year Japanese government bond remained relatively stable in 2005. At the end of the year, the 10-year yield
was approximately 1.5 per cent, cf. Chart 16. The discount rate remained
unchanged at 0.1 per cent in 2005, and was last adjusted in 2001.
In the UK, the yield on the benchmark 10-year government bond fell
from approximately 4.5 per cent at the beginning of 2005 to approximately 4.1 per cent at the end of the year, cf. Chart 16. In the 4th
quarter, the 10-year yield was lower than the 10-year US yield, among
1
See Allan Bødskov Andersen, John Hydeskov and Michael Sand, Why Are Long-Term US Yields Low?,
Danmarks Nationalbank, Monetary Review, 4th Quarter 2005.
42
other things because the Bank of England lowered its base rate in August. The 10-year yield spread to the euro area, which has been widening in recent years, narrowed substantially in the 4th quarter of 2005, cf.
Chart 17. The yield spread stabilised in December, to approximately 80
basis points at the end of 2005.
In Denmark, the yield on the benchmark 10-year government bond fell
from approximately 3.8 per cent to approximately 3.2 per cent in the 1st
half-year. The Danish yield fell more strongly than the euro area yield, so
that the 10-year yield spread to the euro area became negative in the
early summer, cf. Chart 17. In the 2nd half-year, the 10-year yield spread
stabilised, and was close to zero at the end of 2005. The low yield in
Denmark compared to the euro area reflects the strong Danish economy,
among other factors.
In response to the ECB's interest-rate adjustments, in both December 2005
and March 2006 Danmarks Nationalbank raised the lending rate, the discount rate and the interest rate on the current accounts of the monetarypolicy counterparties by 0.25 percentage points. After Danmarks Nationalbank unilaterally raised the lending rate by 0.10 percentage points to
2.50 per cent in February 2006, cf. p. 32, the 10-year yield spread to the
euro area widened slightly. After interest rates were raised on 2 March,
the lending rate was 2.75 per cent, while the discount and current-account rates were 2.50 per cent.
The yield on the benchmark 10-year Swedish government bond fell from
approximately 3.9 per cent at the beginning of 2005 to approximately 3.0
per cent in September. The explanatory factors included Sveriges Riksbank's lowering of its repo rate by 0.5 percentage points in June 2005, as
well as uncertainty concerning new rules for risk compilation by the
pension and life insurance sector.1 The spread to the euro area became
negative in May and remained negative until the beginning of December,
cf. Chart 17. In the wake of the announcement of the rules, which were
less restrictive than first expected, the downward trend reversed, and the
Swedish 10-year yield rose to approximately 3.3 per cent at the end of
2005. Sveriges Riksbank raised its repo rate from 1.50 per cent to 1.75 per
cent in January 2006, and to 2.00 per cent in February 2006.
In Norway, the yield on the benchmark 10-year government bond fell
from approximately 4.0 per cent at the beginning of 2005 to approximately
3.7 per cent at the end of the year. The sight deposit rate was raised by 0.25
percentage points in July and in November, to 2.25 per cent at end-2005.
1
In some respects, the new rules are similar to the "traffic lights" that the Danish Financial Supervisory
Authority operates with. The rules governing the Swedish pension and life insurance sector entered
into force on 1 January 2006 and leads to an increase in the demand for long-term bonds on the part
of the pension and life insurance companies.
43
10-YEAR YIELD SPREADS TO THE EURO AREA
Chart 17
Basis points
160
140
120
100
80
60
40
20
0
-20
2003
2004
Denmark
Sweden
2005
Norway
UK
Note: Weekly observations. For the euro area, the yield on a 10-year German government bond is used.
Source: EcoWin.
Credit spreads, i.e. the spread between the yields on, respectively, corporate and mortgage-credit bonds and a secure government bond, have
narrowed considerably in recent years, cf. Chart 18. This is attributable
among other factors to the falling level of interest rates and thus lower
CREDIT SPREADS FOR BONDS FROM THE EURO AREA
Chart 18
Basis points
200
180
160
140
120
100
80
60
40
20
0
2003
AAA
2004
AA
A
Note: Aggregate index of liquid euro-denominated bonds.
Source: J.P. Morgan and EcoWin.
2005
BBB
44
potential earnings from investment in highly rated government bonds.
This has attracted investors to less safe investments with higher expected
returns.
In April and May 2005, the US credit spread with the rating A, and especially BBB, widened substantially. This also affected the credit spread in
the euro area. The background was the downgrading of General Motors
and Ford.1 However, the spread soon narrowed again, and by mid-June
it was at around the same level as prior to the downgradings. The credit
spreads widened slightly in the 2nd half of 2005 and in the beginning of
2006.
FOREIGN-EXCHANGE MARKETS
The US dollar strengthened in 2005 in spite of sustained large balanceof-payments and government budget deficits. Altogether, the dollar
strengthened by approximately 11 per cent vis-à-vis the euro and the
yen, and by approximately 8 per cent against the pound sterling. At the
end of 2005, the exchange rate was 1.19 dollars per euro, and it remained at around this level at the beginning of 2006, cf. Chart 19.
The strengthening of the dollar in 2005 should, inter alia, be viewed
against the background of the continued tightening of monetary policy
in the USA, which has led to a generally higher level of interest rates in
the USA than in the euro area and Japan. The uncertainty concerning
the economic development in the euro area, and the rejection of the
EU's Constitutional Treaty in France and the Netherlands in the early
summer, may also have contributed to the dollar's strengthening vis-àvis the euro.
At the end of July, the People's Bank of China announced that it
would adjust its fixed-exchange-rate policy vis-à-vis the dollar. This
entailed revaluation of the renminbi by 2 per cent against the dollar, cf.
Box 4. Subsequently, the dollar weakened marginally against the major
currencies for a brief period. This weakening was, among other things, a
result of uncertainty concerning China's future strategy in relation to its
dollar stock in the foreign-exchange reserve.
Viewed over the full year, the Japanese yen remained unchanged
against the euro. At the close of 2005, the exchange rate was 139 yen
per euro, cf. Chart 19. The relative parities of the two currencies were,
however, volatile during the year.
1
General Motors and Ford are among the largest issuers of corporate bonds. Combined, the two
companies have an outstanding bond volume of approximately 320 billion dollars, equivalent to
approximately 10 per cent of the total outstanding volume of corporate bonds in the USA.
45
DOLLAR AND YEN VIS-À-VIS EURO
Chart 19
Dollars per euro
Yen per euro
1.45
145
1.40
140
1.35
135
1.30
130
1.25
125
1.20
120
1.15
115
1.10
110
1.05
105
100
1.00
2003
Dollars
2004
2005
Yen (right-hand axis)
Note: Weekly observations.
Source: EcoWin.
In the 1st half of 2005, the pound sterling strengthened by approximately 6 per cent against the euro, cf. Chart 20. The situation reversed in the
2nd half-year, and sterling weakened briefly, while the development in
the rest of the year was relatively stable. Over the full year sterling appreciated by approximately 3 per cent, to 0.69 pounds sterling per euro
at the end of 2005.
The Swedish krona weakened by approximately 4 per cent vis-à-vis the
euro in 2005, cf. Chart 20. The falling currency in the 1st half-year was e.g.
attributable to less positive growth prospects. During May 2005 there were
also mounting expectations that Sveriges Riksbank would lower its repo
rate. These expectations were fulfilled in June, when the repo rate was
lowered by 0.5 percentage points. Towards the end of the year, the krona
strengthened against the euro, which in part reflected growing expectations that Sveriges Riksbank would raise the repo rate. In January 2006 the
rate was increased to 1.75 per cent, and in February 2006 to 2.00 per cent.
At the end of 2005, the exchange rate was 9.43 Swedish kronor per euro.
As the price of oil continued to rise throughout 2005, the Norwegian
krone strengthened vis-à-vis the euro, and by the end of the year it had
appreciated by approximately 3 per cent to 8.01 Norwegian kroner per
euro. Strong economic growth and Norges Bank's raising of the sight
deposit rate on two occasions contributed to the strengthening of the
46
REVALUATION OF THE CHINESE CURRENCY
Box 4
On 21 July 2005, the People's Bank of China announced that it would adjust the fixedexchange-rate policy vis-à-vis the US dollar in favour of a managed float based on a
basket of currencies. The four principal currencies in the reference basket are the dollar, the euro, the yen and the South Korean won. The weights of the individual currencies are determined on the basis of bilateral trade shares, the currency structure of
the external debt (interest payments), direct foreign investments (dividends) and the
currency structure for current transfers (includes e.g. development aid).
Under the new system, the People's Bank of China fixes a bilateral exchange rate on
a daily basis. The exchange rate is calculated on the basis of the closing rates for the
currencies in the reference basket on the preceding trading day. The day-to-day fluctuation band for the Chinese renminbi vis-à-vis the dollar has been set at +/- 0.3 per
cent. The day-to-day fluctuation band in relation to the other currencies in the reference basket is +/- 1.5 per cent.
On the transition to the new exchange-rate regime, the central rate was fixed at
8.11 renminbi per dollar, equivalent to revaluation by 2 per cent, cf. the Chart (left).
The day-to-day fluctuations after the change of currency regime have been small,
typically below +/- 0.05 per cent. The total appreciation vis-à-vis the dollar since 22
July 2005 has been just below 1 per cent.
In the period from 1994 – when China replaced a double exchange-rate system with
a system based on a single exchange rate – until 1997, the renminbi appreciated by
approximately 5 per cent vis-à-vis the dollar. From 1994 China by and large maintained a fixed-exchange-rate policy against the dollar, keeping the exchange rate constant at 8.28 renminbi per dollar since 1998, cf. the Chart (left).
The People's Bank of China uses intervention as a means of managing the exchange
rate of the renminbi, which has contributed to a rapidly expanding foreign-exchange
reserve in recent years, cf. the Chart (right). However, the liberalisation of China's
foreign-exchange policy in July has not led the People's Bank of China to stabilise the
reserve. On the contrary, it has continued to rise and amounted to approximately 819
billion dollars at end-2005.
RENMINBI VIS-À-VIS DOLLAR AND THE DEVELOPMENT IN CHINAS
FOREIGN-EXCHANGE RESERVE
Renminbi per dollar
8.0
Dollar billion
900
8.1
800
8.2
700
600
8.3
500
8.4
400
8.5
300
8.6
200
8.7
8.8
100
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Renminbi
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
China's foreign-exchange reserve
Note: Reverse axis for left-hand Chart.
Source: EcoWin.
Norwegian krone. At the end of the year, the krone weakened slightly
against the euro, e.g. reflecting lower oil prices and the ECB's raising of
its key interest rate.
47
POUND STERLING, NORWEGIAN KRONE AND SWEDISH KRONA VIS-À-VIS EURO
Swedish kronor and Norwegian kroner per euro
Chart 20
Pounds sterling per euro
10.0
0.82
9.5
0.78
9.0
0.74
8.5
0.70
8.0
0.66
7.5
0.62
7.0
0.58
2003
Swedish kronor
2004
Norwegian kroner
2005
Pounds sterling (right-hand axis)
Source: EcoWin.
STOCK MARKETS
The global stock markets rose overall in 2005, but with considerable
individual variations, cf. Chart 21. US stocks increased moderately, while
euro area stocks rose substantially, and Japanese stocks rose even more –
at a rate unsurpassed since 1986.
High demand for energy, and global oil production close to its
capacity limit led to rising oil prices in 2005, which was clearly reflected
in the global stock markets, cf. Box 5.
Up to the end of the 3rd quarter, US stock markets were influenced by
the tightening of monetary policy, the strengthening of the dollar and
higher energy prices, which flattened the price trend for US stocks. The
downgrading of the large US conglomerates General Motors and Ford,
cf. above, also contributed to keeping US stock prices down. However,
sustained high economic activity and rising employment helped to
prevent stock prices from falling, and towards the end of the year the
broad US stock index, S&P 500, edged upwards. Over the full year the
index increased by a total of 3 per cent.
From the beginning of 2005, euro area stock prices were under pressure from the weak economy. From May stock prices rose considerably,
however, e.g. as a result of the low interest rates. In addition, the
48
STOCK INDICES FOR THE USA, THE EURO AREA, THE UK AND JAPAN
Chart 21
January 2005 = 100
150
140
130
120
110
100
90
80
70
60
2003
S&P 500 (USA)
2004
S&P Euro (euro area)
2005
Nikkei 225 (Japan)
FTSE 100 (UK)
Source: Bloomberg.
weakening of the euro vis-à-vis the dollar improved competitiveness.
The stock index for the euro area, S&P Euro, rose by 23 per cent in
2005.
The Japanese stock index, Nikkei 225, remained virtually unchanged in
the 1st half of 2005, but then rose very strongly, primarily reflecting
more positive economic prospects. More than 90 per cent of the Nikkei
stocks rose, and 10 per cent of the companies more than doubled their
value during the year. Overall, Nikkei 225 rose by 40 per cent over the
year.
British stocks have generally been affected by the same factors as in
the euro area, but with the major difference that UK companies again in
2005 faced higher investment costs as a result of higher interest rates.
Economic growth in the UK generally diminished in 2005, but
nonetheless the FTSE 100 rose by 17 per cent over the year.
The Scandinavian stock markets matched the positive development in
euro area stock prices in 2005, cf. Chart 22. As in the preceding two
years, the Scandinavian stock markets performed better than the euro
area.
The increase in the Danish OMXC20 index – previously the KFX index
– was primarily attributable to the key A.P. Moller – Maersk stocks,
which accounted for just below one third of the increase. Danske Bank
and TDC also contributed to the positive development, and virtually all
49
OIL AND PETROL PRICES AND ENERGY-RELATED STOCKS 2005
Box 5
The rising oil price influenced the global stock markets in 2005. The impact on energyrelated stocks was positive, while other stocks were mainly negatively affected,
although to a lesser extent than expected in the market. The oil price rose from a
level of just under 45 dollars per barrel at the beginning of the year to 70 dollars per
barrel at end-August, i.e. an increase by more than 50 per cent in eight months. This
was the highest nominal level ever and the highest real level since 1981. In the
autumn the oil price dropped back to below 60 dollars, but has subsequently risen
moderately, cf. the Chart.
OIL AND PETROL PRICES AND US ENERGY-RELATED STOCKS
January 2005 = 100
225
200
175
150
125
100
75
50
2003
Oil
2004
Petrol
2005
US energy-related stocks
Note:
Weekly observations. Oil and petrol are the shortest generic futures contracts, i.e. the price of oil and
petrol for delivery in one month.
Source: Bloomberg.
The primary reason for the increase is sustained high demand for oil, e.g. from China,
which imports much of its consumption. The low investments in the oil sector in recent
years also began to influence price formation, since production capacity was close to its
upper limit. Moreover, the number of speculative investors increased as more investment banks and hedge funds sought arbitrage opportunities in the market. Several
temporary factors, e.g. resumption of Iran's nuclear programme and Hurricanes Katrina
and Rita in the Mexican Gulf, also exerted upward price pressure in some intervals.
Particularly the hurricanes had significant impacts on petrol prices, which increased
considerably on some days by, respectively, 20 per cent during Katrina and 14 per cent
during Rita. Even though petrol prices fell during the autumn the overall increase in
2005 was 60 per cent.
Energy-related stocks in both the USA and the euro area benefited from the higher
energy prices in 2005, which in both cases rose by approximately 30 per cent. These
were the sectors in S&P 500 and S&P Euro that saw the highest increases. Energyrelated stocks are included with a weight of only 9 per cent in the S&P 500, but are
the primary reason for the overall increase in the US stock markets 2005.
50
STOCK INDICES FOR DENMARK, SWEDEN AND NORWAY
Chart 22
January 2005 = 100
160
150
140
130
120
110
100
90
80
70
60
50
40
2003
OMXC20 (Denmark)
2004
OMX (Sweden)
2005
OBX (Norway)
Source: Bloomberg.
companies appreciated during the year. The overall index rose by approximately 37 per cent over the year, making 2005 the Danish stock
market's best year since 1997.
All stocks rose in the Swedish OMX index, and for the third consecutive year the electronics enterprise LM Ericsson made the most positive
contribution to the index. Norwegian shares benefited mainly from the
higher oil prices, and particularly Statoil and Norsk Hydro contributed to
the increase in the OBX index over the year.
51
The Domestic Financial System1
The substantial increase in the banks' profits continued in 2005, driven
by considerable growth in lending and historically low losses. The very
low losses are attributable to the favourable economic situation, but
also to the introduction of new accounting rules in 2005.
The earnings of the mortgage-credit institutes continued to rise in
2005, as a result of such factors as significant remortgaging activity and
sustained high growth in lending.
Favourable market conditions have led to positive, and increasing,
returns, which has strengthened the assets of investments associations
and the earnings of pension companies.
In 2005, the EU reached political agreement on the proposed directive
for new capital-adequacy rules, known as Basel II.
The banking supervisory authorities, central banks and finance ministries of the European Union in 2005 concluded a memorandum of understanding (MoU) on cooperation in financial crisis situations. The
Danish authorities have also entered into an MoU on financial supervision, supplemented by a bilateral MoU between the Danish Financial
Supervisory Authority and Danmarks Nationalbank.
BANKS
The banks improved their total profit after tax in 2005 against 2004. The
increase in the banks' revenue in 2005 was a result of substantial lending
growth, a sustained low level of losses and higher income from fees. The
largest banks achieved a return on equity after tax of around 18 per
cent, compared to 15 per cent in 2004.
Total lending by the banks amounted to kr. 1,095 billion at the end of
2005, compared to kr. 860 billion at end-2004. Lending growth is driven
by the favourable economic situation, combined with low interest rates,
which stimulates borrowing demand. The strong growth in the banks'
lending to households seen in recent years is to a large extent attributeable to increased lending for home financing on terms equivalent to
mortgage credit, i.e. variable-rate loans, long maturities and in some cases
deferred amortisation. The loans are granted against real property as
1
For a more detailed review and analysis of the financial system and its framework conditions, see
Danmarks Nationalbank, Financial Stability, which is expected to be published on 23 May 2006.
52
collateral and thus entail relatively low risk. These loans include "bank
mortgage loans", whereby both a lending and a deposit account are set
up in the borrower's name on the same interest-rate terms, typically at a
higher interest rate than for a mortgage-credit loan. The counterpart to
the increasing lending to households is higher liquidity, which is reflected
in a rising volume of deposits with the banks, cf. Chart 23.
Income from fees has risen significantly, primarily as a result of remortgaging activity and considerable trade in securities, including shares. The
banks' operating costs have increased due to investments in the expansion and adjustment of the branch network, as well as staff increases
in response to a higher level of activity.
As of 1 January 2005, the new international financial reporting standards, IFRS, were implemented in Denmark. Under the new accounting
standards, provisions for lending are no longer to be made on the basis
of a demonstrated risk of losses under the prudent accounting principle.
Instead, lending is written down according to a neutrality principle in
the event of value impairment. This means that one or several events
must have occurred that give an objective indication of a value impairment before claims are written down. Write-downs thus take place at a
later stage than provisions under the prudent accounting principle, and
often by a smaller amount.
ANNUAL GROWTH IN DEPOSITS AND LENDING
Chart 23
Per cent
25
20
15
10
5
0
2001
Growth in banks' deposits
Note:
2002
2003
Growth in banks' lending
2004
2005
Growth in mortgage-credit institutes' lending
Deposits from and lending to residents in the non-financial sector intermediated by banks and mortgage-credit
institutes located in Denmark, i.e. the head offices of Danish banks and mortgage-credit institutes and branches
and subsidiaries of foreign banking and credit institutions.
53
In 2005, write-down on lending was reduced from an already very low
level as a consequence of the favourable economic development and the
new accounting rules.
MORTGAGE-CREDIT INSTITUTES
The mortgage-credit institutes improved their total profit after tax in
2005 compared to 2004. The improved earnings are attributable to significant remortgaging activity and high growth in lending, cf. Chart 23.
Total lending by mortgage-credit institutes amounted to kr. 1,663 billion at end-2005, against kr. 1,488 billion at end-2004. Net new lending
rose by kr. 75 billion to kr. 163 billion in 2005. Adjustable-rate loans accounted for a large share of the growth in lending.
Adjustable-rate loans comprised 49 per cent of mortgage-credit lending
at end-2005, cf. Table 4. Loans with short fixed-interest periods of up to
and including 1 year, make up 71 per cent of the adjustable-rate loans.
Deferred-amortisation loans continued to win ground in 2005, and
there was also considerable remortgaging of existing loans to deferredamortisation loans. Deferred-amortisation mortgage-credit loans as a ratio
of total lending thus rose from 16 per cent at end-2004 to 26 per cent at
end-2005. The increase was more or less equally distributed on fixed-rate
and adjustable-rate loans.
INVESTMENT ASSOCIATIONS
At end-2005, investment associations managed total assets of kr. 724
billion, which is an increase of 40 per cent compared to 2004. Two thirds
of the increase is attributable to net payments received, while the remainder stems from investment returns. In relative terms equity funds
grew the most due to rising stock prices. At year-end, 36 per cent of the
LENDING TO RESIDENTS BY MORTGAGE-CREDIT INSTITUTES BY LOAN TYPE
Table 4
Per cent of total lending, year end
2003
2004
2005
Fixed-rate loans ............................................
of which deferred-amortisation ...............
57.1
1.2
49.6
5.0
45.7
18.2
Adjustable-rate loans ...................................
of which deferred-amortisation ...............
of which fixed-interest period ≤ 1 year ....
35.8
13.4
50.1
44.1
29.8
57.7
49.0
35.2
70.8
Index-linked loans ........................................
7.1
6.4
5.3
Note: Lending by mortgage-credit institutes excluding lending to Monetary Financial Institutions, MFIs.
54
ASSETS OF INVESTMENT ASSOCIATIONS BY FUND TYPE, YEAR-END
Chart 24
Kr. billion
800
700
600
500
400
300
200
100
0
2001
Danish bonds
2002
Danish shares
2003
Foreign bonds
2004
Foreign shares
2005
Mixed funds
assets of investment associations were placed in shares, 50 per cent in
bonds and the rest in mixed funds, cf. Chart 24.
At the end of 2005, private investors held 35 per cent of the investment certificates issued. The share held by pension companies remained
more or less unchanged at 30 per cent.
The new legislation on hedge associations, which came into force on 1
July 2005, makes it possible to set up hedge associations in Denmark.
Hedge associations are the Danish equivalent of hedge funds1. At the
end of 2005, a small number of associations had applied to the Danish
Financial Supervisory Authority for approval as hedge associations.
PENSION COMPANIES
Based on the market development and the financial statements presented, life insurance companies and professional pension funds, hereinafter pension companies, are generally assessed to have achieved positive investment returns in 2005. Significantly rising share prices in Europe,
modest increases in US stock market prices and relatively stable market
conditions are expected to have contributed positively to earnings in this
1
There is no clear definition of a hedge fund, but the term generally covers investment funds that are
not subject to regulation by the authorities in relation to either choice of strategy or risk profile.
Unlike investment associations, the Danish hedge associations will not be subject to limitation of
their options to gear or sell short in the market. See also Jesper Ulriksen Thuesen, Hedge Funds in
Denmark and Internationally, Danmarks Nationalbank, Monetary Review, 1st Quarter 2005.
55
sector in 2005. The pension companies' increasing use of financial instruments to hedge their investments against adverse fluctuations in interest
rates is also expected to have made a positive contribution.
Several pension companies increased their range of pension products
without interest-rate guarantees in 2005.
THE BOND MARKET
The total outstanding volume of listed krone-denominated bonds was
kr. 2,748 billion at end-2005, representing an increase by 8 per cent on
2004, cf. Table 5. The volume of outstanding government bonds fell by
kr. 95 billion, while the volume of mortgage-credit bonds rose by kr. 283
billion.
In 2005, premature redemptions of Danish mortgage-credit bonds
reached a record-high level of kr. 543 billion, an increase by kr. 233 billion from the preceding year. The increase should be viewed against the
background of the falling interest rates, cf. Chart 25. Bond yields continued to fall in 2005, from an already low level, cf. p. 42, and the minimum coupon rate was lowered from 3 per cent in the 1st half to 2 per
cent in the 2nd half of 2005. The minimum coupon rate for the 1st half
of 2006 remains unchanged at 2 per cent.
Trading in Danish government securities
Danish government securities are traded via electronic trading platforms
with various types of price quotation, and in the OTC market. A large part
of the electronic trading in Danish government securities takes place on
the electronic trading platform MTSDenmark. Government bonds have
been issued and traded on MTSDenmark since November 2003, and in
2005 trading in Danish Treasury bills was also introduced.
OUTSTANDING VOLUME OF LISTED DOMESTIC KRONE-DENOMINATED
BONDS, NOMINAL VALUE
Kr. billion
Table 5
2004
2005
Government bonds, etc. ...............................
Mortgage-credit bonds ................................
Other bonds ..................................................
630
1,806
116
535
2,089
125
Total ..............................................................
2,552
2,748
Anm.:
Both old and new mortgage-credit bonds are included in the statement of the outstanding volume of mortgagecredit bonds, and the figure is thus affected by the refinancing activity. As of December 2005, the value of
refinanced krone-denominated mortgage-credit bonds is estimated at kr. 383 billion. Government bonds, etc.
also include Treasury notes and Treasury bills.
56
PREMATURE REDEMPTIONS OF MORTGAGE-CREDIT BONDS AND BOND YIELDS
Kr. billion
160
Chart 25
Per cent
14
140
12
120
10
100
8
80
6
60
4
40
2
20
0
0
1996
1997
1998
1999
2000
Premature redemptions (left-hand axis)
30-year mortgage-credit-bond yield
2001
2002
2003
2004
2005
10-year government-bond yield
Note:
The benchmark 30-year mortgage-credit bond is the series priced below par in which bond loans are typically
issued. A switch to a new series takes place when a suitable outstanding volume has been reached. The yield on
the benchmark 30-year mortgage-credit bond is not a precise indicator of when it is favourable to remortgage.
In 2005, average daily turnover on MTSDenmark reached almost kr.
2 billion. Besides MTSDenmark, Danish government securities are
traded on other electronic trading platforms such as TradeWeb,
BloombergBondtrader and BondVision. In addition, a price-quoting
scheme has been established at the Copenhagen Stock Exchange. This
gives small investors access to a transparent and efficient market for
trading in Danish government securities.
AGREEMENT ON NEW CAPITAL-ADEQUACY RULES IN THE EU
In Denmark, a bill to implement the directive on new capital-adequacy
rules, known as Basel II, was submitted for consultation in February
2006. The bill is expected to be introduced in the Folketing (Parliament)
in the spring.
In the autumn of 2005, the EU reached political agreement on the proposed directive on new capital-adequacy rules. The new directive entails
amendments to the existing Banking and Capital-Adequacy Directives
and complies with the Basel Committee's revised recommendations for
an international capital adequacy framework. Basel II is a further development of the existing capital-adequacy rules, which are observed in
more than 100 countries worldwide. The aim is for capital requirements
57
to better reflect the risks incurred by the individual credit institutions in
the course of their business.
The directive in its final version is expected to be published during
2006, and will then be formally adopted by the EU Council of Ministers1.
The directive is to be transposed into national legislation of the member
states effective from the beginning of 2007. However, up to the end of
2007 it will still be possible for credit institutions to apply the existing
rules. The most advanced methods for calculation of the minimum
capital requirement cannot be applied before 1 January 2008.
The new capital-adequacy framework is thus in place. The more technical aspects will be determined by the European Commission after consultation with the European Banking Committee (EBC).
To ensure a well-functioning market, also in the financial area, it is important to ensure uniform implementation of the directive, and to work
towards convergence in its practical enforcement by the supervisory
authorities. Much of this work is vested in the Committee of European
Banking Supervisors, (CEBS), where for more than two years the national
supervisory authorities and central banks have been preparing common
guidelines, standards and recommendations, etc.
HIMMERLANDSBANKEN
Together with a number of banks (the Guarantee Consortium) Danmarks
Nationalbank provided a guarantee of maximum kr. 150 million in connection with the compulsory winding-up of Himmerlandsbanken in August 1993. Danmarks Nationalbank's share was kr. 90 million. The purpose
of the guarantee was to cover certain concrete exposures that were not
taken over by Spar Nord in connection with its assumption of most of the
assets and liabilities from Himmerlandsbanken, and also to cover unbooked guarantees or compensation claims on the Himmerlandsbanken
winding-up estate. The purpose of the guarantee was not to cover the
share capital or subordinate capital. In addition to the maximum guarantee of kr. 150 million, Danmarks Nationalbank provided an unlimited
guarantee for unbooked liabilities. Claims accepted as simple claims on
the winding-up estate will be subject to the guarantees of the Guarantee
Consortium or Danmarks Nationalbank.
In April 2005, the estate being wound up lost the "bond case" at the
Danish Supreme Court, which thus upheld the previous rulings by the
court of Hobro and the Danish Western High Court. The ruling ordered
1
A preliminary version of the Directive, document number 12890/05, is available at the website of the
Council of the European Union, http://ue.eu.int.
58
the estate to acknowledge that the subordinate capital originally subscribed to as supplementary capital in the form of bonds in 1991 was to
be recognised as a simple claim on the estate being wound up. This meant
that the bonds were comprised by the Guarantee Consortium's guarantee. After the ruling, Danmarks Nationalbank attached importance to
initiating the procedures required to ensure that eligible claims under the
guarantee were met as soon as possible. Against this background a unanimous Guarantee Consortium decided to disburse payments to bondholders via VP Securities Services. In this way, the claims of all bondholders
were honoured according to the same principles. Disbursement took place
on 5 July 2005.
It is expected that the estate will be finally wound up in the 1st half of
2006, after which the guarantees can be released. Danmarks Nationalbank's contribution to the winding-up of Himmerlandsbanken will hereafter amount to approximately kr. 90 million, including the winding-up
costs. This is by and large equivalent to Danmarks Nationalbank's share
of the guarantee furnished by the Guarantee Consortium. A provision
for the guarantee commitment of kr. 90 million was made when it was
entered into in 1993. Consequently, the settlement of the estate is not
expected to have any significant impact on Danmarks Nationalbank's accounts for 2006.
MEMORANDA OF UNDERSTANDING
In 2005, Danmarks Nationalbank concluded several Memoranda of Understanding (MoU). A MoU is a declaration of intent and is not legally binding.
On 1 July 2005, the banking supervisory authorities, central banks and
finance ministries of the European Union agreed on a Memorandum of
Understanding on cooperation in financial crisis situations.1 The MoU relates to principles and procedures for exchange of information between
authorities within the EU in the event of a financial crisis where there is
a risk that the crisis will spread to several member states and also be of a
systemic nature. To further strengthen cross-border cooperation between the authorities, the MoU also includes such issues as contingency
planning, stress tests and crisis exercises.
In the spring of 2005, a Memorandum of Understanding concerning
financial supervision was concluded between Danmarks Nationalbank,
the Danish Ministry of Finance, the Danish Ministry of Economic and
Business Affairs and the Danish Financial Supervisory Authority. The MoU
1
A press release on the MoU is available at CEBS' website, www.c-ebs.org.
59
confirms the existing informal and pragmatic cooperation on maintaining financial stability and, if required, coordinating the handling of financial crises by the parties to the MoU. Responsibility for the cooperation is anchored in a Coordination Committee on Financial Stability
made up of representatives of all four authorities.
Under the MoU concerning financial supervision, Danmarks Nationalbank and the Danish Financial Supervisory Authority have concluded a
separate Memorandum of Understanding.1 This MoU is to contribute to
transparency in relation to the cooperation, and contribute to a clearer
division of tasks, easier administration and exchange of knowledge and
information between the two parties. The MoU comprises three subagreements on, respectively, the stability of the financial system, financial statistics, and payment systems and clearing centres.
1
Both Memoranda of Understanding are available at www.nationalbanken.dk.
60
Banknotes and Coins
Cash circulation increased by 8.1 per cent in 2005, which can be assumed
to be a result of high growth in private consumption. The total cash circulation was kr. 55.5 billion at year-end.
In 2006, Danmarks Nationalbank will initiate the process to design a
new Danish banknote series to replace the existing series from 1997. In
2005, Danmarks Nationalbank introduced a new, more secure 50-krone
banknote and a new Faroese 1,000-krone banknote.
To mark the bicentenary of the birth of Hans Christian Andersen, Danmarks Nationalbank commenced the issue of a new series of coins with
fairy tales as their common theme. In 2005, the first two coins in the
series, with motifs from "The Ugly Duckling" and "The Little Mermaid",
were issued.
Two new tower coins, with the motifs of Landet Church on the island
of Tåsinge and Nólsoy Lighthouse in the Faroe Islands, were issued in
2005, and in February 2006 they were followed by a tower coin depicting Gråsten Palace Tower.
BANKNOTES AND COINS IN CIRCULATION
The value of banknotes and coins in circulation was kr. 55.5 billion at end2005. This is an increase by 8.1 per cent from 2004.1 The large increase can
be assumed to be a result of high growth in private consumption.
The number of 500-krone banknotes has increased substantially in recent years and now constitutes 16 per cent of total banknotes in circulation. The increase in the circulation of 500-krone banknotes may be a
consequence of the increasing volume of banknotes circulated via ATMs.
The circulation of 200-krone banknotes has also increased considerably
in recent years, while the circulation of 100-krone banknotes is by and
large unchanged compared to 2000, cf. Chart 26. However, 100-krone
banknotes still constitute the largest share, 39 per cent, of total banknotes in circulation. The total circulation of banknotes rose by 8.4 per
cent in 2005, to kr. 50.4 billion at year-end.
1
As in Tables 2 and 3 in the Appendix of Tables on p. 160, the circulation is stated exclusive of
commemorative coins, the circulation of Faroese banknotes and certain older banknotes, and
therefore deviates from the figure stated on Danmarks Nationalbank's balance sheet.
61
BANKNOTES IN CIRCULATION
Chart 26
Index, 2000 = 100
140
135
130
125
120
115
110
105
100
95
2000
2001
50-krone banknote
500-krone banknote
2002
2003
100-krone banknote
1,000-krone banknote
2004
2005
200-krone banknote
The circulation of coins increased by 5.6 per cent to kr. 5.2 billion at
the end of 2005. Especially the circulation of 20-krone coins has increased.
Pursuant to the Danmarks Nationalbank Act of 1936 the circulation of
banknotes must be covered by Danmarks Nationalbank's holdings of
gold and other assets. Since September 1939 an exemption from the
gold coverage provision has been granted. The circulation is covered by
other assets.
UPGRADING OF BANKNOTES
A more secure 50-krone banknote with a hologram and fluorescent
colours was issued in August 2005. This marked the conclusion of the upgrading of Danish banknotes which Danmarks Nationalbank commenced in 2002. All Danish banknotes have now been upgraded with a
hologram and fluorescent colours. These security features make the
banknotes more difficult to counterfeit, as well as making it easier to
distinguish a genuine from a counterfeit banknote. The motifs on the
banknotes are unchanged, and the old banknotes remain legal tender,
but will be gradually withdrawn from circulation.
62
NEW BANKNOTE SERIES
In 2006, Danmarks Nationalbank will initiate the process to design a new
Danish banknote series to replace the existing series from 1997. Danmarks
Nationalbank will invite a number of artists to prepare design proposals
for the new banknote series. The chosen design is expected to be announced in the late summer of 2006, and the first banknote in the new
series is planned to be issued in 2009.
In current years a number of countries are introducing new and better
security features on their banknotes. In order to keep up with technological advances and to make it ever more difficult to counterfeit banknotes, Danmarks Nationalbank has begun work on a new banknote series.
Further upgrading of the present banknote series would be at the expense of aesthetics, and multiple changes to the same banknote series can
create uncertainty regarding the characteristics of an authentic banknote.
Consequently, major enhancements of banknote security are best
communicated in conjunction with the issue of a new banknote series.
COUNTERFEIT BANKNOTES
In 2005, 442 counterfeit banknotes were found in circulation, cf. Chart
27. This is a considerable decrease compared to the preceding three
years when more than 1,000 counterfeit banknotes were removed from
COUNTERFEIT BANKNOTES FOUND IN CIRCULATION
Chart 27
Number of banknotes
1,600
1,400
1,200
1,000
800
600
400
200
0
1996
1997
50-krone banknote
500-krone banknote
1998
1999
2000
2001
100-krone banknote
1,000-krone banknote
2002
2003
2004
2005
200-krone banknote
63
circulation every year. The number of counterfeit banknotes in 2005 was
at the lowest level since 1997. Part of the explanation may be that
Danmarks Nationalbank has enhanced the security of the banknotes, so
that a large proportion of the banknotes now in circulation have holograms and fluorescent colours. The new security features make it more
difficult to counterfeit banknotes and easier to distinguish a genuine
from a counterfeit banknote.
Only few attempts to copy the new security features have been detected. The 100-krone and 500-krone banknotes are still the banknotes
most frequently counterfeited.
FAIRY TALE COINS
In 2005, Danmarks Nationalbank introduced a new series of thematic
coins with motifs from Hans Christian Andersen's fairy tales, and the first
two coins in the series of five were issued. The motifs for the first two
coins, "The Ugly Duckling" and "The Little Mermaid" were designed by,
respectively, the sculptors Hans Pauli Olsen and Tina Maria Nielsen. The
fairy tale coins are presented in Box 6. The portrait of the Queen on the
obverse of the coins is by the sculptor Professor Mogens Møller.
The fairy tale coins are issued as 10-krone coins in three different editions – a gold coin, a fine silver coin and an ordinary 10-krone coin. The
gold and silver coins are issued to cater for the collector's market. The
prices of these coins exceed their face value. All fairy tale coins are legal
tender and can be exchanged at Danmarks Nationalbank at face value.
The gold coins with "The Ugly Duckling" and "The Little Mermaid" are
issued in maximum editions of 7,000 and 6,000, the silver coins in maximum editions of 75,000 and 60,000, while the ordinary 10-krone coins are
each issued in an edition of 1.2 million. The next fairy tale coin will be issued in the spring of 2006.
FAIRY TALE COINS
Issued
31 March 2005
Box 6
Issued
20 October 2005
64
TOWER COINS
Issued
28 January 2005
Box 7
Issued
15 September 2005
Issued
15 February 2006
TOWER COINS
Danmarks Nationalbank issued two more 20-krone coins with Danish
towers as the motif on the reverse in January and September 2005. The
motif for the sixth coin in the series, designed by the sculptor Øivind
Nygaard, is the tower of Landet Church on the island of Tåsinge. The
seventh coin, depicting Nólsoy Lighthouse in the Faroe Islands, was designed by the Faroese sculptor Hans Pauli Olsen. The eighth coin in the
tower series was issued in February 2006. Its motif of the tower of Gråsten
Palace was designed by the sculptor and graphic artist Sys Hindsbo. The
obverse of the tower coins shows a profile of the Queen. The tower coins
are presented in Box 7. The three tower coins were each issued in an
edition of 1.2 million.
2005 COIN SET
The Royal Mint's 2005 Coin Set was again issued in two editions, an
ordinary edition and a proof edition. The coins in the ordinary coin set
are minted with two strokes, which is one more than the ordinary coins
in circulation. The coins in the proof edition are minted with three
strokes. The medal in the 2005 Coin Set is a copy of the medal awarded
to Olfert Fischer and his men after the Battle of Copenhagen in 1801, in
which they defended Copenhagen against the British navy. The ordinary
and proof editions are issued in maximum 31,000 and 3,500 sets, respectively.
65
COIN SET FOR CHILDREN
Box 8
In February 2006, The Royal Mint for the first time issued a coin set
especially for children. The children's coin set includes the year's coins
minted with two strokes and a silver medal. The medal has space for
engraving a child's name. The motif for the medal is by the illustrator
Cato Thau-Jensen, who also designed the folder in which the coins are
mounted, cf. Box 8.
FAROESE BANKNOTE SERIES
A new Faroese 1,000-krone banknote was issued in September 2005. This
completes the Faroese banknotes series that was introduced in 2001. The
primary motifs on the new Faroese banknotes are inspired by Faroese
fauna, while the motifs on the reverse are reproductions of watercolours
of Faroese landscapes.
The primary motif on the new 1,000-krone banknote is a purple
sandpiper, and behind it a watercolour of a flock of birds is reproduced.
The motif on the reverse is a watercolour of the view from the island of
Sandoy.
The Faroese artist Zacharias Heinesen painted the watercolours for the
banknote series, which is presented in Box 9.
66
THE COMPLETE FAROESE BANKNOTE SERIES
Box 9
67
Payment Systems
The number and value of krone-denominated payments made via Danmarks Nationalbank's payment system, Kronos, increased in 2005. Settlement of krone-denominated payments in CLS Bank, the international
foreign-exchange settlement system, has increased considerably.
In March 2006 Danmarks Nationalbank's responsibility for oversight of
systemically important payment systems was enshrined in the Danish
Securities Trading Act.
It is planned for Denmark to join the new pan-European payment
system, Target2, in May 2008. Target2 will replace the euro module of
Kronos, and the Sumclearing and VP Settlement will be modified to
settle euro-denominated payments via Target2.
DEVELOPMENT IN PAYMENT AND SETTLEMENT SYSTEMS
The Danish payments infrastructure comprises several systemically important payment and settlement systems, i.e. systems that are important
in relation to financial stability. These systems settle various types of
transactions in kroner and euro. Danmarks Nationalbank acts as settlement bank for the systems, since settlement takes place via accounts at
Danmarks Nationalbank. Tables 6 and 7 show the transaction volumes in
these systems in, respectively, kroner and euro.1
Kronos is Danmarks Nationalbank's system2 for settlement of payments
in kroner and euro. The value and number of krone-denominated payments via Kronos increased in 2005. Kronos is the Danish part of the panEuropean euro payment system, Target. The number and value of eurodenominated payments transmitted via Kronos increased considerably in
2005 after weaker development in the preceding year. Around half of the
Danish euro-denominated payments are transmitted to Germany. The
transaction volume in the overall Target system continued to rise in 2005.
The Sumclearing is the Danish retail payment system for settlement of
Dankort (debit card) transactions, credit transfers, Betalingsservice (direct
debit), etc. The Sumclearing transaction volume rose in 2005. The Sum-
1
2
For a detailed description of the Danish payment and settlement systems and Danmarks Nationalbank's role in this connection, see Danmarks Nationalbank, Payment Systems in Denmark, 2005.
Kronos is an RTGS (real-time gross settlement) system that is primarily used for individual and instant
settlement of large payments.
68
1
PAYMENTS IN KRONER
Table 6
2003
2004
2005
Kronos
Number of transactions, '000 ........................
Value of transactions, kr. billion ..................
647
56,888
631
53,040
664
60,633
Sumclearing
Value of transactions, kr. billion ..................
986,537
4,242
1,088,030
4,421
1,120,807
5,027
VP settlement
Number of trading transactions, '000 ..........
Value of trading transactions, kr. billion .....
6,215
26,327
7,348
27,951
10,182
25,198
CLS Bank
Number of trades settled, '000 .....................
Number of trades settled, kr. billion ............
20
5,097
86
19,812
129
31,333
FUTOP settlement
Number of contracts, '000 .............................
771
704
994
Note:
For CLS Bank, the figures do not cover the full year 2003, since the Danish krone did not join CLS until 8 September 2003.
Source: Danish Bankers Association, VP Securities Services, Copenhagen Stock Exchange, CLS Bank and own calculations.
1
Figures for 2003 and 2004 have been revised in relation to Report and Accounts, 2004.
clearing is also used for settlement of a small, but growing number of
euro-denominated credit transfers.
VP Securities Services (VP) settles securities transactions and other transactions related to securities. The number of krone-denominated transacttions settled via VP rose substantially in 2005, while the total transaction
value decreased. On the other hand, the number of euro-denominated
transactions fell, but their total value increased.
PAYMENTS IN EURO
Table 7
2003
2004
2005
66,608
420,749
69,213
443,993
76,151
488,901
Of which Danish participants
Number of transactions, '000 .................
Value of transactions, euro billion .........
102.6
3,208
92.0
3,278
105.8
3,774
Sumclearing
Value of transactions, euro billion ...............
92.1
1.4
148.1
2.0
182.6
2.7
VP settlement
Number of trading transactions, '000 ..........
Value of trading transactions, euro billion ...
3.6
16.5
10.7
19.9
6.1
22.6
Target – all participating member states
Value of transactions, euro billion ...............
1
Source: ECB, Danish Bankers Association and VP Securities Services.
1
Figures for 2004 have been revised in relation to Report and Accounts, 2004.
69
CLS Bank is an international system for settlement of foreign-exchange
transactions in 15 currencies, including Danish kroner. Settlement of transactions in kroner rose significantly in 2005. Among other things, this
reflects that an increasing number of banks use CLS for settlement of their
foreign-exchange transactions.
FUTOP settlement comprises clearing and settlement of trading in futures and options in Danish kroner.1 The number of contracts rose considerably in 2005, partly as a result of increased activity on the part of
foreign participants.
OVERSIGHT
Danmarks Nationalbank oversees systemically important payment and
securities settlement systems in Denmark. The objective is to contribute
to a secure and effective payments infrastructure and thus to minimise
the potential risk that problems in payment and securities settlement
systems jeopardise financial stability. Oversight by Danmarks Nationalbank comprises Kronos, the Sumclearing and VP settlement, in the lastmentioned case in cooperation with the Danish Financial Supervisory
Authority. The ongoing oversight activities are described in the publication Financial Stability, while reports on the individual systems are published on Danmarks Nationalbank's website.
In order to distinguish more clearly between the tasks of Danmarks
Nationalbank and the Danish Financial Supervisory Authority in relation
to systemically important payment systems, in March 2006 Danmarks
Nationalbank's responsibility for oversight was enshrined in the Danish
Securities Trading Act. The amendment to the Act will be followed by a
revision of the Memorandum of Understanding (MoU) relating to this
area between Danmarks Nationalbank and the Danish Financial Supervisory Authority, cf. p. 58. The MoU is to ensure a clear delineation of
the elements of the payments infrastructure that are subject to oversight, as well as an appropriate division of work and exchange of information.
In November 2005, Kronos, the Sumclearing and VP Settlement were
reviewed by the IMF as part of its assessment of the financial system in
Denmark, cf. p. 85. The IMF's assessment of the Danish payments infrastructure will be published in the autumn of 2006.
1
In the 2nd half of 2005, trading, clearing and settlement of Danish futures and options gradually migrated to the Stockholm Stock Exchange. This is a consequence of the merger of the Copenhagen
Stock Exchange into the OMX Group.
70
INFRASTRUCTURE FOR KRONE-DENOMINATED PAYMENTS
Dankort with chip
In 2004, all holders of a Dankort or Visa/Dankort received a new card
with both a chip and a magnetic strip. The new card replaced the old
card with a magnetic strip only. A chip card is considerably more difficult
to counterfeit than a card which only has a magnetic strip.
The chip Dankort has had many technical teething problems, including
long response times when the chip is read. This has led many retailers to
block use of the chip in their terminals, so that only the magnetic strip
can be used. At present the chip is only used in approximately 2 per cent
of all Dankort transactions. The banks have launched a project aimed at
solving the chip Dankort problems in order to encourage chip-based
payments. The work will be undertaken by PBS in dialogue with retailers
and their organisations.
New settlement cycle in VP
In order to enhance interaction between the Danish and international
securities markets, in June 2005 VP introduced a new settlement cycle,
VP60, for securities transactions in Danish kroner. VP60 takes effect at
noon, which is now the final deadline for settlement of transactions in
kroner. The introduction of VP60 extended the Danish settlement day by
1.5 hours. At the same time, the link from Euroclear, the international
central securities depository, to VP was upgraded, so that securities can
be transferred in real time, i.e. without any delay, between a participant's securities account in VP and Euroclear.
INFRASTRUCTURE FOR EURO-DENOMINATED PAYMENTS
Retail payments in Europe
In 2005, the European banks continued to develop a common infrastructure for retail payments in euro. The objective is to create a Single Euro
Payments Area (SEPA), in which there is no distinction between national
and cross-border payments. In 2005 the banks developed a common set
of rules for credit transfers, direct debit and payment cards. According
to the roadmap for SEPA, the banks must offer these payment services
as from 2008. The establishment of SEPA will contribute to reducing the
costs of cross-border retail payments within the EU and support the
development of the single market for goods and services.
In December 2005, the European Commission presented a proposal for
a directive on retail payments in the EU (New Legal Framework). The
directive is to harmonise the national rules for retail payments in the EU,
71
thereby supporting the development of SEPA. It is the intention of the
European Commission that the directive cover both national and crossborder payments, not only in euro but in all currencies.
Also in December 2005, the EU Council of Ministers achieved political
agreement on the Regulation on information on the payer accompanying transfers of funds. The regulation implements an international recommendation to combat the financing of terrorism.1 The essence of the
regulation is that in future transfers of funds must be accompanied by
information enabling the payer to be identified. Transfers of funds within the EU must include information on the payer's account number,
while transfers between EU member states and other countries must
also include information on the payer's name and address.
Target2
The development of a new pan-European system, Target22, for settlement of euro-denominated payments continued in 2005. The central
banks of Germany, Italy and France, which are jointly to develop and
operate Target2, have now completed the functional and technical
specifications for the system.
In mid-2005 it proved necessary to postpone the implementation of
Target2. Furthermore, it was decided that member states will migrate
from the existing Target to Target2 in three groups, since it is deemed to
be too risky, technically and operationally, for all member states to join
the system at the same time. The postponement entails that the first
member states will migrate to Target2 in November 2007, while Denmark will join the system in May 2008 as part of the final group.
At the same time, Denmark has decided to reorganise its payments infrastructure for euro-denominated payments. This implies that the Kronos
euro module will be replaced by Target2, and that the Sumclearing and
VP Settlement will be modified to settle euro-denominated payments via
Target2. The link to the Sumclearing and VP Settlement will be established via a special interface in Target2. This allows a choice of different
settlement models, including models that allow VP Settlement and the
Sumclearing in euro to continue according to the same principles as applied today. For the participants it is an advantage that multiple systems
settle euro-denominated payments via Target2, since a participant will in
principle be able to settle all positions via a single account, thereby using
1
2
Special Recommendation VII from the Financial Action Task Force (FATF) on money laundering and
the financing of terrorism, which has been adopted by all EU member states.
Target2 is an RTGS (real-time gross settlement) system. For a general description of Target2, see
Danmarks Nationalbank, Payment Systems in Denmark, 2005.
72
its liquidity more efficiently. Danmarks Nationalbank will coordinate the
Danish migration to Target2.
Sveriges Riksbank and the Bank of England have announced that they
do not wish to participate in Target2. This does not affect Danmarks
Nationalbank's decision to participate, one reason being that Denmark
has a different banking structure to Sweden and the UK. Only few of
the current 30 participants in the euro-denominated settlement have the
option to settle euro-denominated payments and gain access to intraday
liquidity in euro via branches/subsidiaries in the euro area. In Sweden
and the UK, on the other hand, most participants in euro-denominated
settlement are represented in the euro area.
73
International Monetary Cooperation
The process to ratify the Constitutional Treaty for the EU was suspended
after the Treaty was rejected by referenda in France and the Netherlands in the early summer of 2005.
Cyprus, Latvia, Malta and Slovakia joined ERM II in 2005, so that seven
of the ten new EU member states are now ERM II participants.
The Accession Treaty with Bulgaria and Romania was signed in April
2005 with a view to EU membership in 2007. In October, accession negotiations were opened with Turkey and Croatia.
In March 2005, the EU member states agreed on a reform of the Stability and Growth Pact. According to estimates by the European Commission 11 member states, including five euro area member states, exceeded the Treaty's 3-per-cent limit for government budget deficits in 2005.
The IMF adopted guidelines for 100 per cent debt relief to Heavily Indebted Poor Countries. The total lending by the IMF was halved as a result of premature redemptions by the largest borrowers.
By agreement with Denmark, the IMF began an assessment of the
Danish financial sector (FSAP), equivalent to the assessments performed
in many other member countries.
PERIOD OF REFLECTION IN THE EU
After a number of years when the EU moved forward, with the establishment of EMU, accession of many new member states, and preparation of a Constitutional Treaty, 2005 was characterised by uncertainty
and a slowdown in development. Agreement was reached on a reform
of the Stability and Growth Pact, and after intense negotiations the EU
heads of state or government, at the meeting of the European Council
on 15-16 December 2005, agreed on the long-term framework for the
EU's budget, i.e. the Financial Perspectives 2007-13. However, the process to ratify the Constitutional Treaty, which had been adopted at the
meeting of the European Council in June 2004 after several years' preparatory work, was suspended after rejection of the Constitutional
Treaty in two referenda, in France and the Netherlands, in respectively
May and June 2005. At the subsequent meeting of the European Council
on 16-17 June 2005 the heads of state or government therefore declared
a period of reflection. The pause for reflection is to be used for a broad
debate on the future of Europe. Against this background, the European
74
Council will decide in the 1st half of 2006 how to proceed. The Constitutional Treaty cannot enter into force until ratified by all EU member
states. A few member states chose to continue the ratification process
after the declaration of the period of reflection, while a number of
member states – including Denmark – postponed ratification indefinitely.
The Constitutional Treaty would have only a limited impact on economic and monetary policy in the EU since the existing framework for
economic policy cooperation is by and large maintained.1
NON-EMU MEMBER STATES
The ten member states that joined the EU in May 2004 have an obligation to adopt the euro at some time in the future. During 2005, several
of these member states made progress towards complying with the EU
Treaty's convergence criteria, which are the conditions for adopting the
euro.
The convergence criteria include a requirement to participate in the
EU's Exchange-Rate Mechanism, ERM II, without serious tensions for at
least two years. Seven of the ten new EU member states are now ERM II
participants. Estonia, Lithuania and Slovenia joined ERM II in June 2004,
Latvia, Malta and Cyprus in May 2005 and, most recently, Slovakia in
November 2005, cf. Box 10.
All these member states have agreed on standard fluctuation bands
for their respective currencies of +/- 15 per cent around the central rate.
Denmark, which has participated in ERM II since 1999, has a special
agreement on a narrower fluctuation band of +/- 2.25 per cent. The fluctuation bands and central rates have in all cases been determined by
agreement between the applicant and the euro area member states, the
European Central Bank (ECB) and the non-euro area member states already participating in ERM II. Latvia has made a unilateral commitment
to a narrower fluctuation band, Malta a commitment to keep the lira at
its central rate, and Lithuania and Estonia have maintained their currency boards2 as unilateral obligations within the framework of ERM II,
cf. Box 10. For most of the member states, joining ERM II has not en-
1
2
For a more detailed review of the overall framework for the Constitutional Treaty and the provisions
on economic and monetary cooperation, see Tina Winther Frandsen, The EU Constitutional Treaty
and EMU, Danmarks Nationalbank, Monetary Review, 4th Quarter 2004.
A currency board is the most extensive type of fixed-exchange-rate policy, whereby there is general
access to free, unrestricted exchange of currency to and from an anchor currency at a fixed rate of
exchange. Monetary policy in countries with currency boards assumes that domestic base money is
fully covered by foreign-exchange reserves and gold. For a more detailed description of currency
boards, see Ulrik Bie and Niels Peter Hahnemann, Currency Boards, Danmarks Nationalbank, Monetary Review, 2nd Quarter 2000.
75
EXCHANGE-RATE REGIMES AND TARGET DATES FOR EURO AREA
MEMBERSHIP FOR NON-EMU MEMBER STATES
Present exchange-rate regime
Membership of
ERM II
Box 10
Target date for
euro area
membership
Member states participating in ERM II
Cyprus ....... Fluctuation band of +/- 15 per cent
2 May 2005
1 January 2008
Denmark ... Fluctuation band of +/- 2.25 per cent 1 January 1999
Not determined
Estonia ...... Currency board
28 June 2004
1 January 2007
Latvia ........ Fluctuation band of +/- 1 per cent
2 May 2005
1 January 2008
Lithuania .. Currency board
28 June 2004
1 January 2007
Malta ........ Fluctuation band of +/- 0 per cent
2 May 2005
1 January 2008
Slovakia .... Fluctuation band of +/- 15 per cent
28 November 2005 1 January 2009
Slovenia .... Fluctuation band of +/- 15 per cent
28 June 2004
1 January 2007
Member states not participating in ERM II
Czech
Republic .... Managed float with euro as reference
-
2010
Hungary .... Pegged to euro with a fluctuation
band of +/- 15 per cent
-
2010
Poland ....... Free float
-
Not determined
Sweden ..... Free float
-
Not determined
UK ............. Free float
-
Not determined
Note:
The fluctuation band in ERM II is +/- 15 per cent. However, Denmark has a special agreement on a fluctuation band of +/- 2.25 per cent. Estonia, Latvia, Lithuania and Malta have entered into unilateral obligations
concerning narrower fluctuation bands or currency boards.
Source: European Commission and ECB.
tailed significant changes in their exchange-rate policies, and their participation in ERM II has been without tensions.
In addition to participating in ERM II for two years, member states
wishing to adopt the euro must meet the requirements concerning the
government budget deficit, government debt, inflation and long-term
interest rates.1 At least biennially the European Commission and the ECB
prepare convergence reports to assess compliance with the criteria by 11
of the 13 member states that have not adopted the euro. Denmark and
the UK have treaty-bound derogations and need therefore only be assessed at their own request. The next convergence reports are to be prepared in 2006. These reports will show whether Estonia, Lithuania and
Slovenia, all of which will have participated in ERM II for two years at the
end of June 2006, fulfil the criteria and can thus join the euro area as
planned on 1 January 2007, cf. Box 10. Compliance with the inflation cri1
These are the economic convergence criteria. The member states must also comply with a number of
legislative requirements.
76
terion may prove to be difficult, particularly for Estonia. In 2005,
inflation in Estonia was 4.1 per cent, e.g. as a consequence of high oil
prices. In Estonia, as in most of the other new EU member states, energy
is relatively important in the calculation of inflation. The other economic
convergence criteria are expected to be met by the three member states.
Most of the new EU member states plan to introduce euro banknotes
and coins when they join the euro area. In this respect they differ from
the existing euro area member states, which did not introduce euro
banknotes and coins until January 2002, after a three-year transitional
period in which the euro only existed as a unit of account.1 As regards
practical preparations, the new EU member states are at different
stages. In November 2005, the European Commission assessed that there
was a general need to speed up preparations if the member states are to
introduce the euro as planned.
FUTURE ENLARGEMENTS OF THE EU
The Accession Treaty with Bulgaria and Romania was signed in April
2005, with a view to the two member states' EU membership in 2007. In
its report from October 2005, the European Commission assessed that
the two countries had made substantial progress during the preceding
year, but that a number of challenges still lie ahead if they are to be
ready to join the EU in 2007 as planned. EU membership may therefore
be postponed until 2008. The EU's relations with the candidate countries
Turkey and Croatia entered a new phase in October 2005 when accession negotiations were opened. The negotiations are likely to be protracted, particularly those with Turkey. Negotiations with Turkey are not
expected to be concluded until approximately ten years after their opening, at the earliest. Macedonia became an official candidate country in
December 2005, but no date has yet been set for the opening of accession negotiations.
THE STABILITY AND GROWTH PACT
In recent years, fiscal-policy cooperation within the EU has been characterised by the member states' difficulties in fulfilling the provisions of
the EU Treaty and the Stability and Growth Pact relating to government
budget deficits and debt. The problems culminated in 2004, when the
European Commission brought an action before the European Court of
Justice following the decision by the Ecofin Council concerning the
1
Greece, which joined the euro area on 1 January 2001, had a shorter transitional period, however.
77
excessive deficits of Germany and France. In practice this decision meant
that the excessive deficit procedure was held in abeyance for these two
member states.1 This left fiscal-policy cooperation in a deadlock and
triggered a debate on a reform of the Pact.
In March 2005, agreement was reached on adjustment of the rules of
the Stability and Growth Pact. The reform appears to have paved the way
for resolving the deadlock and for the rules again to be enforced with sufficient political support. The necessity of this is emphasised by the European Commission's autumn forecast, which paints a dismal picture of the
budgetary situation in Europe.
2005 reform of the Stability and Growth Pact
The rules of the Treaty establishing the European Community, including
its key prohibition of "excessive deficits" have not been changed with the
reform of the Pact.2 In principle, a deficit exceeding 3 per cent of GDP is
defined as excessive. The Stability and Growth Pact expands and specifies
these fundamental rules under the Treaty. The purpose is to contribute to
preventing excessive deficits, and also to lay down a more detailed procedure for correcting excessive deficits.
The 2005 reform was a compromise, mainly aimed at strengthening the
preventive elements of the Pact and increasing flexibility in the excessive
deficit procedure, particularly in low-growth situations, cf. Box 11.
In terms of the preventive arm of the Pact, the reform has entailed
tightening of the requirement to pursue a medium-term objective of
government budgets that are close to balance or in surplus. In the event
of low potential growth and high government debt, the requirement of
the medium-term objective is increased. In principle, member states that
diverge from their medium-term objectives must adjust their cyclically
adjusted deficit by at least 0.5 per cent of GDP per annum.3 This will
entail enhanced consolidation of the nominal budget balance during
upswings, and more limited consolidation when economic growth is below potential. In addition, major structural reforms may be taken into
1
2
3
See Danmarks Nationalbank, Report and Accounts, 2004, pp. 80-81.
While the prohibition applies to all EU member states except the UK, which is subject to a special
derogation for as long as it does not participate in the euro, under the EU Treaty only the euro area
member states can be ordered to take measures to reduce their excessive deficits and can be subject
to sanctions.
The government budget balance is affected by a number of factors which do not directly relate to
fiscal policy, including in particular the cyclical position. Compilation of the balance adjusted for cyclical developments, i.e. a cyclically adjusted balance, therefore gives a more true and fair view of the
actual fiscal-policy development. However, the cyclically adjusted balance always includes some degree of estimation and is therefore subject to uncertainty. If further adjustment is made for one-off
measures, etc. the structural balance is achieved. For a further discussion of the issues relating to
compilation of cyclically adjusted budgets, reference is made to Allan Bødskov Andersen, Cyclically
Adjusted Government Budget Balances, Danmarks Nationalbank, Monetary Review, 3rd Quarter
2002.
78
OVERVIEW OF SIGNIFICANT AMENDMENTS TO THE PACT
Preventive arm of the Pact
•
•
Differentation
of
member
Corrective arm of the Pact
states'
•
sions concerning the excessive deficit
the basis of government debt, poten-
procedure, which now enter into
tial growth and fiscal-policy sustain-
force in the event of negative growth
ability
or a sustained period of low growth
One-off measures are no longer in-
in relation to the potential
•
factors", to be taken into account in a
Higher nominal budget adjustment in
balanced overall assessment of a bud-
The minimum adjustment requirement
get deficit
•
comprises not only euro area member
states, but also ERM II member states
•
Specification of "all other relevant
get adjustment
"good times" than in "bad times"
•
Relaxation of the exemption provi-
medium-term budget objectives on
cluded in the calculation of the bud•
Box 11
Extension of deadlines under the procedure
•
Possibility of new deadlines in the
Expenses that have long-term cost-
event of unforeseen adverse eco-
reducing effects are to be taken into
nomic events
account
Note: For a more detailed review of the 2005 reform of the Stability and Growth Pact, see Thomas Haugaard Jensen
and Jens Anton Kjærgaard Larsen, The Stability and Growth Pact – Status in 2005, Danmarks Nationalbank,
Monetary Review, 3rd Quarter 2005.
account if they improve the long-term sustainability of the fiscal policy.
Such measures include costs of pension reforms.
The reform of the corrective arm of the Stability and Growth Pact has
facilitated access to exemptions from the excessive deficit procedure in
the event that the 3-per-cent limit has been exceeded. Under the Treaty's
excessive deficit procedure, a member state's budget deficit may exceed
the 3-per-cent limit, provided that the circumstances are exceptional and
temporary and the deficit remains close to the 3-per-cent limit. Under the
reform, a breach is exceptional when GDP growth is negative or has been
below its potential level for a protracted period. Previously, the requirement was an annual decrease in GDP of at least 0.75 per cent. The reform
entails that a balanced overall economic assessment must be performed,
taking into account all relevant factors related to exceeding the 3-percent limit. As a new element, "all other relevant factors" have been specified, and the member state in question may point to factors to be considered. Consequently, a number of country-specific factors such as potential growth, fiscal-policy consolidation efforts, structural-policy measures,
etc, may be included in the assessment.
The duration of the excessive deficit procedure has also become more
flexible since the deadline for correction of an excessive deficit may in
special circumstances be extended from one to two years. In addition,
79
the deadlines given may be extended in the event of unforeseen adverse
economic events, provided that the member state in question has introduced fiscal-policy tightening measures as recommended.
The significance of the reform of the Pact in 2005 cannot be assessed
yet, since it will depend on how the new rules are applied in practice.
However, the rules have become more complex, which marks a departure
from the original concept of a simple set of rules. The increased access to
exemptions can impede strict enforcement of the excessive deficit procedure.
The budget situation 2005 – status
According to the European Commission's autumn forecast from November 2005, the budget deficit in the euro area is expected to increase
to 2.9 per cent, from 2.7 per cent in 2004. For the EU overall, an increase
from 2.6 to 2.7 per cent is expected.
The European Commission expects 11 member states to exceed the
Treaty's 3-per-cent limit in 2005, cf. Chart 28, including five euro area
member states – France, Greece, Italy, Portugal and Germany – all of
which are subject to the excessive deficit procedure. The procedure
was initiated for Italy and Portugal in 2005, in both cases under the
rules of the reformed Stability and Growth Pact. The European Com-
ESTIMATED BUDGET DEFICIT AND DEBT IN EU MEMBER STATES IN 2005
Portugal
Hungary
6
Budget deficit as a percentage of GDP
Slovakia
4
France
Greece
UK
Luxembourg
Italy
Malta
Germany
Poland
Czech Republic
Chart 28
Cyprus
Netherlands
2
Lithuania
Austria
Slovenia
Latvia
Ireland
0
Spain
Belgium
Sweden
Estonia
Finland
-2
Denmark
-4
0
20
40
60
80
100
120
Debt as a percentage of GDP
Note:
Member states indicated in blue comply with the 3-per-cent limit for budget deficits stipulated in the Treaty, as
well as the 60-per-cent limit for government debt. Negative figures indicate a government budget surplus.
Source: The European Commission's autumn forecast 2005.
80
mission regarded neither Italy's nor Portugal's deficit as temporary or
exceptional, and "other relevant factors" were therefore not included
in the assessment of the excessive deficit. For Italy, 2007 was set as the
deadline for correction of the deficit, while Portugal has been given
until 2008. Greece was the first member state to be given notice to
take measures to reduce its budget deficit. The deadline was postponed by one year until 2006. The excessive deficit in the Netherlands
was corrected in 2004, one year ahead of the deadline. The excessive
deficit procedure was therefore abrogated in 2005 when the budget
deficit for 2004 was found to have been 2.3 per cent of GDP. For Germany and France, 2005 was the deadline for correction of their excessive deficits. According to the European Commission's autumn forecast,
both member states still exceeded the 3-per-cent limit in 2005, and
consequently the procedure is expected to be resumed for these two
member states in 2006.
Among the new member states, Cyprus brought its deficit below the
3-per-cent limit in 2005, while Hungary on the other hand adjusted its
budget deficit for 2005 substantially upwards. As a result, the Ecofin
Council decided in November 2005 that Hungary had not lived up to the
Council decisions from March to improve the budget.1
DISCUSSION OF THE IMF's FUTURE DEVELOPMENT
The strategic development of the International Monetary Fund, IMF, was
a major topic at the meetings of the International Monetary and Financial Committee, IMFC2, in the spring and autumn of 2005. The objective
was to specify the role of the IMF in a globalised world with increasing
capital flows and growing economic influence among the emerging
economies, and in relation to the efforts of the poorest member countries to reach the UN's millennium development targets by 20153, cf. Box
12. One of the focus areas is to increase the influence of some of the
Asian emerging economies in the IMF, since their economic progress has
not been reflected in correspondingly greater influence. Unless this is
ensured, there is a risk that the countries will view IMF membership as
less relevant. At the same time, a number of countries wish to strengthen the influence of the developing countries.
1
2
3
For non-euro area member states, the provisions relating to notice and sanctions under the excessive
deficit procedure do not apply. This means that the Ecofin Council can only recommend that these
member states take effective measures to prevent excessive deficits, and repeat such recommendations.
See the description of the IMF's decision-making structure at Danmarks Nationalbank's website.
The UN's millennium development targets relate to reducing poverty, improving health, etc. in developing countries by 2015.
81
THE IMF's MEDIUM-TERM STRATEGY
Box 12
In the spring of 2004, the G8 countries discussed a strategy for the development of the
IMF in connection with the 60th anniversary of the Bretton Woods institutions. At the
annual meeting in 2005, the IMFC approved the preparation of a medium-term strategy by the IMF. Ongoing efforts will concentrate on:
•
Focusing and streamlining economic surveillance of member countries with a global
perspective in the analyses
•
Discussing the IMF's potential role as a provider of emergency loans to prevent
crises. In addition, the role of the IMF in solving economic crises should be considered
•
Increasing flexibility in relation to the IMF's instruments for low-income countries,
supplemented with specific analyses of the fulfilment of the UN's millennium development targets, and reducing bureaucratic procedures. The IMF's technical assistance should be integrated to a greater extent with other efforts in relation to the
recipient country
•
Equipping the IMF better for advising member countries in connection with liberalisation of their capital balances
•
Setting priorities for the IMF's tasks within a three-year budget framework. At the
same time, the revenue base should be reassessed in view of lower lending, e.g.
through more active investment of quota funds
•
Streamlining the organisation, including changing the salary system, improving internal risk management and ensuring efficient division of responsibilities in relation
to the World Bank
•
Ensuring appropriate quotas and influence for IMF member countries
DEBT RELIEF FROM IMF TO POOR COUNTRIES
In November, the Executive Board of the IMF adopted the implementation modalities for the Multilateral Debt Relief Initiative to cancel 100
per cent of the claims on a number of poor countries, cf. Box 13. The Initiative is to be seen as part of the efforts to reach the UN's millennium
development targets and was initially prompted by a proposal made by
the G8 finance ministers in June 2005.
In addition, the IMF has adopted two new facilities for low-income
countries at the initiative of the G8 countries. Poor countries with
balance-of-payments problems as a result of sudden external events can
now raise loans with concessional financing, the Exogenous Shocks Facility, ESF. Finally, a new type of programme with no attached lending
facility, the Policy Support Instrument, PSI, has been created. Approval
of a two-year PSI for Nigeria in October enabled the achievement of a
debt rescheduling agreement that Nigeria had concluded with the Paris
Club group of western creditor countries.
82
THE MULTILATERAL DEBT RELIEF INITIATIVE, MDRI
Box 13
In principle, the Multilateral Debt Relief Initiative entails 100 per cent debt relief from
the IMF, the World Bank and the African Development Bank. The Initiative is aimed at
countries that have obtained or will obtain partial debt relief under the Heavily Indebted Poor Countries, HIPC, facility. So far, 18 countries have obtained final HIPC debt relief,
but in total up to 41 countries may in principle be comprised by the HIPC initiative.
From the IMF's point of view, implementation of MDRI means that other member
countries with annual per capita income of 380 dollars or less may also be eligible. The
reason is that the use of IMF resources requires uniform treatment of member countries. The countries in question are relieved of their debt to the IMF at end-2004, less
subsequent paid redemptions, however.
To obtain debt relief, the member countries must have serviced their loans from the
IMF and comply with certain minimum requirements for macroeconomic policy, poverty
reduction and government debt management. In December 2005, the Executive Board
of the IMF assessed that 19 countries fulfilled the conditions for immediate debt relief at
1
the beginning of 2006. The total debt relief to these countries will amount to around
SDR 2.3 billion (approximately 3.3 billion dollars). The total cost of MDRI to the IMF may
reach approximately five billion dollars, depending on which countries qualify for debt
relief. This can be expected to amount to approximately 10 per cent of the total costs of
MDRI from the IMF, the World Bank and the African Development Bank.
In general, financing must be obtained via a reasonable distribution of costs. As far as
the IMF is concerned it should mainly be achieved within the existing framework, but
with a special arrangement for such countries as the Sudan, Somalia and Liberia, which
have very large outstanding debt with the IMF. For this purpose the IMF has established
2
three trust funds :
•
MDRI-I comprises e.g. funds from the IMF's general resources that can be used for
debt relief to countries with per capita income of 380 dollars or less.
•
MDRI-II comprises e.g. (previously paid up) bilateral funds that can be used for debt
relief to countries with per capita income of more than 380 dollars, that have obtained or will obtain partial debt relief under the HIPC initiative.
•
The ESF trust fund will comprise funds for financing concessional loans under ESF (the
Exogenous Shocks Facility).
Denmark has regularly contributed to concessional loans under the Poverty Reduction
and Growth Facility, PRGF, and in December Denmark accepted that Danish contributions may also be used for the new debt relief initiative.
In 2000, Danmarks Nationalbank granted a government-guaranteed loan of SDR 100
3
million for the financing of lending under the PRGF. It is primarily this type of loan that
will now be subject to debt relief and financed via the MDRI trust funds. In December,
Denmark accepted premature redemptions of Danmarks Nationalbank's loan. Following
the debt relief to the 19 countries, SDR 31.9 million has been repaid to Danmarks
Nationalbank.
1
2
3
17 of these countries have previously obtained final debt relief under the HIPC initiative (Benin, Bolivia, Burkina
Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Rwanda, Senegal,
Tanzania, Uganda and Zambia), while two of the countries do not participate in the HIPC initiative (Cambodia and
Tajikistan).
For the Multilateral Debt Relief Initiative to enter into force, amendment of the trust fund for the Poverty Reduction and Growth Facility, PRGF, had to be accepted by all contributors. Denmark accepted the necessary amendments on 13 December 2005.
See Danmarks Nationalbank, Report and Accounts, 2003, p. 87.
83
LENDING BY THE IMF
During the past year, the IMF's total lending has been more than halved,
cf. Chart 29. Two of the three largest creditor countries – Argentina and
Brazil – have paid off their remaining debt to the IMF ahead of schedule,
while the third country, Turkey, has redeemed SDR 3.6 billion. Finally,
Russia has settled its account with the IMF.
The IMF's outstanding claims under general resources totalled kr. 257
billion (approximately SDR 28 billion) at end-2005, of which Denmark's
contribution to financing the loans was kr. 1.9 billion. This outstanding
represented approximately 13 per cent of the members' total quotas,
which is the lowest level for 25 years. The premature redemptions of the
remaining debt reduce the IMF's income from interest, which accentuates
the problem concerning the IMF's future income basis, cf. Box 12.
Argentina's government decided to use an increase in its foreignexchange reserve to redeem the remainder of its IMF debt of SDR 6.9 billion (approximately 10 billion dollars). The increase in the foreignexchange reserve is attributable to e.g. higher commodity prices and a
competitive export sector, factors which have contributed to rising export
revenue. The relationship between the IMF and Argentina has been
strained and the Argentinean authorities have threatened to stop
servicing Argentina's debt to the IMF.
OUTSTANDING IMF LENDING, YEAR-END
Chart 29
SDR billion
80
70
60
50
40
30
20
10
0
2001
Other lending
Note:
2002
PRGF, etc.
2003
Indonesia
2004
Russia
Turkey
2005
Brazil
Argentina
Outstanding lending in 2005 has been adjusted for Argentina's repayment on 4 January 2006, as well as debt relief to 19 Heavily Indebted Poor Countries on 6 January 2006, cf. Box 13.
Source: IMF.
84
In Brazil an increasing foreign-exchange reserve has enabled premature
redemption of its debt to the IMF after the expiry of the borrowing programme in March. The development in the foreign-exchange reserve is
e.g. attributable to an increasing surplus on the current account of the
balance of payments, as well as stability-oriented macroeconomic policy,
which has contributed to restoring confidence in the economy. In July,
Brazil paid off the fourth of its debt that accrued interest at the highest
rate, while the remaining SDR 10.8 billion (approximately 16 billion dollars) was repaid in December. The last redemptions were scheduled for
2007.
With annual growth of approximately 5 per cent, the economic restoration of Turkey continued in 2005, but a current-account deficit of approximately 6 per cent of GDP entails that the external balance is still
fragile. In May a new 3-year stand-by agreement for SDR 6.7 billion (approximately 10 billion dollars) was concluded. At the core of the new
programme is continuation of the tight fiscal policy, as well as intentions
to introduce a number of structural reforms, including a new banking
act with strengthened supervision, further measures in preparation for
privatisation, and increased flexibility in the labour market.
The oil price increases in recent years enabled premature redemption
by Russia – one of the world's major oil exporters – of the remaining approximately SDR 2 billion (approximately 3 billion dollars) of its debt to
the IMF in January 2005. The last instalment was not due until 2008. In
addition, in the summer of 2005 Russia paid off 15 billion dollars of its
debt to the Paris Club.
Iraq has concluded a stand-by agreement with the IMF
In December 2005, Iraq concluded a stand-by agreement with the IMF
for SDR 475.4 million (approximately 685 million dollars). This agreement is to be viewed as a continuation of the post-conflict assistance
that was adopted in September 2004 as a prerequisite for the implementation of phase two of the Paris Club agreement on debt relief
to Iraq.1 Economic growth in Iraq in 2005 is estimated at approximately
2.5 per cent. As a result of the rise in oil prices, the budget deficit is
lower than expected, and the foreign-exchange reserve has been increasing. In general, the Iraqi authorities have succeeded in promoting
overall macroeconomic stability in the face of extremely difficult conditions. A number of the reforms agreed with the IMF have, however,
been implemented at a slower rate than envisaged.
1
See Danmarks Nationalbank, Report and Accounts, 2004, pp. 85-86.
85
OVERVIEW OF IMF VISITS TO DENMARK IN 2005 AND 2006
Box 14
Preliminary FSAP visit to Denmark
• Meetings with relevant national authorities and organisations
• Introductory discussions between national authorities and the IMF
regarding stress tests and international standards
Visit by IMF Deputy Managing Director Agustín Carstens
• Meetings with, inter alia, Danmarks Nationalbank, the Ministry of Finance and
the Economic Council
Preparation of Article IV consultation
• Meetings with Danmarks Nationalbank, the Ministry of Finance and the
Economic Council, the Danish Welfare Commission, the Danish Globalisation
Council and the Danish Financial Supervisory Authority
First FSAP mission to Denmark
• Review of the standards concerning banking supervision, insurance, and
payment and securities settlement systems
• Determination of framework for stress tests
• Meetings with authorities, organisations and other institutions
Special FSAP mission to Denmark
• Review of the standard concerning anti-money laundering and
combating the financing of terrorism
Second FSAP mission to Denmark
• Review of results of stress tests
• Provisional conclusions on stability in the financial system
Article IV consultation with Denmark
• Discussion of conclusions regarding FSAP
• Review of the Danish economy
Aug
2005
Sep
2005
Oct
2005
Nov
2005
Feb/Mar
2006
May
2006
Jun
2006
THE IMF's MACROECONOMIC AND FINANCIAL SURVEILLANCE OF
DENMARK
Traditionally, the IMF has focused on macroeconomic surveillance, but in
recent years financial surveillance has been given higher priority in view
of the financial crises in Asia in 1997-98. At the core of financial surveillance is the Financial Sector Assessment Program, FSAP1. The Program is
voluntary, but most IMF members, including Denmark, have announced
that they would like an FSAP.
Normally, the IMF sends a mission to Denmark every other year, but
during 2005 and 2006 the IMF is expected to visit Denmark seven times
in all, since this time its surveillance also includes FSAP. An extensive
FSAP mission in November 2005 included almost 100 meetings between
the IMF and relevant Danish authorities, organisations and financial institutions to give the IMF an overview of the financial sector. The FSAP
seeks to disclose strengths and weaknesses in the financial systems in
order to assess financial stability. In this context Danmarks Nationalbank
1
For a more detailed review of FSAP, see Gitte Wallin Pedersen, Review of the Financial System in
Denmark, Danmarks Nationalbank, Monetary Review, 3rd Quarter 2005.
86
performs stress tests to show how macroeconomic shocks affect the financial systems.1 The Danish Financial Supervisory Authority and specific
financial institutions also participate in the stress tests. The IMF furthermore reviews international standards in four areas. The Danish Financial
Supervisory Authority holds the main responsibility for the standards relating to banking supervision, insurance, and anti-money laundering and
combating the financing of terrorism, while Danmarks Nationalbank
holds the main responsibility for the standard relating to payment and
securities settlement systems.
The IMF conducts its FSAP up to an Article IV consultation, which is the
key element of the IMF's surveillance of macroeconomic conditions in
member countries. The next Article IV consultation in Denmark is expected to take place in June 2006, when the conclusions of the FSAP will
also be discussed. The schedules for the FSAP and the Article IV consultation are outlined in Box 14. The conclusions are expected to be published in autumn 2006.
1
See Danmarks Nationalbank's annual publication Financial Stability.
87
Organisation and Tasks of Danmarks
Nationalbank
At the end of 2005 Danmarks Nationalbank had 552 employees, equivalent to 516 full-time positions.
DANMARKS NATIONALBANK'S OBJECTIVES AND VALUES
Danmarks Nationalbank has a number of objectives and values, which
are the guidelines for its day-to-day activities. Both the objectives and
the values have been drawn up in close cooperation between management and employees, and they form the basis for the individual departments' work on objectives and action plans. No changes were made to
the objectives and values in 2005.
Objectives
The overall objectives of Danmarks Nationalbank as an independent and
credible institution are:
• To ensure a stable krone.
• To ensure efficient and secure production and distribution of banknotes and coins of high quality.
• To contribute to efficiency and stability in the payment and clearing
systems and in the financial markets.
• To act as banker to the central government.
• To prepare reliable and relevant financial statistics.
• To prepare and communicate credible standpoints on economic and
financial issues with relation to Danmarks Nationalbank's objectives.
• To maintain its financial strength by means of consolidation and risk
management.
Values
While safeguarding its traditions, Danmarks Nationalbank shall actively renew itself and adapt to trends in society and to the requirements
of the surrounding world. Danmarks Nationalbank shall protect its
credibility by not only displaying professional competence, managerial
skills and sound judgement, but also by maintaining an organisation
which lives up to the principles Danmarks Nationalbank considers to
be significant to society's development: efficiency, cost awareness and
•
88
•
•
•
•
readiness for change. Focusing on its primary tasks, on an ongoing
basis Danmarks Nationalbank shall set priorities for its work.
In brief: We shall display professional competence and exert sound
judgement, and ourselves live up to the principles we consider to be
important to society.
Danmarks Nationalbank shall be an attractive workplace capable of attracting, motivating and retaining well-qualified employees and offering them working conditions which ensure balance between work and
leisure. Key qualifications are initiative, commitment, adaptability and
a willingness and ability to cooperate across professional barriers, and
with other areas of the organisation. All employees must have the necessary training and/or education to handle their tasks. It is a joint responsibility to ensure that everyone is trained and developed in preparation for new tasks.
In brief: It is important to Danmarks Nationalbank that all employees
display professional competence, show initiative and an ability to cooperate, and can adapt to change.
Danmarks Nationalbank shall be service-oriented in terms of both the
external relations of line functions, and the internal relations of staff
functions with the rest of the bank. Teamwork and project work within
each unit and between departments is encouraged. In cooperation with
the employees, managers shall set priorities for tasks, define targets and
ensure the necessary responsibility sharing and communication, thereby
limiting the need for detailed supervision. This gives employees the
widest possible scope to define their own working methods, solve tasks
and take decisions themselves to the greatest extent possible.
In brief: Managers shall motivate employees, set priorities, delegate
responsibility and encourage teamwork.
Danmarks Nationalbank's relations with the financial sector are based
on market-oriented solutions, and the costs to the sector and to
Danmarks Nationalbank must be weighed against the value to society
of the system or requirement. The underlying principle for systems and
requirements relating to the credit institutions shall be equal treatment
irrespective of size, geographical location and national affiliation.
In brief: Relations with the financial sector shall be based on marketoriented solutions and relevance to society.
In relations with public authorities and players in the financial system,
and in international cooperation, Danmarks Nationalbank shall seek influence and express attitudes which are in line with Danmarks Nationalbank's objectives. In relations with the public Danmarks Nationalbank
shall, via the media and otherwise, ensure an understanding of the
decisions relating to Danmarks Nationalbank's own tasks. With regard
89
to financial conditions or economic policy in general, Danmarks Nationalbank shall comment on these issues if they are of material importance
to its implementation of monetary and foreign-exchange policy, or to
the efficiency and stability of the financial markets.
In brief: Danmarks Nationalbank shall participate actively in national
and international cooperation and shall communicate its policies in a
clear and transparent way.
DANMARKS NATIONALBANK'S MANAGEMENT
The Royal Bank Commissioner
The Royal Bank Commissioner is the formal link between the Government and Danmarks Nationalbank. The Minister for Economic and
Business Affairs Mr Bendt Bendtsen is the Royal Bank Commissioner.
Board of Directors
The Board of Directors has 25 members, of whom eight are elected by
the Folketing (Parliament) from among its members, and two are appointed by the Minister for Economic and Business Affairs who is the
Royal Bank Commissioner. The other 15 members, who must have indepth knowledge of business conditions, are elected by the Board of
Directors and should represent different geographical areas and professions, including wage-earners. Meetings are normally held once in
each quarter. The Board of Directors has organisational tasks and must
approve the annual accounts. The Board of Directors of Danmarks
Nationalbank as of 1 March 2006 is shown in Box 15. Changes in the
Board of Directors are stated in the press releases on p. 137-138.
The Committee of Directors
The Committee of Directors has seven members. The two members of
the Board of Directors appointed by the Minister for Economic and Business Affairs are permanent members. On the election of the other five
members of the Committee of Directors, it is customary for the Board of
Directors to elect two MPs representing the government and the opposition parties, respectively. The Committee of Directors usually meets
ten times a year. The Committee of Directors of Danmarks Nationalbank
as of 1 March 2006 is shown in Box 16.
The Board of Governors
The Board of Governors has three members. The governors are charged
with the day-to-day management of Danmarks Nationalbank and hold
sole responsibility for the formulation and ongoing adjustment of
90
THE BOARD OF DIRECTORS OF DANMARKS NATIONALBANK, 1 MARCH 2006
Box 15
Chairman: Hans E. Zeuthen, Professor
Deputy Chairman: Helle Bechgaard, Director
Elected by the Folketing
for the period ending 31 March 2006:
Elisabeth Arnold, MP
Pia Christmas-Møller, MP
Kristian Thulesen Dahl, MP
Svend Erik Hovmand, MP
Henrik Sass Larsen, MP
Jens Rohde, MP
Villy Søvndal, MP
Helle Thorning-Schmidt, MP
Appointed by the Minister for Economic and Business Affairs
Michael Dithmer, Permanent Secretary, Ministry of Economic and Business Affairs
Michael Lunn, Permanent Secretary, Ministry of Justice
Elected by the Board of Directors
for the period ending 31 March:
Johannes Fløystrup Jensen, Director
2006
Kirsten Nissen, Trade Union President
2006
Finn Thorgrimson, Former President of the Trade Union Federation
2006
Jette W. Knudsen, Director
2007
Kjeld Larsen, Farmer
2007
Kirsten Nielsen, Former Council President
2007
Søren Bjerre-Nielsen, Group President
2008
Niels Boserup, Managing Director
2008
Knud Koch-Jensen, Engineer
2008
Niels Due Jensen, Group Chairman
2009
Jens Rostrup-Nielsen, Director, R & D Division
2009
Hans E. Zeuthen, Professor
2009
Helle Bechgaard, Director
2010
Niels Fog, Merchant
2010
Kirsten Stallknecht, Former President for the ICN
2010
monetary policy. As Governor by Royal Appointment Mr Nils Bernstein is
Chairman of the Board of Governors. Mr Nils Bernstein succeeded Ms
Bodil Nyboe Andersen, who retired at the end of October 2005.1 The
two other members, who are appointed by the Board of Directors on
the recommendation of the Committee of Directors, are Mr Torben
Nielsen and Mr Jens Thomsen.
1
On 24 June 2005, the Danish government nominated the then Permanent Secretary of State in the
Prime Minister's Office, Nils Bernstein, as the new Governor by Royal Appointment and Chairman of
the Board of Governors of Danmarks Nationalbank.
91
THE COMMITTEE OF DIRECTORS OF DANMARKS NATIONALBANK,
1 MARCH 2006
Box 16
Chairman: Hans E. Zeuthen, Professor
Deputy Chairman: Michael Dithmer, Permanent Secretary, Ministry of Economic and
Business Affairs
Elected by the Board of Directors for the period ending 31 March 2006:
Søren Bjerre-Nielsen, Group President
Kirsten Nissen, Trade Union President
Jens Rohde, MP
Helle Thorning-Schmidt, MP
Hans E. Zeuthen, Professor
Appointed by the Minister for Economic and Business Affairs
Michael Dithmer, Permanent Secretary, Ministry of Economic and Business Affairs
Michael Lunn, Permanent Secretary, Ministry of Justice
Auditors
The Minister for Economic and Business Affairs appoints two stateauthorised public accountants as the external auditors of Danmarks Nationalbank for one year at a time. State-Authorised Public Accountant Mr
Svend Ørjan Jensen and State-Authorised Public Accountant Ms Mona
Blønd have been reappointed until 31 March 2007.
DEPARTMENTS
Danmarks Nationalbank has 15 departments, cf. the organisation chart
on p. 94. The tasks of the individual departments are as follows:
• Accounting manages and monitors the accounts of customers (credit
institutions, the central government, central banks, etc.) and the settlement of payments in the financial sector. It undertakes settlement
and bookkeeping of transactions concerning Danmarks Nationalbank's foreign-exchange and bond portfolios, and the central-government debt. It also undertakes Danmarks Nationalbank's payroll
administration and prepares its accounts, budgets and statistical reporting.
Government Debt Accounting undertakes bookkeeping and control of
domestic and foreign government debt, as well as the Social Pension
Fund, on behalf of the Ministry of Finance. In addition, it prepares
financial statements of the development in and distribution of centralgovernment debt, as well as the size of current payments.
92
•
•
•
•
•
•
•
•
Banking Services supplies banknotes to the banks in Denmark, in the
Faroe Islands and in Greenland. This takes place via cash depots established by agreement with banks. Worn banknotes are returned to
Banking Services for control of authenticity and destruction.
The Banknote Printing Works manufactures Danish and Faroese banknotes, and is thus responsible for the design of the banknotes, the
production of printing plates and ink, and the actual printing of the
banknotes, as well as quality control, cutting out and packaging. The
Banknote Printing Works also participates in international cooperation
on improving the security of banknotes.
Economics analyses monetary and foreign-exchange policy issues as
well as macroeconomic development in Denmark, the EU and other
industrialised countries. The department undertakes research in these
areas. The economic model of the Danish economy, "Mona", has been
developed by the department for analysis of inter alia cyclical trends.
Economics edits Danmarks Nationalbank's quarterly Monetary Review.
Facility Services is responsible for the administration and maintenance
of Danmarks Nationalbank's properties and for internal services.
Financial Markets' responsibilities are managing, monitoring and analysing Danmarks Nationalbank's portfolios, assessing and analysing the
development in the financial sector and in financial stability in Denmark, and preparing outline strategies and analyses of government
debt policy. Financial Markets publishes Danish Government Borrowing and Debt and Financial Stability.
Internal Audit undertakes the audit of Danmarks Nationalbank's procedures, internal control environment and control measures, IT use and
risk-management procedures. In cooperation with the appointed external auditors, it audits Danmarks Nationalbank's annual accounts. In
addition, it audits Danmarks Nationalbank's Pension Fund subject to
winding up and various foundations. Finally, in cooperation with the
National Audit Office of Denmark it also audits the Guarantee Fund for
Depositors and Investors, the Social Pension Fund, the High-Technology
Foundation, the Financing Fund and government debt management.
International Relations is responsible for relations with international
economic policy organisations, including the European Central Bank,
ECB, and the International Monetary Fund, IMF.
IT is responsible for the use of IT at Danmarks Nationalbank, including
its IT strategy. The tasks include operation and development of Danmarks Nationalbank's LAN, application development, and the purchasing and management of Danmarks Nationalbank's hardware and software. IT also handles Danmarks Nationalbank's relations with Bankernes
EDB Central, BEC.
93
•
•
•
•
•
•
Market Operations undertakes tasks relating to monitoring and analysis
of market developments, e.g. the implementation of foreign-exchange,
monetary and liquidity policy, including intervention in the foreignexchange and money markets. It is responsible for the administration of
Danmarks Nationalbank's portfolios, comprising the foreign-exchange
reserve and the bond portfolio. In connection with the implementation
of government debt policy, it undertakes domestic and foreign borrowing for the central government.
Payment Systems handles policy issues relating to payment systems, including securities settlement. It cooperates with owners and operators
of the Danish retail payment and settlement systems and monitors
these systems. It also develops and maintains Danmarks Nationalbank's
payment system for large krone- and euro-denominated payments.
Personnel and Organisation is responsible for personnel policy and staff
and organisational development, the planning of security measures,
issues relating to operational risk, internal control procedures, supervision and contingency plans for business continuity, as well as coordination of the annual budget and planning process.
The Royal Mint manufactures Danish coins and supplies banks in Denmark, the Faroe Islands and Greenland with coins. In addition to ordinary coins in circulation, commemorative coins, thematic coins, coin sets
and medals are also manufactured.
The Secretariat undertakes general secretariat functions for the Board
of Governors, the Committee of Directors and the Board of Directors
and is responsible for external and internal communication, including
relations with the press, and Danmarks Nationalbank's website, intranet and lectures. The Information Desk responds to general external
enquiries. The Secretariat also comprises Danmarks Nationalbank's
central archives and library. Legal Affairs handles general legal issues,
including EU law. The Secretariat edits Danmarks Nationalbank's Report and Accounts.
Statistics compiles, prepares and distributes financial statistics, including statistics for the financial sector, financial sector accounts, compilation of the financial items of the balance of payments and Denmark's
foreign debt and direct investments. Statistics are published electronically via the Internet.
94
ORGANISATION CHART 1 MARCH 2006
Accounting
Board of Directors
25 members
Director, Chief Accountant
Henrik Larsen
Head of Division
Jan Thorndal
Committee of Directors
Internal Audit
7 members
Chief Auditor
Jan Birkedal
Board of Governors
Secretariat
Government Debt
Accounting
Head of Division
Viggo Sørensen*)
Banking Services
Governor by Royal Appointment,
Chairman
Nils Bernstein
Chief Cashier
Lars Gerrild Sørensen
Director, General Manager
Ejner Petersen
Head of Division
Anne-Mette Thorsen
Reimann
Head of Division
Winnie Jakobsen
Legal Affairs
Governor
Banknote Printing
Works
Head of Secretariat
Karsten Biltoft
Head of Division
Kirsten Rohde Jensen
Torben Nielsen
Economics
Governor
Jens Thomsen
Assistant Governor, Head of
Economics
Anders Møller Christensen
Head of Division
Christian Ølgaard
Head of Division
Leif Yde
Financial Markets
Head of Financial Markets
Hugo Frey Jensen
Facility Services
Head of Facility Services
Erik Lundgreen
Head of Risk Management
Ib Hansen
Head of Government Debt
Management
Ove Sten Jensen
IT
Head of Financial Institutions
Jens Lundager
Head of IT
Søren Lundsby Hansen
Statistics
Payment Systems
Head of Statistics
Jens Dalsgaard
Head of Payment Systems
Kristian Kjeldsen
Head of Division
Bent Christiansen
International Relations
Director, Head of
International Relations
Kai Aaen Hansen
Head of Division
Niels Bartholdy
Personnel and
Organisation
Head of Personnel and
Organisation
Flemming Farup
Head of Division
John Larsen
The Royal Mint
General Manager
Laust Grove
Market Operations
Head of Market Operations
Jesper Berg
Head of Division
Frank Nielsen
Head of Division
Erik Pedersen
*) Viggo Sørensen, Head of Division, is also Head of the Secretariat for The Guarantee Fund for Depositors and
Investors.
95
STAFF
Staffing structure
At the close of 2005, Danmarks Nationalbank had 552 employees,
equivalent to 516 full-time positions. Employees in part-time positions
constituted 13 per cent of the staff.
Danmarks Nationalbank employed 24 student assistants at the close of
2005, most of whom were pursuing studies in economics. In addition, 3
employees are preparing PhDs. The bank also employs 4 apprentices
within the areas of clerical work, media graphics and structural carpentry.
The proportion of employees who are immigrants or descendents
thereof from non-western countries1 is 2.2 per cent. The highest percentages are seen in the staff groups academic staff (0.9 per cent) and
IT/clerical staff (0.9 per cent).
In 2005, the staff turnover rate was 13 per cent2, cf. Table 8. A total of
55 new employees joined the bank, while 72 left in 2005. One third of
the latter group left as a result of restructuring of work processes and
staff reduction at the Banknote Printing Works in 2004. By far the majority of those who left did so voluntarily or under a severance scheme.
The staffing structure of Danmarks Nationalbank has changed in recent
years, and the proportion of academic staff has risen substantially, cf.
Table 9. The changed staffing structure reflects ongoing rationalisation
among non-academic staff groups, as well as the fact, as seen in other
business enterprises, that work tasks have become increasingly complex
and thus require a higher level of education. The group of female academics with more than five years' seniority is growing. Among the academic staff, 32 per cent are women.
Overall, women accounted for 43 per cent of the staff in 2005. The proportion of women has been declining slightly in recent years, which may
be attributable to ongoing rationalisation of clerical staff and bank staff,
which are the areas where most women have traditionally been employed. The proportion of women in managerial positions3 is 12 per cent,
while 8 per cent of senior managers4 are women.
Seniority and the average age of employees fell by 0.5 years in 2005.
The average seniority is 12.9 years, and the average age is 42.2 years. At
approximately 20 per cent, the proportion of employees with at least 25
1
2
3
4
Non-western countries are countries outside the EU, the Nordic region, the USA, Canada, Australia,
New Zealand, Andorra, Liechtenstein, Monaco, San Marino, Switzerland and the Vatican.
Calculated as the number who left the bank as a ratio of the average number of employees in 2005.
Defined as at least Assistant Head of Division.
Defined as members of the Board of Governors and the senior manager group (Heads of Divisions/
Departments, Directors and Assistant Governors).
96
STAFF TURNOVER RATE
Table 8
Per cent
2000
2001
2002
2003
2004
2005
Staff turnover rate .........................
11.0
6.8
9.2
6.7
10.4
13.0
years' seniority remains high. For employees in senior managerial positions, the average age is 50.5 years, and their average seniority at the
bank is 21.4 years.
Staff development and education
Great importance is attached to the ongoing professional and personal
development of the staff. This is achieved via the day-to-day work, internal and external courses, further and supplementary education (e.g.
the graduate diploma in business administration), internal job rotation
and various leave-of-absence schemes, including leave to work for
international financial organisations.
The bank's expenditure on education was kr. 10.6 million in 2005,
which is an increase by kr. 1.7 million compared with the preceding year.
Overall, it is equivalent to 4.3 per cent of the payroll costs in 2005. Educational spending was distributed on approximately 75 per cent of the
staff1.
For courses held during working hours, the average employee participated in 2.2 courses with a total duration of approximately five course
days.
25 employees changed jobs in 2005 after applying for posts advertised
internally. At the close of the year, 12 employees had taken leave to
work for international financial organisations.
In 2005, Danmarks Nationalbank began to apply Assessment Center as
an employee development tool with a view to assessing the managerial
potential of certain employees. External consultants undertake the assessments, which conclude with a personal report for the employee, and
possibly subsequent coaching sessions with an HR consultant.
Recruitment
In 2005, 26 external job advertisements2 were posted, resulting in 750 applications, 99 interviews with candidates and 40 profile tests for 37 positions filled. Candidates for temporary positions, including jobs as student
assistants, are not required to take tests. Compared to 2004, there were
fewer applicants for by and large the same number of vacancies. The low1
2
Defined as all staff employed by Danmarks Nationalbank during 2005.
Student assistants are not included in the figures.
97
STAFF GROUPS
Table 9
2001
Year-end
Number
2002
Per
cent
Number
2003
Per
cent
Number
2004
Per
cent
Number
2005
Per
cent
Number
Per
cent
Academic staff ... 130
Bank staff ........... 128
IT-/clerical staff ... 114
Service staff ........ 92
Craftsmen/
technicians .......... 94
23
23
21
16
149
122
111
90
27
22
20
16
153
116
104
86
28
21
19
16
165
104
98
86
31
19
18
16
173
96
92
84
33
19
18
16
17
87
15
85
16
83
16
71
14
Total ................... 558
100
559
100
544
100
536
100
516
100
Note: Number of employees converted to full-time positions.
er number of applicants is, inter alia, attributable to the fact that Danmarks Nationalbank employed an external recruitment agency to fill some
positions.
In 2005, Danmarks Nationalbank participated in several career fairs as
part of its stronger, targeted effort to recruit new staff from relevant
fields of further and higher education and from relevant educational institutions.
Absence due to illness
In 2005, absence due to illness was an average of 7.7 days per staff member, which is an increase compared to 2004 (7.1 days). The rise is primarily
attributable to a few cases of long-term illness. If these cases are disregarded, absence due to illness has declined from 6.1 days to 5.8 days per
staff member.
Salary and employment conditions
In 2005, Danmarks Nationalbank negotiated the collective agreements
with the Staff Association of Danmarks Nationalbank, which comprises
most of the bank's employees, and with senior managers. The agreements
run for three years and are subject to negotiation in 2008. Among other
things, the collective agreement with the Staff Association allows for individual agreements with certain staff groups concerning general allowances instead of timesheet entry, as well as the option for all employees
to conclude agreements on salary packages (gross salary schemes) regarding ADSL and telephony.
Internal rules for purchase and sale of financial shares
As from 1 April 2005, the governors and senior managers of Danmarks
Nationalbank, as well as employees in departments that may have access
98
to market-sensitive information, may not on their own account trade in
shares issued by institutions subject to the supervision of the Danish Financial Supervisory Authority. By internal agreement, the governors have
observed this prohibition since 1996.
LECTURES
Lectures are an important part of Danmarks Nationalbank's targeted and
proactive strategy to communicate its policies and tasks. The governors
and senior managers give lectures at different venues in Denmark and in
connection with events at Danmarks Nationalbank. In addition, many lectures are given at Danmarks Nationalbank by a "lecture team" of younger
employees.
A major target group is students in upper secondary school and at
commercial colleges with some knowledge of economics, since Danmarks
Nationalbank wishes to stimulate their interest in economics and increase
familiarity with the tasks of Danmarks Nationalbank. The number of
lectures in this category increased from 31 in 2000 to 116 in 2005. More
than 3,000 people thus attended lectures at Danmarks Nationalbank in
2005.
OTHER INITIATIVES IN 2005
Renovation of the roof of Danmarks Nationalbank
At the beginning of 2005, Danmarks Nationalbank called for tenders for
the ongoing task of renovating the roof of Danmarks Nationalbank. The
project is expected to be completed in mid-2006.
Conference on communication within ERM II for the new EU member
states
In September 2005, Danmarks Nationalbank held a conference for the
new EU member states in order to share experience regarding communication within ERM II. Danmarks Nationalbank has extensive experience
of sharing information and communicating within the framework of the
fixed-exchange-rate policy. The conference included a review of Danmarks Nationalbank's communication policy vis-à-vis the press, market
participants and the general public. Latvia and Hungary also contributed
presentations concerning their communication policy.
Workshop on securities lending
In November 2005, Danmarks Nationalbank held a workshop on securities
lending for representatives of 15 central banks, who discussed theoretical,
99
practical and operational issues. Danmarks Nationalbank uses securities
lending on a short-term basis in its management of the foreign-exchange
reserve.
Danmarks Nationalbank issued "Payment Systems in Denmark"
In July 2005, Danmarks Nationalbank issued the publication "Payment
Systems in Denmark". Danmarks Nationalbank oversees payment and securities settlement systems of importance to financial stability and considers it important to make available a comprehensive description of the
systems and the payments infrastructure.
The publication contains a general description of payment and settlement systems and the role of central banks in this context. Danmarks
Nationalbank's role in relation to payment systems and the Danish payments infrastructure is described in detail, while selected international
payment and settlement systems are presented on a more general basis.
Finally, Danmarks Nationalbank's oversight of important payment and
settlement systems is described.
Financial sector continuity
Danmarks Nationalbank and the Danish Financial Supervisory Authority
have conducted an initial analysis of the need for continuity planning for
the financial sector in Denmark. Such planning will be aimed at increasing
the resilience of the sector so that the sector as such will be able to
continue critical business processes after an operational incident. Focus
will therefore be on services that are time critical, involve large sums of
money and are of significant importance to behaviour in the financial
markets. Financial sector continuity planning does not replace the financial enterprises' own business continuity planning. Danmarks Nationalbank will undertake coordination of the ongoing work.
Restructuring of Danish Ship Finance as a limited liability company
On 17 January 2005, Danish Ship Finance, the Danish Ministry of Economic
and Business Affairs and Danmarks Nationalbank concluded an agreement on the restructuring of Danish Ship Finance as a limited liability
company. The Board of Representatives of Danish Ship Finance and the
Committee of Directors of Danmarks Nationalbank approved the agreement, and the necessary legislative amendment has been adopted by the
Folketing (Parliament).
Danmarks Nationalbank purchased shares in Danish Ship Finance A/S
for nominally kr. 63 million at a market value of kr. 231 million. These
shares cannot be sold for at least five years. See the press release on pp.
149-150.
100
Danmarks Nationalbank's sale of shares in Grønlandsbanken
At the beginning of 2005, Danmarks Nationalbank sold its entire shareholding in Grønlandsbanken A/S to the Greenland Home Rule, cf. the
stock-exchange announcement of 20 January 2005. The transferred
shareholding constituted 13.7 per cent of the share capital of Grønlandsbanken A/S. The Danish Financial Supervisory Authority approved
the Greenland Home Rule as the purchaser of the shares. The ownership and voting rights relating to the shares therefore passed to the
Greenland Home Rule on 15 February 2005. See the press release on
p. 150.
Danmarks Nationalbank's sale of shares in Bella Center
In April 2005, Danmarks Nationalbank sold its shares in Bella Center A/S.
At the same time, three other large shareholders – the Danish government, Danske Bank and Nordea – sold their shares.
Danmarks Nationalbank had been a shareholder of Bella Center A/S
since its foundation in July 1964. At that time it was seen as an important task for society to establish an exhibition centre in the vicinity of
Copenhagen, and Danmarks Nationalbank therefore subscribed to
shares for nominally kr. 1 million, equivalent to approximately 11 per
cent of the share capital of Bella Center A/S. After a number of subsequent capital injections, Danmarks Nationalbank's nominal shareholding
at the beginning of 2005 was kr. 17.3 million, constituting 13.3 per cent
of the total share capital.
The reasons for selling Danmarks Nationalbank's shares included
that ownership of an exhibition and conference centre is not deemed
to be a natural part of Danmarks Nationalbank's activities, and that
the Danish Ministry of Finance wished to sell the government's
shares.
Acquisition of Dankort A/S and PBS International by PBS
On 1 December 2005, PBS Holding A/S, in which Danmarks Nationalbank
holds an interest of 17.7 per cent of the shares, acquired Dankort A/S. The
latter company, which was established in 2001, acquired the rights to the
Dankort (debit card) and the role of administrator of the rules and
licences.
In addition, PBS Holding A/S has acquired the shares of PBS International as from 1 January 2006. The primary activity of this company is to sell acceptance agreements for a number of international
payment cards. PBS International was established in 2003 in connection with a demerger of PBS into a number of independent companies.
101
REPRESENTATION ON COMMITTEES, ETC.
As of 1 March 2006 Danmarks Nationalbank is represented on the following committees, etc.:
• Bankernes EDB Central (BEC)
Governor Torben Nielsen is an observer on the Board of Directors
• Danish Ship Finance A/S
Governor Jens Thomsen is a member of the Board of Directors
• The Financial Business Council
Governor Jens Thomsen is a member, and Jens Lundager, Head of Division, is an alternate member
• The Economic Council
Governor Jens Thomsen is a member
• The Danish Securities Council
Hugo Frey Jensen, Head of Financial Markets, is a member, and Birgitte
Bundgaard Madsen, Adviser, is an alternate member
• Industriens Realkreditfond
Danmarks Nationalbank has appointed Professor Michael Møller to
the Board of Directors
• PBS Holding A/S and PBS A/S
Governor Torben Nielsen is a member of the Board of Directors, and
Kristian Kjeldsen, Head of Division, is an alternate member
• Managing Committee for the Social Pension Fund
Ove Sten Jensen, Head of Division, is a member
• VP Securities Services
Governor Torben Nielsen is the Vice Chairman of the Board of Directors
REPRESENTATION IN INTERNATIONAL ORGANISATIONS
As part of the international foreign-exchange and monetary-policy cooperation Danmarks Nationalbank participates in a number of committees, sub-committees and working groups, of which the most significant are:
The European Union, EU
• The Committee of European Banking Supervisors
Jens Lundager, Head of Division (with Flemming Nytoft Rasmussen,
Deputy Director, Financial Supervisory Authority)
• The Economic and Financial Committee
Governor Jens Thomsen (with Per Callesen, Deputy Secretary, Ministry
of Finance). Niels Bartholdy, Head of Division, is an alternate member
(with Steen Lohmann Poulsen, Head of Division, Ministry of Finance)
102
•
•
•
The Economic Policy Committee
Christian Ølgaard, Head of Division, is an alternate member of the Committee (with Niels Kleis Frederiksen, Head of Division, Ministry of
Finance. Helge Sigurd Næss Schmidt, Head of Division, Ministry of
Finance, and Birgitte Anker, Head of Division, Ministry of Economic and
Business Affairs are members)
Economic and Financial Committee Group on EU Government Bills and
Bonds
Governor Jens Thomsen is Chairman, and Ove Sten Jensen, Head of
Division, is a member (with Michael Wiemann, Head of Section, Ministry of Finance)
The Working Group of Mint Directors
Laust Grove, General Manager, the Royal Mint, and Johanne Dinesen
Riishøj, Head of Section
The European Central Bank, ECB
• The General Council
Governor Nils Bernstein
Danmarks Nationalbank participates partly in the following ECB committees where EU central banks outside the euro area have access:
• Banking Supervision Committee
Hugo Frey Jensen, Head of Financial Markets (with Flemming Nytoft
Rasmussen, Deputy Director, Financial Supervisory Authority)
• Payments Systems Committee
Kristian Kjeldsen, Head of Division, and Allan Damm Christensen, Assistant Head of Division
• Legal Committee
Kirsten Rohde Jensen, Head of Division
• Monetary Policy Committee
Anders Møller Christensen, Assistant Governor
• Information Technology Committee
Søren Lundsby Hansen, Head of IT, and Johan Sebastian Gabel, Adviser
• Eurosystem/ESCB Communications Committee
Karsten Biltoft, Head of Secretariat, and Winnie Jakobsen, Head of
Division
• International Relations Committee
Governor Jens Thomsen and Kai Aaen Hansen, Director, Head of International Relations
• Market Operations Committee
Frank Nielsen, Head of Division
103
•
•
•
•
Accounting Committee
Henrik Larsen, Director, and Lisbeth Sundin, Assistant Head of Division
Internal Auditors Committee
Jan Birkedal, Chief Auditor, and Brian Skovbo Hansen, Head of Section
Banknote Committee
Tage Heering, Head of Division
Statistics Committee
Jens Dalsgaard, Head of Statistics, and Tom Christensen, Assistant
Head of Division
The International Monetary Fund, IMF
Board of Governors
Governor Nils Bernstein is a member. (Christian Kettel Thomsen, Permanent Secretary, Ministry of Finance, is an alternate member)
• The Nordic/Baltic Monetary and Financial Committee
Governor Jens Thomsen (with Per Callesen, Deputy Secretary, Ministry of
Finance)
Gitte Wallin Pedersen, Adviser, is a member of the Group of Alternate
Members (with Charlotte Hougaard Møller, Head of Section, Ministry
of Finance)
•
Organisation for Economic Cooperation and Development, OECD
• The Economic Policy Committee
Governor Jens Thomsen (with Per Callesen, Deputy Secretary, Ministry of
Finance and Ulrik Nødgaard, Deputy Permanent Secretary, Ministry of
Economic and Business Affairs)
DANMARKS NATIONALBANK'S ANNIVERSARY FOUNDATION OF 1968
Danmarks Nationalbank's Anniversary Foundation was established in
connection with the bank's 150th anniversary in 1968, when kr. 15 million was given to the Foundation. This sum has been supplemented several times, and the paid-up capital, which is placed in bonds, amounted
to kr. 85 million at the end of 2005.
The Foundation primarily supports decorative art, architecture and
design, but also music, dance and theatre. When considering applications, the Board of the Foundation attaches great importance to quality
as well as support to new and future-oriented artistic projects.
On 1 March 2006, the Board of the Foundation comprised former Governor Bodil Nyboe Andersen (Chairman), Professor Hans E. Zeuthen
(Deputy Chairman), the architect Merete Ahnfeldt-Mollerup, the ceramic
artist Karen Bennicke, director Lars Eskesen, and Karoline Prien Kjeldsen,
104
Permanent Secretary, the Danish Ministry of Culture. Danmarks Nationalbank's Committee of Directors has appointed Governor Nils Bernstein as
new Chairman of the Foundation as from 1 April 2006. He replaces Bodil
Nyboe Andersen, who retires from the Board of the Foundation.
The Board meets four times a year to award grants. In 2005, 1,250 applications were considered and 177 grants totalling kr. 4.9 million were
awarded.
In October 2005 the Foundation awarded an honorary grant of kr.
100,000 to the designer Ole Palsby in connection with the opening of an
exhibition at the Danish Museum of Art and Design.
DANMARKS NATIONALBANK'S GUEST APARTMENTS AT NYHAVN 18
Danmarks Nationalbank has seven guest apartments at Nyhavn 18 which
are made available to foreign scientists and artists. Residence in the guest
apartments is free and granted for periods of three to twelve months. In
2005 the guest apartments were allocated to nine visitors.
The committee formed to advise on the allocation of the apartments
consists of Professor Ole Feldbæk (Chairman), Dr. Else Marie Bukdahl and
Professor Søren-Peter Fuchs Olesen.
THE ERIK HOFFMEYER TRAVEL GRANT FOUNDATION
In 2005 the Board of the Erik Hoffmeyer Travel Grant Foundation
awarded two travel grants of kr. 35,000 each to editor, PhD Lasse Horne
Kjældgaard, the Society for Danish Language and Literature, and to the
glass artist Armen Georgens.
The Erik Hoffmeyer Travel Grant Foundation was established by the
Board of Directors of Danmarks Nationalbank in 1995 as a tribute to former governor Erik Hoffmeyer for 30 years' outstanding service as Chairman of Danmarks Nationalbank's Board of Governors.
The Board of the Travel Grant Foundation comprises Professor Hans E.
Zeuthen (Chairman), former Governor Erik Hoffmeyer and former Chief
Rabbi Bent Melchior.
105
Risk Management
Danmarks Nationalbank applies a model for operational risk management. In 2005, work continued to reduce the probability and potential
consequences of operational incidents at Danmarks Nationalbank. No
significant operational incidents with a negative impact on the reputation or finances of Danmarks Nationalbank have occurred.
Danmarks Nationalbank's financial risks mainly comprise market risks.
The bank is exposed to the development in interest rates, exchange rates
and the gold price. Danmarks Nationalbank's market risk, measured as
Value-at-Risk, was kr. 2.4 billion at the end of 2005 and by and large unchanged in relation to end-2004. The risk on the gold stock has, however,
increased due to rising gold prices. This increase is to some extent set off
by a decline in the bank's interest-rate risk. Danmarks Nationalbank's
credit risk is very limited. The bank seeks to completely avoid credit losses
by solely having claims on counterparties with high credit standing and by
requiring collateral to a significant extent.
OPERATIONAL RISK
Operational risk is the risk of financial loss resulting from inadequate or
failed internal processes, people and systems, or from external events.
Loss of reputation is also a key concern for Danmarks Nationalbank so
that this aspect is also taken into account when assessing operational risk.
Danmarks Nationalbank's model for operational risk management is
based on the principles for sound management of operational risk issued
by the Bank for International Settlements. The model comprises standards
for assessment of operational risk, preparation of procedures, physical
security and IT security, as well as business continuity planning.
The model is based solely on a qualitative standard. Operational risk
management comprises analyses of various risk scenarios, ongoing
management reporting on potential threats and incidents, and assessments of whether the model's requirements are observed within the organisation.
The introduction of measures to counter relevant threats should be
viewed in relation to the criticality of the business activities to the bank.
It is assessed that no significant operational incidents with a negative
impact on the reputation or finances of Danmarks Nationalbank occurred
in 2005.
106
Risk assessments and procedures
The risk assessment model contributes to identifying and assessing operational risk for given business areas, products, processes or systems. A risk
assessment includes an estimate of the probability of an incident occurring, and of its potential impact.
The risk assessments will be gradually extended until all relevant issues
have been taken into account. For instance, risk assessments have been
prepared for operation of the IT department's back-up system, physical
access control and hand-held terminals.
In 2005, Market Operations held a workshop to highlight the risks/
threats that may arise in various phases of the trading process, establish
measures to cover these risks and threats, and identify any residual risks.
Subsequently an activity plan has been prepared for the improvement of
existing and the introduction of new measures.
In connection with the implementation of a number of organisational
changes and restructuring of work routines at the Banknote Printing
Works, in 2005 a new risk assessment was performed. This mapping of the
risk scenario was the basis for various adjustments to the technical and administrative measures.
Physical security and IT security
A review of the policies for physical security and IT security did not give
rise to any adjustments.
Danmarks Nationalbank's IT security management is based on ISO
17799, the international code of practice for information security management. ISO 17799 is in accordance with DS 484, which is the mandatory security standard for Danish government institutions, and consequently it is assessed that Danmarks Nationalbank complies with the
government's IT security management requirements.
In relation to IT security, the separation of the Internet and the LAN
was strengthened via the introduction of a more robust firewall design.
DANMARKS NATIONALBANK'S MANAGEMENT OF FINANCIAL RISKS
Danmarks Nationalbank's financial result is dependent on several uncertainties; especially the development in a number of financial markets, but also
counterparties' ability and willingness to meet their payment obligations.
To a certain extent, Danmarks Nationalbank's financial risks are a result
of its role as monetary authority, which includes managing the monetary
and foreign-exchange policy, issuing banknotes and coins and functioning
as banker to the banks and to the central government. The risks arising
from the role as monetary authority are unavoidable. For example, it is
107
necessary to hold a foreign-exchange reserve in order to conduct a fixedexchange-rate policy. Other risks reflect that Danmarks Nationalbank as a
financial enterprise seeks to achieve a sound return. Interest-rate risk is
e.g. determined on the basis of a trade-off between expected revenue
and risk.
Danmarks Nationalbank's choice of risk level is characterised by prudence. A low level of risk reduces the probability of losses to Danmarks
Nationalbank and makes it possible to maintain a high degree of solvency
even in periods of extreme market conditions.
Danmarks Nationalbank is primarily exposed to market risks such as
interest-rate, foreign-exchange and liquidity risk, and to a lesser degree to
other types of risk, e.g. credit risks. The aim is to completely avoid losses as
a result of counterparty failure.1
Market risk
Market risk is the risk of suffering a loss as a consequence of price fluctuations in the financial markets. For Danmarks Nationalbank, the risk factors primarily comprise interest rates, but also exchange rates and the
gold price.
In the assessment of the risk factors' impact on Danmarks Nationalbank's financial result it is important to draw a distinction between exposure and risk.
Exposure is the extent to which a loss is incurred on a given change in a
specific risk factor. The interest-rate exposure is expressed as the krone
duration, stating the loss in kroner on an increase in the level of interest
rates by 1 percentage point. The foreign-exchange exposure can be expressed as the change in market value in kroner on a 1-per-cent change in
the exchange rate.
On compiling the risk, the probability of loss is evaluated by combining
exposure with the probability of a change in the risk factor concerned.
One of the methods for assessing interest-rate and exchange-rate risk is
calculation of Value-at-Risk, VaR, which can be interpreted as the maximum loss under normal market conditions. In addition to VaR, stress scenarios are used that measure losses under extremely unfavourable market
conditions.
Interest-rate exposure and risk
A part of Danmarks Nationalbank's assets are fixed-rate bonds, while its
liabilities are primarily floating-rate liabilities. Consequently, Danmarks
1
Danmarks Nationalbank's financial risks and management thereof are described in Danmarks Nationalbank, Financial Management at Danmarks Nationalbank, 2004.
108
INTEREST-RATE EXPOSURE OF DANMARKS NATIONALBANK
Capital loss in kr. billion on a general 1-per-cent increase in
interest rates
Table 10
End-2004
End-2005
Kroner ...................................................................................
Euro .......................................................................................
Pounds sterling .....................................................................
Dollars ...................................................................................
Swedish kronor .....................................................................
0.6
0.6
0.1
0.3
0.1
0.7
0.5
0.1
0.4
0.1
Total ......................................................................................
1.8
1.8
Nationalbank will incur a capital loss in the event of an increase in interest
rates. Experience shows that in the long term fixed-rate bonds yield higher returns than placements at floating rates. Over an extended period,
Danmarks Nationalbank is therefore expected to increase its return by assuming a certain interest-rate risk.
At the close of 2005, the loss would have been kr. 1.8 billion on a 1per-cent increase in the general level of interest rates, cf. Table 10.
The bond portfolio is placed in several markets. The exposure to Danish
interest rates is attributable to the portfolio of Danish government, mortgage-credit and Ship Finance bonds. The exposure to foreign interest
rates is primarily attributable to the placement of a part of the foreignexchange reserve in foreign bonds. Spreading the interest-rate exposure
over different markets and maturity segments contributes to reducing the
interest-rate risk.
Foreign-exchange exposure and risk
Danmarks Nationalbank holds considerable foreign-exchange assets, first
and foremost the foreign-exchange reserve, which serves as an intervention reserve. Danmarks Nationalbank obtains an exchange-rate gain when
the krone weakens since the krone value of foreign-exchange assets hereby increases. Similarly, an exchange-rate loss is incurred when the krone
strengthens. At the close of 2005 the market value of foreign-exchange
outstandings totalled kr. 216 billion, cf. Table 11. Danmarks Nationalbank
will thus incur a loss of kr. 2.16 billion if the krone strengthens by 1 per
cent.
History shows that from time to time exchange-rate fluctuations can
result in substantial losses. Against this background Danmarks Nationalbank
has chosen to keep the foreign-exchange risk at a low level. This is achieved
by forward sale of dollars, pounds sterling and Swedish kronor against
euro. The foreign-exchange exposure to non-euro currencies is thus converted to euro. For example, at the close of 2005 Danmarks Nationalbank
held sterling assets for kr. 11 billion, but had also sold sterling forward for
109
FOREIGN-EXCHANGE EXPOSURE OF DANMARKS NATIONALBANK
Table 11
End-2005
End-2004
total
Placements
Gold
Forward
contracts
Total
Euro ..........................................
Pounds sterling ........................
Dollars ......................................
Swedish kronor ........................
217
0
5
0
160
11
31
8
7
-
51
-11
-32
-8
210
0
6
0
Total .........................................
223
209
7
0
216
Market value in kr. billion
Note: Negative amounts indicate that Danmarks Nationalbank holds a liability when the foreign currency increases in
value. The value of SDR is distributed on the respective currencies: euro, pound sterling and dollar. The weightings
of the currencies in SDR were altered as of 1 January 2006, cf. Appendix of Tables, Table 12.
kr. 11 billion, cf. Table 11. The sterling exposure was thus eliminated. As the
Table shows, Danmarks Nationalbank has retained a minor dollar exposure
in order to be able to intervene in dollars, and to diversify risk.
The conversion of foreign-exchange exposure to euro exposure is the
key element of the management of Danmarks Nationalbank's foreignexchange risk. In a historical perspective this strategy has reduced the
foreign-exchange risk considerably as a result of the fixed-exchange-rate
policy vis-à-vis the euro. This strategy also implies that the interest-rate exposure can be spread over different markets irrespective of any inherent
foreign-exchange risk.
Danmarks Nationalbank is exposed to the development in the gold price
in view of its gold stock of kr. 7 billion. Gold is typically quoted in dollars
and consequently contributes to the dollar exposure, cf. Table 11. When
the foreign-exchange exposure is converted from dollars to euro, the gold
stock's dollar exposure is taken into account on equal terms with the
other dollar-denominated assets. Danmarks Nationalbank holds the gold
stock at a constant level. Virtually all of the gold stock is physically placed
in foreign central banks. A part of the stock is lent to banks with a high
credit rating. The interest on gold lending is paid in gold, and gold
interest is sold on an ongoing basis. The interest on gold was very low (0.1
per cent) in 2005, and thus did not match even a limited risk. Consequently, no gold was lent in 2005.
Measuring market risk
Danmarks Nationalbank uses various measures to evaluate market risk.
Individually these measures give an indication of Danmarks Nationalbank's risks, and together they illustrate its risk profile. The overall risk
level reflects an assessment of the expected yield in relation to a number
of different risk measures. The methods for measuring Danmarks Nationalbank's risks are subject to constant development.
110
DANMARKS NATIONALBANK'S VALUE-AT-RISK
Kr. billion during a year with a probability of 95 per cent
Table 12
End-2004
1
End-2005
Interest-rate risk ...................................................
Exchange-rate risk ................................................
Gold .......................................................................
Reduction due to diversification .........................
1.7
1.2
1.1
1
-1.5
1.6
1.3
1.9
-2.3
Total ......................................................................
2.5
2.4
Note: VaR with a horizon of one year and a probability of 95 per cent.
1
The breakdown on interest-rate risk and diversification for 2004 is revised in relation to Report and Accounts, 2004.
Value-at-Risk
Danmarks Nationalbank's market risk is e.g. measured by Value-at-Risk,
VaR. This risk measure combines the financial exposures with an estimate
of the typical volatility in the market conditions, taking into account the
covariation between the various risk factors.
At end-2005, Danmarks Nationalbank's VaR1 was calculated at kr. 2.4 billion, compared to kr. 2.5 billion at end-2004, cf. Table 12. The result indicates that in 2006, with a probability of 95 per cent, Danmarks Nationalbank will not incur a loss exceeding kr. 2.4 billion. Equivalently, the result
states that with a probability of 5 per cent Danmarks Nationalbank will
experience a capital loss exceeding kr. 2.4 billion. VaR does not indicate
the size of this potential loss.
The sum of the contributions from each group of risk factors – interest
rates, exchange rates and the gold price – exceeds the total VaR since the
calculation of VaR takes into account that the risk is spread over several
risk groups. The reduction, or the diversification gain, is due to the fact
that losses on all risks seldom appear at the same time.
The increase in VaR for the gold stock is attributable to the rising market value of Danmarks Nationalbank's gold stock. At the same time, the
interest-rate risk has declined as a consequence of smaller fluctuations in
interest rates. Viewed in isolation, Danmarks Nationalbank's gold stock
contributes kr. 1.9 billion to VaR. In relation to the value of the gold stock
this is a large amount. The reason is the large fluctuations in the gold
price in dollars. The gold price measured as dollars per ounce has increased during the past five years, cf. Chart 30. In 2005, the dollar also
strengthened vis-à-vis the euro. Thus, measured in terms of euro per
ounce the gold price has also appreciated. Losses on gold (in dollars) are
often matched by gains on dollars, whereby the gold stock normally contributes to reducing the bank's risk.
1
VaR is calculated on the basis of estimated volatilities and correlations between the relevant risk factors on the basis of a weighting of the last 160 days. VaR is determined by combining these estimates
with Danmarks Nationalbank's portfolio structure as of end-2005.
111
GOLD PRICE AND EXCHANGE RATES
Chart 30
Euro/dollar
Gold price per ounce
600
1.4
550
1.3
500
1.2
450
1.1
400
1.0
350
0.9
300
0.8
250
0.7
200
2001
0.6
2001
2002
Gold price in dollars
2002
2003
2003
Gold price in euro
2004
2004
2005
2005
2006
Euro/dollar (right-hand axis)
At the close of 2005 Danmarks Nationalbank's net capital totalled kr. 52
billion, cf. the balance sheet on p. 127. VaR as a share of net capital was
thus 4.6 per cent at end-2005, compared to 5.0 per cent at end-2004. VaR
has been reduced since 2002, mainly as a result of the lower interest-rate
risk. At the same time, Danmarks Nationalbank's earnings potential has decreased, primarily due to lower short-term interest rates and a flatter yield
curve.
Part of the calculated risk relates to the fluctuation of the krone vis-àvis the euro. The exchange-rate risk in relation to the euro is of a special
nature. The krone/euro exchange rate is solely influenced in the interest
of the fixed-exchange-rate policy and not to increase earnings. Consequently, VaR is also estimated without the exchange-rate risk on the
euro, and at the close of 2005 VaR excluding the exchange-rate risk on
the euro totalled kr. 2.3 billion. In general the exchange-rate risk on the
euro does not affect VaR much due to the stability of the krone vis-à-vis
the euro.
Stress test
The VaR calculations provide information on the general risk of loss, but
not on the extent of the losses in the event of extreme market fluctuations. Stress tests reflecting how extreme, but realistic scenarios of market
development affect the value of Danmarks Nationalbank's current portfolio are used for this purpose.
112
It is difficult to set out market fluctuations that are both realistic and extreme. Danmarks Nationalbank has selected data from sub-periods between 1993 and 2005 in which the development in interest and exchange
rates was particularly unfavourable. On the basis of the portfolio structure
at end-2005, the losses to Danmarks Nationalbank if this development
were to repeat itself are calculated. The following three scenarios have
been set up:
•
•
•
Scenario 1: The one-year period that has given the greatest concurrent total interest and exchange-rate loss.
Scenario 2: The one-year period that has given the greatest total
interest-rate loss, combined with the one-year period that has given
the greatest total exchange-rate loss. The losses do not have to be concurrent.
Scenario 3: The one-year periods that for each individual one-year
interest-rate segment in each currency have given the greatest interestrate loss, combined with the one-year periods that for each currency
have given the greatest exchange-rate loss. The losses do not have to
be concurrent.
As the scenarios are set up, scenario 3 will always give at least as great a
loss as scenario 1 or 2. With the current portfolio structure, the three
scenarios give a total capital loss of between kr. 12 and 16 billion, cf.
Table 13. The most pessimistic scenario will give the bank a capital loss of
around 1/3 of its net capital.
Losses calculated using VaR and stress tests indicate the immediate loss
on a change in market conditions. When the risk over a longer period is
to be assessed, the impact of market conditions on current earnings
DANMARKS NATIONALBANK'S LOSS IN STRESS SCENARIOS, END-2005
Kr. billion
Interest-rate Exchangeloss
rate loss
Table 13
Loss on
gold
Total
Greatest concurrent total interest-rate and
exchange-rate loss (scenario 1) ........................
2.9
9.0
-0.2
11.7
Greatest total interest-rate loss combined
with greatest total exchange-rate loss
(scenario 2) ........................................................
4.4
9.0
1.5
14.9
Greatest interest rate loss in one-year
segments for each currency combined with
greatest exchange-rate loss for each currency
(scenario 3) ........................................................
5.0
9.7
1.5
16.2
Note: A negative figure indicates a gain.
113
must also be taken into account. A large proportion of the losses calculated using VaR and stress tests are attributable to the risk of a general
increase in interest rates, but in that case the current earnings of Danmarks Nationalbank also increase, and in the long term it gains from an
increase in interest rates since the bank from the outset has more income from interest than interest expenditure.
Liquidity risk
Liquidity risk comprises several factors. For Danmarks Nationalbank,
there is first and foremost the liquidity risk that it is not possible to release funds to support the krone, even though the funds are held in reserve.
The principal purpose of the foreign-exchange reserve is to be able to
intervene in the foreign-exchange market. In the management of the
foreign-exchange reserve it is therefore very important to ensure that the
greater part of the reserve can be converted quickly to liquid funds.
Therefore, a large proportion of the foreign-exchange reserve is placed in
the money market or in bonds with a high degree of security, so that they
can easily be realised or used as collateral in various liquid markets.
To manage the liquidity requirement, it must, inter alia, be possible to
release a minimum amount of kr. 25 billion within two days.1
Danmarks Nationalbank also has several other borrowing options, e.g.
access to foreign exchange via the central government's Commercial
Paper programme amounting to 12 billion dollars (equivalent to approximately kr. 74 billion), which is administered by Danmarks Nationalbank.
The programme has been used on several occasions, particularly in connection with the foreign-exchange crises in the early 1990s. However, it
has also been used when the central government needed a short-term
loan in order to maintain a positive balance of its account at Danmarks
Nationalbank. This was the case in 2005, when approximately kr. 17 billion was raised.
In accordance with the ERM II agreement, Danmarks Nationalbank also
has an opportunity to borrow at the ECB. This facility has not been used,
but serves as a safety net. Danmarks Nationalbank moreover has access to
the forward foreign-exchange market where it can transact currency
swaps between kroner and foreign exchange.
On placement of the domestic securities portfolio the same weight is
not given to liquidity considerations.
1
The foreign-exchange market operates with two-day settlement, which means that transactions are
settled two days after the contract date. Liquidity must therefore be available within two days if it is
to be used for intervention purposes.
114
TOTAL CREDIT EXPOSURE ON THE FOREIGN-EXCHANGE RESERVE AND THE
DOMESTIC SECURITIES PORTFOLIO, ETC., END-2005
Bonds
Table 14
Bank claims
Kr. billion
2004
Total
Central
government
Others1
Collateralised
Uncollateralised
Aaa .................
Aa1 .................
Aa2 .................
Aa3 .................
A1 ...................
A2 ...................
A3 ...................
No rating ........
87.6
47.2
45.5
66.5
3.8
5.2
33.7
0.4
8.8
1.5
-
24.4
8.4
2.7
0.3
0.2
5.6
37.3
23.9
47.7
-
4.1
5.9
12.5
17.4
3.6
0.7
0
0.8
3
5.2
68.6
52.0
45.2
67.8
5.1
1.0
0
5.4
Total ...............
255.8
44.5
36.0
114.5
44.2
6.0
245.2
Supranational
institutions2
Total
Note: Moody's credit rating is used. The scale ranges from Aaa to D, where Aaa is the highest credit rating.
1
Other bonds include securities with both explicit and implicit government guarantees, and Danish issuers.
2
Supranational institutions such as BIS, the IMF and the Asian Development Bank. The credit exposure vis-à-vis the IMF
totalled net kr. 1.9 billion. In addition, the IMF has unused drawing rights of kr. 22.3 billion.
3
Exclusively covers BIS and IMF.
Credit risk
Credit risk is the risk of loss due to a counterparty's default on obligations. Credit risk also comprises the risk that the market rating of a
counterparty's credit standing drops, resulting in a capital loss. Credit exposure is stated as the market value of the assets. The credit exposure
on the foreign-exchange reserve and the domestic securities portfolio
was kr. 245 billion at end-2005 against kr. 256 billion at end-2004, cf.
Table 14.
At the close of the year, 95 per cent of the foreign-exchange reserve
and the domestic securities portfolio was placed in supranational institutions or in assets with a rating of Aa3 or higher1.
To reduce the credit risk, Danmarks Nationalbank spreads its assets
among counterparties with a high credit standing. Moreover, collateral is
required to a large extent. The credit risk is therefore very small.
The credit risk on bonds, banks, etc., i.e. claims on foreign governments,
banks, etc., is managed on the basis of the ratings given by international
credit rating agencies. Moreover, all significant holdings are subject to
maximum limits. The domestic securities portfolio almost exclusively comprises government bonds, mortgage-credit bonds and Danish Ship Finance
bonds.
1
Loans in connection with monetary-policy operations, the banks' intraday credits and cash depots are
solely extended on the basis of collateralised bonds, and are not included.
115
For deposits with foreign banks repo agreements with highly-rated
government bonds as collateral are also used. Should a repo counterparty be subject to compulsory liquidation, Danmarks Nationalbank's
deposit is covered by the collateral provided.
Danmarks Nationalbank's holdings of foreign bonds are issued by
central governments or supranational institutions with a high credit rating, or guaranteed by central governments with a high credit rating1.
Danmarks Nationalbank thus does not hold corporate bonds or bonds issued by central governments with a low credit rating.
1
Government-guaranteed securities include securities with an implicit government guarantee.
Accounts
for the year 2005
118
Report on Danmarks Nationalbank's
Accounts
Danmarks Nationalbank's accounts for 2005 show a profit of kr. 4.9 bilion,
compared to kr. 2.8 billion in 2004. This change is due primarily to the
increase in value adjustments by kr. 1.9 billion, and in other income by kr.
0.8 billion, while net income from interest declined by kr. 0.3 billion. Transfer of kr. 1.2 billion to the Value Adjustment Reserve reduces the amount
for distribution to kr. 3.7 billion, of which kr. 0.7 billion is allocated to the
General Reserves and kr. 3.0 billion is payable to the central government.
PRESENTATION OF DANMARKS NATIONALBANK'S ACCOUNTS
The accounts for 2005 have been prepared in accordance with the same
accounting policies as in the previous year, cf. p. 123.
The accounts reflect that Danmarks Nationalbank issues banknotes
and coins, holds substantial assets comprising the foreign-exchange reserve and functions as banker to the banks and the mortgage-credit
institutes, and to the central government.
The profit from financial items was kr. 4,826 million, which is kr. 1,534
million higher than in 2004, and the total profit for the year is kr. 4,902
million, i.e. kr. 2,059 million higher than in 2004.
The balance sheet increased from kr. 337.1 billion to kr. 392.0 billion.
The profit and loss account
Net income from interest
Net income from interest totalled kr. 3,616 million, which is kr. 338 million
less than in 2004.
Income from interest on foreign assets fell by kr. 202 million to kr. 5,420
million. The decrease reflects lower interest rates on a virtually unchanged
average foreign-exchange reserve.
Net interest to banks and mortgage-credit institutes (interest on deposits and certificates of deposit less interest on monetary-policy lending1)
increased by kr. 668 million to kr. 2,232 million. The increase is mainly
attributable to a higher average net position.
1
The rates of interest for loans and certificates of deposit are identical, while the rate of interest for
deposits has been lover than the other interest rates.
119
Danmarks Nationalbank's interest expenditure on the central government's deposit fell by kr. 553 million to kr. 1,173 million as the central
government's balance on average was kr. 28 billion lower.
Interest on domestic bonds fell by kr. 120 million to kr. 1,699 million.
The decrease is attributable to a lower level of interest rates.
Value adjustments, etc.
Value adjustments resulted in a gain of kr. 1,210 million.
Value adjustment of Danmarks Nationalbank's gold stock gave a gain
of kr. 1,818 million, which is related to the fact that the price of gold
converted to Danish kroner increased by 35 per cent during 2005.
Value adjustment of foreign-exchange positions1 resulted in a loss of
kr. 97 million. The loss is due to a market-value loss of kr. 806 million,
which is partly offset by an exchange-rate gain of kr. 709 million.
The market-value loss on domestic securities of kr. 510 million can be
related to a market-value loss on domestic bonds.
A significant part of the market-value loss on the domestic and foreign
bonds can be related to the fact that a large proportion of the bond portfolio at the beginning of the year had a market value above par, and
therefore automatically released a capital loss in step with redemption, or
because the redemption date was forthcoming.
Other income
This item comprises income of kr. 800 million relating to the restructuring
of Danish Ship Finance as a limited liability company, as well as revenue of
kr. 48 million from the sale of coin sets and medals.
Expenses
Total expenses increased by kr. 254 million to kr. 804 million. The increase
is mainly related to a one-off payment of kr. 200 million to Danmarks
Nationalbank's Pension Fund subject to winding-up to cover Danmarks
Nationalbank's pension commitment. The payment is necessary due to a
continuing decrease in the level of interest rates combined with an adjustment of the capital requirements for pension funds. Staff expenses increased by kr. 9 million to 326 million, and other expenses increased by kr.
46 million to kr. 278 million. Other expenses comprise kr. 79.5 million for
conversion and substantial maintenance of the Danmarks Nationalbank
buildings, and represents an increase of kr. 24.3 million compared to 2004.
In the period the average number of staff fell from 533 to 521.
1
Foreign-exchange positions comprise the foreign-exchange reserve, as well as unsettled foreignexchange contracts, currency and interest-rate swaps, domestic foreign-exchange balances, and the
liability counterpart of Special Drawing Rights (SDR) allocated by the IMF.
120
Profit for the year
The result for the year is a profit of kr. 4,902 million, against a profit of kr.
2,844 million in 2004. The positive value adjustment of the year of kr.
1,210 million is transferred to the Value Adjustment Reserve, which hereafter amounts to kr. 3,858 million. An amount of kr. 738 million, corresponding to 20 per cent of the profit excluding value adjustments, is allocated to the General Reserves, after which the General Reserves total kr.
48,074 million. Kr. 2,954 million is payable to the central government, corresponding to 80 per cent of the profit excluding value adjustments.
The balance sheet
Gold
The stock of gold amounted to kr. 6.9 billion at the end of the year,
compared to kr. 5.1 billion in 2004. The increase is related to the increase
in the price of gold converted to Danish kroner by 35 per cent during
2005.
Foreign assets
Assets amounted to kr. 204.2 billion at the end of the year, compared to
kr. 208.5 billion in 2004. This is equivalent to a decrease of 2 per cent.
The assets are placed in euro (77 per cent), dollars (14 per cent), pounds
sterling (5 per cent) and Swedish kronor (4 per cent). The exchange-rate
risk is restructured so that the exposure is mainly in euro. The positions
are held mainly in highly-rated government bonds and governmentguaranteed bonds, deposits with central banks and commercial banks,
or as lending against collateral in government bonds and governmentguaranteed bonds.
Foreign assets are the most significant item of the foreign-exchange
reserve, together with gold, claims on the IMF and foreign liabilities.
Claims on the International Monetary Fund, IMF
This balance-sheet item comprises Denmark's IMF quota less the IMF's
outstanding drawing right on Danmarks Nationalbank with addition of
Danmarks Nationalbank's holdings of Special Drawing Rights, SDR, in the
IMF and loans for the Poverty Reduction and Growth Facility Trust, PRGF.
Loans under PRGF are guaranteed by the central government. The account with the IMF is stated in SDR (Special Drawing Rights). During 2005
the IMF made deposits equivalent to SDR 327 million with Danmarks
Nationalbank, and Danmarks Nationalbank increased its holdings of SDR
in the IMF by SDR 50 million. Net claims on the IMF have thus been reduced by SDR 277 million. Together with the value adjustments for the
year this reduces the claim by kr. 2.1 billion to kr. 3.6 billion.
121
Monetary-policy lending
Monetary-policy lending is collateralised loans to banks and mortgagecredit institutes. This item increased by kr. 62.7 billion to kr. 135.3 billion.
Other lending
The loans of kr. 4.3 billion almost exclusively comprise lending to banks
in connection with decentralised cash depots of kr. 3.5 billion and
receivables from Danish Ship Finance A/S of kr. 0.8 billion.
Domestic bonds
The value of domestic bonds fell from kr. 37.1 billion to kr. 34.3 billion.
The holdings comprise mortgage-credit bonds (kr. 21.8 billion), government bonds (kr. 9.9 billion) and Danish Ship Finance bonds (kr. 2.6 billion).
Shares
Danmarks Nationalbank has sold its shares in Grønlandsbanken A/S and Bella
Center A/S. Danmarks Nationalbank has acquired shares in Danish Ship
Finance A/S in connection with its restructuring as a limited liability company.
Banknotes and coins in circulation
Banknotes in circulation increased by kr. 3.9 billion to kr. 51.0 billion,
while coins in circulation increased by kr. 0.3 billion to kr. 5.3 billion.
Banknotes in circulation include Faroese banknotes at kr. 369 million. The
increase in banknotes in circulation in 2005 is somewhat greater than in
the previous years.
Monetary-policy deposits
The net deposits of banks and mortgage-credit institutes in current accounts and settlement accounts increased from kr. 6.9 billion to kr. 12.8
billion, and deposits placed in certificates of deposit rose from kr. 160.4
billion to kr. 207.6 billion.
Other deposits
This item comprises banks' and mortgage-credit institutes' deposits in
euro-denominated current accounts and securities settlement accounts
totalling kr. 0.2 billion, as well as other deposits of kr. 2.0 billion, of
which the account of Danish Ship Finance A/S amounts to kr. 1.3 billion.
Central government
The central-government deposit decreased from kr. 60.8 billion to kr.
56.4 billion. The central government's share of the profit of Danmarks
Nationalbank is included in this amount.
122
Foreign liabilities
The liabilities increased by kr. 0.8 billion to kr. 2.4 billion and comprise
kroner deposits with Danmarks Nationalbank from supranational institutions and other central banks.
Counterpart of Special Drawing Rights allocated by the IMF, SDR
The allocation was unchanged during the year, and the adjustment of
the item by kr. 0.1 billion to kr. 1.6 billion solely reflects the value adjustment for the year.
Net capital
The net capital amounts to kr. 52,232 million, which is the net capital at
the beginning of the year of kr. 50,284 million with addition of the allocation to the Value Adjustment Reserve of kr. 1,210 million and allocation
to the General Reserves of kr. 738 million.
123
ACCOUNTING POLICIES
General
Danmarks Nationalbank's Accounts for the year 2005 are presented in accordance with the
Danmarks Nationalbank Act. In all significant respects these accounting policies are in accordance
with the sound policies for European central banks. Unrealised gains on foreign exchange and
securities are recognised in the profit and loss account, however.
The accounting policies applied are unchanged from the previous year.
Accounting policies:
Income and expenses are recognised in the profit and loss account for the period which they concern. Income and expenses in foreign exchange are converted at the exchange rates prevailing at
the time they are recorded in the accounts.
Premiums and discounts on Treasury bills and certificates of deposit, as well as forward premiums on forward securities and foreign-exchange contracts, are recognised as interest.
Both realised and unrealised gains and losses are recognised in the profit and loss account.
Income from shares, etc. is recognised in the year in which the dividend is declared.
Gold is stated at market value on the balance-sheet date.
Assets and liabilities in foreign exchange, including forward contracts, are entered at the official exchange rates and securities market prices prevailing on the balance-sheet date. Swaps and futures
are stated at market value.
Bonds, including forward contracts, are stated at market value at year-end.
Repurchase agreements, etc. Securities sold in connection with repurchase agreements, and gold
and securities made available in lending facilities, are included in Danmarks Nationalbank's holdings.
Shares, etc. Capital investments and equivalent investments and equity investments in associated companies (in which the ownership interest or voting rights are 20 per cent or more) are stated at acquisition value or written down to market value at year-end if this is assessed to be significantly lower.
Tangible fixed assets are stated at acquisition price less depreciation and amortisation. Assets with an
acquisition value of less than kr. 100,000 are recognised as expenditure in the year of acquisition.
Depreciation on a linear per-annum basis takes place over the expected useful lives of the assets.
The useful lives are assessed as follows:
Bank properties .......................................................
Other properties .....................................................
Building improvements ...........................................
Technical building facilities ....................................
Technical production facilities ................................
Other machinery and equipment ...........................
100 years
25-50 years
25 years
10-25 years
5-10 years
3-5 years
124
PROFIT AND LOSS ACCOUNT FOR THE YEAR 2005
Note
2005
kr. '000
2004
kr. '000
Income from interest, etc.:
Interest on foreign assets .......................................
1
5,420,336
5,622,583
Interest on domestic loans ......................................
2,159,247
1,728,517
Interest on domestic bonds ....................................
1,698,753
1,818,472
Commission and other income ...............................
2,768
_________
1,950
_________
9,281,104
9,171,522
_________
Expenditure on interest, etc.:
2
Interest on foreign liabilities ..................................
43,681
31,499
Interest on domestic deposits .................................
5,621,497
_________
5,186,252
_________
Net income from interest .......................................
5,665,178
_________
5,217,751
_________
3,615,926
3,953,771
Value adjustments, etc.:
Value adjustment of gold .......................................
1,817,511
-173,672
3
Value adjustment of foreign assets .........................
-96,990
-562,153
4
Value adjustment of domestic securities .................
-510,478
_________
73,599
_________
Profit from financial items .......................................
1,210,043
_________
-662,226
_________
4,825,969
3,291,545
125
PROFIT AND LOSS ACCOUNT FOR THE YEAR 2005
Note
5
2005
kr. '000
2004
kr. '000
Profit from financial items ......................................
4,825,969
3,291,545
Income from shares, etc. ........................................
67,510
71,733
Other income ..........................................................
848,495
83,605
Expenses:
6
Staff expenses .........................................................
325,862
317,353
One-off payment to Danmarks Nationalbank's
7
8
Pension Fund subject to winding-up .....................
200,000
-
Other expenses ........................................................
278,467
_________
232,554
_________
804,329
549,907
35,513
34,452
-
19,000
_________
_________
4,902,132
_________
2,843,524
_________
Profit for the year ...................................................
4,902,132
2,843,524
Allocation to/from the Value Adjustment Reserve .
-1,210,043
_________
662,226
_________
3,692,089
_________
3,505,750
_________
Depreciation and write-down of tangible fixed assets
Other expenditure ..................................................
Profit for the year ...................................................
Distribution of the profit for the year:
allocated as follows:
Allocation to the General Reserves, 20 per cent ...
738,418
701,150
Payable to the central government, 80 per cent ...
2.953.671
_________
2.804.600
_________
3,692,089
_________
3,505,750
_________
126
BALANCE SHEET AT 31 DECEMBER 2005
Note
2005
kr. '000
2004
kr. '000
Assets
9
Gold ....................................................................................
6,941,496
5,123,985
10 Foreign assets .....................................................................
204,204,373
208,455,625
11 Claims on the International Monetary Fund, IMF, etc. ....
3,557,456
5,683,980
Monetary-policy lending ...................................................
135,296,000
72,635,000
12 Other lending .....................................................................
4,323,980
3,412,350
13 Domestic bonds ..................................................................
34,329,299
37,101,501
14 Shares, etc. ..........................................................................
748,028
630,452
15 Tangible fixed assets ..........................................................
656,657
669,589
16 Other assets ........................................................................
1,916,771
3,332,220
Accruals ...............................................................................
22,347
___________
21,498
___________
Total assets .........................................................................
391,996,407
___________
337,066,200
___________
127
BALANCE SHEET AT 31 DECEMBER 2005
Note
2005
kr. '000
2004
kr. '000
Banknotes ...........................................................................
50,953,341
47,046,751
Coins ...................................................................................
5,264,107
4,991,867
Liabilities
17
Net current accounts ......................................................
12,840,588
6,873,495
Certificates of deposit ....................................................
207,582,000
160,379,000
18 Other deposits ....................................................................
2,187,401
2,820,433
Central government ...........................................................
56,428,399
60,810,198
Foreign liabilities ................................................................
2,391,166
1,632,935
Counterpart of Special Drawing Rights
allocated by the International Monetary Fund (SDR) ..
1,614,480
1,513,833
Other liabilities ...................................................................
502,846
___________
714,070
___________
Total creditors ....................................................................
339,764,328
___________
286,782,582
___________
General Capital Fund .........................................................
50,000
50,000
Statutory Reserves ..............................................................
250,000
250,000
Value Adjustment Reserve .................................................
3,857,910
2,647,867
General Reserves ................................................................
48,074,169
___________
47,335,751
___________
19 Total net capital .................................................................
52,232,079
___________
50,283,618
___________
Total liabilities ....................................................................
391,996,407
___________
337,066,200
___________
20 Guarantees .........................................................................
101,525
169,868
21 Other liabilities ...................................................................
56,749,682
___________
54,331,073
___________
56,851,207
___________
54,500,941
___________
Off-balance-sheet items
128
NOTES TO THE ACCOUNTS FOR 2005
Note
1
2
3
4
5
6
Interest on domestic loans
Interest on monetary-policy loans (collateralised loans) ..........
Interest on loans to other borrowers .........................................
Interest on domestic deposits
Interest on current accounts ........................................................
Interest on certificates of deposit ...............................................
Interest on the central government's deposits ...........................
Interest to other depositors, etc. .................................................
Value adjustment of foreign assets
Market-value adjustment ............................................................
Exchange-rate adjustment ...........................................................
Value adjustment of domestic securities
Value adjustment of domestic bonds .........................................
Value adjustment of shares .........................................................
Other income
Income from sale of coin sets and medals ..................................
Income in connection with the restructuring of
Danish Ship Finance as a limited liability company ....................
Reversal of provision for VB Finans .............................................
Staff expenses
Salaries and remuneration ..........................................................
Other staff expenses ....................................................................
In 2005 the average number of employees was 521 on a fulltime basis (2004: 533)
2005
kr. '000
2004
kr. '000
2,125,359
33,888
_________
1,715,392
13,125
_________
2,159,247
_________
1,728,517
_________
145,012
4,212,589
1,172,997
90,899
_________
131,766
3,147,189
1,726,241
181,056
_________
5,621,497
_________
5,186,252
_________
-806,116
709,126
_________
-393,588
-168,565
_________
-96,990
_________
-562,153
_________
-511,341
863
_________
-85,186
158,785
_________
-510,478
_________
73,599
_________
48,495
16,605
800,000
_________
67,000
_________
848,495
_________
83,605
_________
242,851
83,011
__________
250,648
66,705
__________
325,862
__________
317,353
__________
129
Note
7
8
9
Other expenses
Materials for banknote production ............................................
Materials for coin production .....................................................
Real property, current expenses ..................................................
Data processing, etc. ....................................................................
Minor acquisitions and maintenance of machinery
and equipment ..........................................................................
Other expenses .............................................................................
Reimbursement of previously paid VAT on canteen services ....
Depreciation and write-down of tangible fixed assets
Properties ....................................................................................
Operating equipment .................................................................
2005
kr. '000
2004
kr. '000
20,635
35,378
127,771
27,491
23,703
27,927
99,353
30,907
15,447
51,745
__________
9,635
50,834
-9,805
__________
278,467
__________
232,554
__________
11,857
23,656
__________
10,142
24,310
__________
35,513
__________
34,452
__________
46,933,781
4,216,278
38,535,078
114,518,675
561
___________
63,351,323
2,199,754
31,518,348
111,385,548
652
___________
204,204,373
___________
208,455,625
___________
14,828,405
12,878,805
__________
13,904,002
9,309,853
__________
1,949,600
705,226
__________
4,594,149
243,471
__________
2,654,826
4,837,620
902,630
__________
846,360
__________
3,557,456
__________
5,683,980
__________
Gold
The gold stock amounts to 66,550 kg (2004: 66,550 kg)
10 Foreign assets
Foreign bonds .............................................................................
Claims on central banks ..............................................................
Claims on foreign commercial banks .........................................
Repo transactions against collateral in foreign bonds ...............
Other foreign assets ....................................................................
11 Claims on the International Monetary Fund (IMF), etc.
Denmark's IMF quota .................................................................
The IMF's holdings of Danish kroner .........................................
Reserve position with the IMF ....................................................
Holdings of Special Drawing Rights, SDR ..................................
Loans for the Poverty Reduction and Growth Facility Trust
(guaranteed by the central government) ..............................
130
Note
2005
kr. '000
12 Other lending
Banks and mortgage-credit institutes ........................................
Receivable from associated company ........................................
Other loans ..................................................................................
2004
kr. '000
3,486,533
800,000
37,447
____________
3,371,367
40,983
___________
4,323,980
____________
3,412,350
___________
9,949,949
24,379,350
__________
14,984,496
22,117,005
__________
34,329,299
__________
37,101,501
__________
455,466
292,562
__________
178,744
390,148
61,560
__________
748,028
__________
630,452
__________
Receivable from associated company is subordinated current
and future other debt and liabilities in the company. The
receivable is expected to be finally repaid in 2007.
13 Domestic bonds
Danish government bonds ..........................................................
Other domestic bonds .................................................................
14 Shares, etc.
Marketable shares .......................................................................
Capital investments and equivalent investments ......................
Equity investments in associated companies .............................
Capital investments and equivalent investments comprise
capital subscription to the ECB and shares in the Bank for
International Settlements (BIS), SWIFT, PBS Holding, SAS and
Exhibition Centre Herning.
Equity investments in associated companies comprise:
Equity investment Share of equity1)
Værdipapircentralen A/S
(VP Securities Services) ....... 24.2 per cent
Danish Ship Finance A/S .... 18.9 per cent
1
Share of result1)
kr. 35.9 million kr. 19.3 million
kr. 114.0 million kr. 51.0 million
Based on provisional accounts.
Danmarks Nationalbank's portfolio of shares, etc. at 31 December
2005 has an estimated market value of no less than kr. 2.0 billion.
15 Tangible fixed assets
Properties ....................................................................................
Machinery and equipment .........................................................
At the most recent official assessment Danmarks Nationalbank's
properties were valued at kr. 1,053 million.
582,048
74,609
__________
581,364
88,225
__________
656,657
__________
669,589
__________
131
NOTES ON THE ACCOUNTS FOR 2005
Note
2005
kr. '000
2004
kr. '000
16 Other assets
The amount includes outstanding interest of kr. 1,888 million
(2004: kr. 1,917 million)
17 Net current accounts
Deposits in current accounts and settlement accounts .............
Drawing on current accounts .....................................................
120,597,236
107,756,648
___________
63,296,195
56,422,700
__________
12,840,588
___________
6,873,495
__________
199,700
1,987,701
__________
255,234
2,565,199
__________
2,187,401
__________
2,820,433
__________
Total
At 31 December 2005 Danmarks Nationalbank acts as full
guarantor to VP Securities Services for kr. 74.5 billion (2004: kr.
30.3 billion) and to the Danish Bankers Association (Sumclearing) for kr. 42.6 billion (2004: kr. 31.4 billion) in connection
with the banks and mortgage-credit institutes' payment settlements with 2 January 2006 as the value date.
18 Other deposits
Banks and mortgage-credit institutes ........................................
Other depositors .........................................................................
General
Value
General
Capital Fund and
Adjustment
Reserves
Statutory Fund
Reserve
kr. '000
19 Total net capital
Net capital 1 January 2005 ...
kr. '000
kr. '000
kr. '000
__________
__________
__________
__________
300,000
2,647,867
47,335,751
50,283,618
__________
1,210,043
__________
738,418
__________
1,948,461
__________
300,000
__________
3,857,910
__________
48,074,169
__________
52,232,079
__________
Carried forward from the
profit for the year ..............
132
NOTES ON THE ACCOUNTS FOR 2005
Note
20 Guarantees
VP Securities Services, share of Guarantee Capital ....................
VP Securities Services, guarantee for errors by other
account-holding institutions ...................................................
Danish Ship Finance, share of Guarantee Capital .....................
Other guarantees ........................................................................
2005
kr. '000
2004
kr. '000
68,796
72,523
31,699
1,030
___________
33,315
63,000
1,030
___________
101,525
___________
169,868
___________
50,656,795
2,537,974
242,164
48,428,687
2,681,491
114,663
3,312,749
___________
3,106,232
___________
56,749,682
___________
54,331,073
___________
The Bank has provided a guarantee for the obligations of
Danmarks Nationalbank's Pension Fund subject to winding-up.
21 Other liabilities
Forward purchases of foreign exchange ...................................
Market value of assets in currency swap agreements ...............
Futures .........................................................................................
Unutilised portion of credit facilities made available to
the IMF (SDR) ...........................................................................
The bank has established intervention agreements with the
ECB, and in addition an undertaking of support has been
given to former employees. The undertaking of support is
covered by a pension insurance company.
Pension commitments: the present value of a defined benefit
pension plan concerning the Board of Governors is stated
under other liabilities to the extent that the commitments are
not hedged in a pension fund.
133
SIGNATURES AND AUDIT REPORTS
Copenhagen, 28 February 2006
Nils Bernstein
Torben Nielsen
Jens Thomsen
/Henrik Larsen, Chief Accountant
Internal Auditor's Report
I have audited the Accounts of Danmarks Nationalbank for the financial year 1 January-31 December 2005, pp. 117-132, which
are submitted in accordance with the Danmarks Nationalbank Act.
The Accounts are the responsibility of Danmarks Nationalbank's Committee of Directors and Board of Directors. My responsibility is to express an opinion on the Accounts based on my audit.
Basis of opinion
I have conducted the audit in accordance with Danish Standards on Auditing. Those standards require that I plan and perform
the audit to obtain reasonable assurance that the Accounts are free of material misstatement.
The audit included examining, on a test basis, evidence supporting the amounts and other information disclosed in the
Accounts. The audit also included assessing the accounting policies applied and the significant estimates made by the
Committee of Directors and the Board of Directors. I believe that the audit performed provides sufficient basis for my opinion.
My audit has not resulted in any qualification.
Opinion
In my opinion, the Accounts give a true and fair view of Danmarks Nationalbank's assets, liabilities and financial position at 31
December 2005, and of the result of Danmarks Nationalbank's activities for the financial year 1 January-31 December 2005, in
accordance with the Danmarks Nationalbank Act.
Jan Birkedal, Chief Auditor
External Auditors' Report
As auditors appointed by the Minister of Economic and Business Affairs we have audited the Accounts of Danmarks Nationalbank for the financial year 1 January-31 December 2005, pp. 117-132, which are submitted in accordance with the Danmarks
Nationalbank Act.
The Accounts are the responsibility of Danmarks Nationalbank's Committee of Directors and Board of Directors. Our responsibility is to express an opinion on the Accounts based on our audit.
Basis of opinion
We have conducted our audit in accordance with Danish Standards on Auditing. Those standards require that we plan and
perform the audit to obtain reasonable assurance that the Accounts are free of material misstatement.
The audit included examining, on a test basis, evidence supporting the amounts and other information disclosed in the
Accounts. The audit also included assessing the accounting policies applied and the significant estimates made by the
Committee of Directors and the Board of Directors. We believe that the audit performed provides sufficient basis for our
opinion.
Our audit has not resulted in any qualification.
Opinion
In our opinion, the Accounts give a true and fair view of Danmarks Nationalbank's assets, liabilities and financial position at 31
December 2005, and of the result of Danmarks Nationalbank's activities for the financial year 1 January-31 December 2005, in
accordance with the Danmarks Nationalbank Act.
Svend Ørjan Jensen, State-Authorised Public Accountant
Mona Blønd, State-Authorised Public Accountant
These Accounts, audited in the manner prescribed by the by-laws of Danmarks Nationalbank, are hereby adopted by the
Board of Directors.
Copenhagen, 20 March 2006
Hans E. Zeuthen Helle Bechgaard Michael Dithmer
Elisabeth Arnold Søren Bjerre-Nielsen Niels Boserup Pia Christmas-Møller Kristian Thulesen Dahl Niels Fog
Svend Erik Hovmand Johannes Fløystrup Jensen Niels Due Jensen Knud Koch-Jensen Jette W. Knudsen
Henrik Sass Larsen Kjeld Larsen Michael Lunn Kirsten Nielsen Kirsten Nissen Jens Rohde
Jens Rostrup-Nielsen Kirsten Stallknecht Villy Søvndal Finn Thorgrimson Helle Thorning-Schmidt
Appendix
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Press Releases
INTEREST-RATE CHANGES
1 December 2005: Interest rate increase
The discount rate and the interest rate on the banks' current accounts
with the Nationalbank are raised by 0.25 per cent to 2.25 per cent. The
Nationalbank's lending rate and the rate of interest on certificates of deposit are raised by 0.25 per cent to 2.40 per cent. The increase will have
effect as from 2 December 2005.
The interest rate increase is a consequence of the raising by the European Central Bank of the minimum bid rate on the main refinancing operations by 0.25 per cent to 2.25 per cent.
17 February 2006: Interest rate increase
With effect from 17 February 2006 the lending rate and the rate of interest for certificates of deposit are raised from 2.40 per cent to 2.50 per
cent. The discount rate and the rate of interest on banks' current accounts
with Danmarks Nationalbank are unchanged at 2.25 per cent.
The increase by 10 basis points is due to an outflow of foreign exchange
in February, among other things as a result of Danish institutional investors' purchase of foreign shares and other securities. In accordance
with the fixed-exchange-rate policy Danmarks Nationalbank has intervened to support the krone. The interest-rate increase is intended to
make placements in kroner more advantageous. Danmarks Nationalbank
emphasises that the outflow of capital does not reflect a weakening of
the Danish economy.
2 March 2006: Interest rate increase
The discount rate and the interest rate on the banks' current accounts
with the Nationalbank are raised by 0.25 per cent to 2.50 per cent. The
Nationalbank's lending rate and the rate of interest on certificates of deposit are raised by 0.25 per cent to 2.75 per cent. The increase will have
effect as from 3 March 2006.
The interest rate increase is a consequence of the raising by the European Central Bank of the minimum bid rate on the main refinancing operations by 0.25 per cent to 2.50 per cent.
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THE BOARD OF DIRECTORS AND THE COMMITTEE OF DIRECTORS
11 March 2005: Election to Danmarks Nationalbank's Board of Directors
Folketinget (Parliament) has elected Mr Svend Erik Hovmand to the Board
of Directors of Danmarks Nationalbank until 31 March 2006. He succeeds
Ms Rikke Hvilshøj, Minister of Refugee, Immigration and Integration Affairs.
16 March 2005: Elections to the Committee of Directors and Board of
Directors of Danmarks Nationalbank
Elections to the Board of Directors
The five-year terms of three of the 25 members of the Board of Directors
expire on 31 March 2005. At the meeting on 15 March 2005 at 3 pm the
Board of Directors re-elected Ms Helle Bechgaard, Director, Mr Niels Fog,
Merchant, and Ms Kirsten Stallknecht, Former President of the ICN.
The Board of Directors re-elected Mr Hans E. Zeuthen, Professor, as
Chairman and Ms Helle Bechgaard, Director, as Deputy Chairman for the
coming year.
Elections to the Committee of Directors
The Committee of Directors has seven members, of whom five are
elected by the Board of Directors. The Board of Directors re-elected Mr
Søren Bjerre-Nielsen, Group President, Ms Pernille Blach Hansen, MP, Ms
Kirsten Nissen, Trade Union President, Mr Jens Rohde, MP, and Mr Hans
E. Zeuthen, Professor. All are elected for the coming year.
Two members of the Committee of Directors, Mr Michael Dithmer,
Permanent Secretary, and Mr Michael Lunn, Permanent Secretary, are
appointed by the Royal Bank Commissioner for the period ending in 2006.
At its first meeting the Committee of Directors re-elected Mr Hans E. Zeuthen, Professor, as Chairman and Mr Michael Dithmer, Permanent Secretary,
as Deputy Chairman for the period from 1 April 2005 to 31 March 2006.
3 May 2005: Election to Danmarks Nationalbank's Board of Directors
Folketinget (Parliament) has elected Ms Helle Thorning-Schmidt and Mr
Henrik Sass Larsen to the Board of Directors of Danmarks Nationalbank
until 31 March 2006. They succeed Ms Pernille Blach Hansen and Ms Pia
Gjellerup.
10 May 2005: Election to the Committee of Directors of Danmarks
Nationalbank
The Board of Directors has elected Ms Helle Thorning-Schmidt, MP, as a
new member of the Committee of Directors for the remainder of the term
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ending on 31 March 2006. Ms Helle Thorning-Schmidt succeeds Ms Pernille
Blach Hansen.
28 October 2005: Election to Danmarks Nationalbank's Board of Directors
Folketinget (Parliament) has elected Mr Villy Søvndal to the Board of
Directors of Danmarks Nationalbank until 31 March 2006. He succeeds
Mr Holger K. Nielsen.
PUBLICATIONS
16 March 2005: Danmarks Nationalbank's Report and Accounts for 2004
At the meeting of the Board of Directors of Danmarks Nationalbank on 15
March 2005 the Board of Governors presented the Report and Accounts for
2004.
The Report, which presents recent trends in the Danish economy, the
monetary and foreign-exchange policy, and the financial and foreignexchange markets, as well as a review of international monetary cooperation, together with Danmarks Nationalbank's other areas of operation and its organisation, was noted.
Danmarks Nationalbank's Accounts for 2004 were submitted by the
Board of Governors for adoption on the recommendation of the Committee of Directors. The Board of Directors and the Royal Bank Commissioner, Mr Bendt Bendtsen, Minister of Economic and Business Affairs,
approved the Accounts.
Accounts
The net profit for the year was kr. 2,844 million, compared to kr. 3,609
million in 2003.
Net income from interest totalled kr. 3,954 million, which is kr. 500 million less than in 2003. Value adjustments are negative at kr. 662 million. In
2003 they were negative at kr. 267 million.
Total expenses decreased by kr. 29 million to kr. 550 million.
Allocation of profit:
• Transfer of kr. 662 million – equivalent to the value adjustments for
the year – from the Value Adjustment Reserve.
• Allocation of kr. 701 million – equivalent to 20 per cent of the profit
after allocation from the Value Adjustment Reserve – to the General
Reserves for consolidation of Danmarks Nationalbank.
• The remaining amount of kr. 2,805 million is transferred to the central
government. For 2003 the amount transferred was kr. 3,101 million.
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The Report and Accounts for 2004 are published today and can be viewed
at www.nationalbanken.dk under Publications, or be obtained from
Danmarks Nationalbank, Information Desk.
12 May 2005: Financial Stability 2005
Danmarks Nationalbank today publishes its annual report on financial
stability in Denmark, "Finansiel stabilitet 2005". The English edition of
this publication is expected to be available on Danmarks Nationalbank's
website as from 31 May 2005. The printed English edition is expected to
be released on 6 June 2005. The publication will be available at
www.nationalbanken.dk under Publications.
The most significant risks to the financial system are identified in the report, including situations that are very unlikely to arise, but which might
have major consequences for the economy. It is assessed whether the
overall financial system is robust enough for any problems experienced
within the sector not to spread and prevent the financial markets from
functioning as providers of capital and financial services. It is the task of
the Danish Financial Supervisory Authority to ensure that each financial
institution is sufficiently robust.
In connection with the report's publication Governor Bodil Nyboe Andersen says: "In general, the financial institutions are doing well in these
years where we see a slightly unusual combination of a favourable economic climate and low interest rates."
"The banking institutions are still robust, but for the small institutions
in particular the exposure to rising losses has increased. This is attributable to such factors as the high growth in lending and reduced capital
reserves," Bodil Nyboe Andersen adds. "Banking institutions with high
lending growth also tend to have the greatest credit risk on their lending portfolios."
An analysis of the households' interest-rate exposure, based on data
from a single mortgage-credit institute, shows that on average the interest expenses of Danish homeowners increase by 1 per cent of their income before tax if the short-term interest rate goes up by 1 percentage
point. However, the figures are subject to considerable variation, and a
substantial group of households is far more at risk since their interest-rate
exposure is more than twice as high. The figures are not alarming in relation to financial stability. For the individual household, the exposure
depends on whether it has other loans at adjustable interest rates,
whether it has a buffer against a possible increase in interest expenses,
and whether it can easily reduce its consumption if interest rates go up.
These issues should be key elements of the advice provided before a loan
is granted.
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The publication is in two parts. The first part starts with an analysis of the
development in the financial sector, with emphasis on the banking institutions. This is followed by chapters on the development in the corporate
sector and the households and in the financial markets, and a chapter on
framework conditions for the financial system.
The second part of the report includes various current topics in relation
to financial stability. These are the interest-rate exposure of Danish households, an analysis of bank equity prices, and an assessment of settlement
risks in VP Securities Services.
5 July 2005: Payment Systems in Denmark
Today Danmarks Nationalbank announces the Danish edition of the publication Payment Systems in Denmark. The English edition is expected to be
published in September 2005.
The publication provides a description of payment and securities settlement systems and describes central banks' role regarding these systems.
The Danish payment and securities settlement systems and Danmarks Nationalbank's responsibilities herein are thoroughly explained, while selected international payment and settlement systems are described in
more general terms. Retail payments are discussed in a Danish and European perspective. Finally, Danmarks Nationalbank's role as overseer of important payment and settlement systems is explained.
One of the objectives of Danmarks Nationalbank is to contribute to
the efficiency and stability of payment and settlement systems. These
systems are a necessity for the efficiency of the Danish financial sector.
Danmarks Nationalbank considers it important that the Danish payment
infrastructure is described in full detail and that this description is available to the general public.
The publication is available on www.nationalbanken.dk. Printed versions of the publication can be obtained by contacting:
Danmarks Nationalbank, Information Desk, Tel.: (+45) 33 63 70 00 (direct),
E-mail: [email protected].
APPOINTMENTS
15 March 2005: New Head of Statistics as from 1 August 2005
As of 1 August 2005, Jens Dalsgaard, Deputy Head of Statistics, will take
over the position as Head of Statistics. Jens Dalsgaard replaces Assistant
Governor Jørgen Ovi, who is to retire.
Jens Dalsgaard, Msc (Econ) is aged 40. He has held positions with Danmarks Nationalbank since 1989 and has been Deputy Head of Statistics
since 2002.
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Jørgen Ovi has held a number of managerial positions with Danmarks
Nationalbank, where he has been employed since 1967.
15 April 2005: Appointment
Danmarks Nationalbank's Committee of Directors has appointed AnneMette Thorsen Reimann, Assistant Head of Division, to Head of Division.
Anne-Mette Thorsen Reimann, MSc (chemical engineering), aged 41, has
held positions at Danmarks Nationalbank since November 2000.
16 August 2005: Appointment
Danmarks Nationalbank's Committee of Directors has appointed Bent
Christiansen, Assistant Head of Division, to Head of Division.
Bent Christiansen, aged 48, holds an MSc (econ.) and has held positions at Danmarks Nationalbank since 1987.
25 August 2005: New Head of Banking Services as from 1 October 2005
As from 1 October 2005, Lars Gerrild Sørensen, Head of Division, is to
head Banking Services. Lars Gerrild Sørensen succeeds Tage Heering, Chief
Cashier, who will undertake international assignments related to cash
services until his retirement in autumn 2006.
Lars Gerrild Sørensen, aged 47, trained in the banking sector and holds a
Dip.Econ. (HD) in Finance. Lars Gerrild Sørensen joined Danmarks Nationalbank in 1982 and has been assistant head of Banking Services since
2002.
BANKNOTES AND COINS
27 January 2005: Landet Church adorns new thematic coin
On 28 January 2005, Danmarks Nationalbank issues the sixth in its series
of thematic 20-krone coins with specially chosen Danish towers as the
motif on the reverse.
Seen through chestnut leaves from the grave of Elvira Madigan and
Sixten Sparre, the tower of Landet Church on the island of Tåsinge reaches
towards the sky on the reverse of the new thematic coin. Landet Church is
a traditional Danish village church, built around 1150-1200 in the Age of
the Valdemars, with the tower and porch added later. The church tower
was built in 1634.
The sculptor Øivind Nygaard is the artist behind the tower motif from
Landet Church. The hearts and pistol that Øivind Nygaard has woven into
the chestnut leaves around the tower symbolise the tragic love story of
Elvira Madigan and Sixten Sparre. "In addition to showing a Danish
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church tower, the pictorial metaphors seen on the coin, combined with
the view of the tower of Landet Church, are intended to tell a story and
interpret the history and mythology of the church," Øivind Nygaard explains.
The Landet Church tower coin is issued as a 20-krone coin in an edition
of 1.2 million. It is of the same size and alloy as the ordinary 20-krone coin
in circulation. The face of the coin shows a profile of the Queen by the
sculptor, Professor Mogens Møller.
The new thematic coin can be purchased from banks and Danmarks
Nationalbank from 28 January 2005. The next tower coin is expected to
be issued in the autumn of 2005.
Pictures can be downloaded from www.nationalbanken.dk – Press room,
Photogallery.
3 February 2005: Thematic coins with Hans Christian Andersen's fairy
tales
To mark the bicentenary of Hans Christian Andersen, Danmarks
Nationalbank is issuing a new series of thematic coins. The first in the
series is issued on 31 March 2005 and is a 10-krone coin in three
different editions – a gold coin, a fine silver coin and an ordinary 10krone coin. The gold and silver coins are issued to meet a demand in the
collector market. These coins will be sold at a price exceeding the face
value, a practice that was customary in Denmark until 1986 and is now
standard international practice.
On the reverse of the first Hans Christian Andersen coin, an adult swan
is studying its reflection in the lake at Bregentved Manor, where Hans
Christian Andersen was inspired to write his famous fairy tale "The Ugly
Duckling". The artist is the sculptor Hans Pauli Olsen.
The face of the Hans Christian Andersen coins shows a profile of the
Queen by the sculptor, Professor Mogens Møller.
The gold coin will be issued in an edition not exceeding 7,000, while the
silver coin will be issued in an edition of up to 75,000. The ordinary 10krone coin will be issued in an edition of 1.2 million. All Hans Christian
Andersen coins are legal tender and can be exchanged at Danmarks
Nationalbank at face value.
The Hans Christian Andersen thematic coins can be purchased from
banks and coin dealers as from 31 March 2005. Some banks and coin
dealers already take orders. The recommended retail prices including
Danish VAT are kr. 2,000 for the gold coin and kr. 200 for the silver
coin. The coins will also be sold from 31 March 2005 from Danmarks
Nationalbank, Banking Services, between 10 am and 1 pm on weekdays.
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24 August 2005: New 50-krone banknote completes the upgrading of
the banknote series
Tomorrow, Danmarks Nationalbank introduces a new, more secure 50krone banknote with a hologram and fluorescent colours. The motifs remain unchanged. The new 50-krone banknote completes the upgrading
of the Danish banknote series commenced by Danmarks Nationalbank in
November 2002.
Governor Torben Nielsen says: "With the new security features the
Danish banknotes are even better protected against counterfeiting. The
general public's awareness of the security features is directly related to
the volume of counterfeiting. The more people that know how to distinguish a genuine banknote from a counterfeit, the more difficult it becomes for counterfeiters to use their counterfeits."
Hologram and fluorescent colours
The metallic hologram on the face of the banknote alternately shows a
flower, the Roman numeral L and the figure 50. Fluorescent colours,
which are visible under ultraviolet light, are used on both sides of the
banknote. On the face, a centaur becomes visible under ultraviolet light,
and on the reverse the green colour shines, particularly in the ring on
the right-hand side of the banknote.
Old 50-krone banknotes remain legal tender
The old 50-krone banknotes remain legal tender, but will be gradually
withdrawn from circulation. The two versions of the 50-krone banknote
will be in parallel circulation for a period of time.
Photo gallery
Pictures of the new security features on the 50-krone banknote can be
downloaded from www.nationalbanken.dk – Press room/Photogallery/
Danish banknotes.
Further information
At www.nationalbanken.dk under Notes and coins a video presentation of
the key security features is available. The information campaign also comprises a GO-CARD, i.e. a free postcard available at cafés in Denmark, as
well as advertising in "Med Rundt", which is distributed to all households.
7 September 2005: The fairy tale continues – a new coin with "The Little
Mermaid"
A new thematic coin inspired by Hans Christian Andersen's fairy tale "The
Little Mermaid" is issued on 20 October 2005.
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This is the second in a series of five coins with fairy tales as their common
theme. Earlier this year, the first fairy tale coin, inspired by Hans Christian
Andersen's fairy tale "The Ugly Duckling", was issued.
The motif on the new coin is designed by the sculptor Tina Maria
Nielsen, who also designed the motif for the Goose Tower coin.
The obverse of the coin is the same as on the ordinary 10-krone coins,
i.e. a profile of the Queen.
Gold and silver coins and an ordinary 10-krone coin
The fairy tale coin is a 10-krone coin issued in three versions – a gold coin,
a silver coin and an ordinary 10-krone coin. The gold coin is minted in an
edition not exceeding 6,000, while the silver coin is minted in an edition
of up to 60,000.
All fairy tale coins are legal tender and can be exchanged at Danmarks
Nationalbank at face value.
On sale from 20 October 2005
The Little Mermaid coins can be purchased from banks as from 20 October 2005. Some banks and coin dealers already take orders.
The recommended retail prices including Danish VAT are kr. 2,000 for
the gold coin and kr. 200 for the silver coin.
The coins can also be purchased from 20 October 2005 from Danmarks
Nationalbank, Banking Services, during the daily opening hours from 10
am to 1 pm.
The fairy tale continues
The next fairy tale coin will be issued in the spring of 2006.
Pictures of the coin can be downloaded from www.nationalbanken.dk –
Press room, Photogallery.
15 September 2005: Faroese lighthouse on new tower coin
Today Danmarks Nationalbank issues the seventh in its series of thematic
coins with towers as the common theme. The motif of Nólsoy Lighthouse
in the Faroe Islands was designed by the Faroese sculptor Hans Pauli
Olsen, who also designed the motifs for the Christiansborg Palace Tower
coin in 2003 and The Ugly Duckling coin in 2005.
The Nólsoy Lighthouse coin is issued as a 20-krone coin in an edition of
1.2 million. It is of the same size and alloy as the ordinary 20-krone coin
in circulation. The obverse of the coin shows a profile of the Queen by
the sculptor, Professor Mogens Møller. The new tower coin can be purchased from banks and Danmarks Nationalbank as from today.
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The seventh tower coin in a series of ten
Since 2002, seven tower coins have been issued. Besides Nólsoy Lighthouse, the motifs are: Landet Church, Svaneke Water Tower, the Goose
Tower, Christiansborg Palace Tower, the Old Copenhagen Stock Exchange
(Børsen) and Aarhus City Hall tower.
On selecting the individual towers, importance has been attached not
only to displaying beautiful towers, but also towers with different functions and from different regions of Denmark.
The next tower coin is expected to be issued at the beginning of 2006.
The last of the 10 tower coins is expected to be issued in 2007.
Pictures of this and earlier tower coins can be downloaded from
www.nationalbanken.dk – Press room, Photogallery.
15 September 2005: The new Faroese banknote series is complete
Today a new Faroese 1,000-krone banknote is issued. This completes the
banknote series. The series was introduced in 2001 with the issue of a
50-krone banknote. The five banknotes in the series depict motifs from
the Faroese landscape and fauna.
The primary motif of the new 1,000-krone banknote is a fragment of
a purple sandpiper, a bird which is common to the Faroe Islands. Behind the purple sandpiper, a watercolour of a flock of birds is reproduced.
The motif on the reverse is a watercolour of a view from the island of
Sandoy. The watercolours are both by the Faroese artist Zacharias Heinesen.
The new 1,000-krone banknote measures 165 x 72 mm and its main
colour is dusty red.
Security features
The 1,000-krone banknote, like the 100-, 200- and 500-krone banknotes,
has a hologram. With the other security features – e.g. the watermark and
security thread with colour change – this helps protect the banknotes
from counterfeiting.
Old banknotes are still legal tender
The old 1,000-krone banknotes remain legal tender, but will be gradually
withdrawn from circulation.
Further information
A folder on the new 1,000-krone banknote will be distributed to every
household in the Faroe Islands from 15 September 2005. For further
information, see www.nationalbanken.dk – Notes and coins.
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12 October 2005: Coin Set 2005 from The Royal Mint
Naval battles and fairy tales are the themes of the 2005 Coin Set. In
addition to the seven ordinary coins in circulation, the coin set includes a
copy of the medal from the Battle of Copenhagen. The medal was
awarded to Captain (later Vice Admiral) Olfert Fischer and his men after
the Battle of Copenhagen in 1801, in which they defended Copenhagen
against the British navy. The expression "to turn a blind eye" relates to
this battle.
The fairy tale coin in the Coin Set 2005 has a motif from Hans Christian
Andersen's "The Ugly Duckling".
The coin set is minted in two versions
The ordinary version of the coin set includes the seven ordinary coins in
circulation, a medal of Nordic gold and the fairy tale coin "The Ugly
Duckling". The coins are mined with two strokes. This is one stroke more
than the coins in circulation. The more strokes, the more distinct the
embossment. This version of the set is minted in an edition of maximum
31,000.
The proof version includes the medal in silver and the coins in circulation in an especially fine quality minted with three strokes. The proof
version is minted in an edition of maximum 3,500.
The tower and fairy tale coins will be issued as full sets once the
respective series are complete.
The coin sets are on sale from 14 November 2005
Some banks and coin dealers already take orders. The recommended
retail price is DKK 200 for the ordinary version and DKK 875 for the proof
version.
The coin sets can also be purchased from Danmarks Nationalbank,
Banking Services, Havnegade 5, DK-1093 Copenhagen K. The opening
hours are Monday-Friday from 10.00 am to 1.00 pm.
Information and pictures
See www.nationalbanken.dk, Notes and coins/Coin set for further information, and Press room/Photogallery/Coins for pictures.
1 February 2006: New tower coin with Gråsten Palace
On 15 February 2006, Danmarks Nationalbank issues a new tower coin
with the Bell Tower of Gråsten Palace as its motif. This is the eighth in the
series of tower coins, of which the first was issued in 2002.
The motif for the new tower coin is designed by the sculptor and graphic artist Sys Hindsbo.
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Can be used as an ordinary 20-krone coin
The Gråsten Palace coin is issued in an edition of 1.2 million. The tower
coin, which bears a portrait of the Queen on the obverse, can be used as
an ordinary 20-krone coin.
Different parts of Denmark
On selecting the towers for the coin series, importance has been attached
to choosing towers with different functions from different regions of
Denmark. This is evident from the list of towers, which – besides the Bell
Tower of Gråsten Palace – includes Nólsoy Lighthouse in the Faroe Islands,
Landet Church on the island of Tåsinge, Svaneke Water Tower on Bornholm, the Goose Tower in Vordingborg, Christiansborg Palace Tower, the
Old Copenhagen Stock Exchange (Børsen) and Aarhus City Hall Tower.
Series to be completed in 2007
The next tower coin is expected to be issued in the autumn of 2006, and
the last of the 10 coins in 2007.
Photo gallery
Pictures of this and earlier tower coins can be downloaded from
www.nationalbanken.dk – Press room, Photogallery.
16 February 2006: Coin Set for Children
On 28 February 2006, Danmarks Nationalbank for the first time issues a
coin set especially for children.
The coin set unfolds like a picture book, from the stag on the front
cover to the medal's happy little beetle with antlers and a crown. The
motifs are inspired by animals of the forest and drawn in an imaginative
style by the illustrator Cato Thau-Jensen.
Silver medal with space for a child's name
On the inside of the coin set, there is space for such information as a
child's name, date of birth and christening date. A child's name can be
engraved on the silver medal. It is up to the buyer of the coin set to arrange this, as Danmarks Nationalbank does not provide this service.
Besides the medal, the coin set comprises Denmark's coin series, i.e. 25and 50-øre coins and 1-, 2-, 5-, 10- and 20-krone coins minted in 2006. This
year's coin set for children is issued in a maximum edition of 10,000.
The coin set is on sale from 28 February 2006
The recommended retail price is kr. 250.00. The coin set can be purchased from banks, coin dealers, gold and silver smiths, and from Dan-
148
marks Nationalbank, Banking Services, Havnegade 5, DK-1093 Copenhagen K. The opening hours are Monday-Friday from 10.00 am to 1.00
pm.
Information and pictures, etc.
Pictures of the coin set can be downloaded from www.nationalbanken.dk
under Press room, Photogallery, and details are available under Notes and
coins, Coin set.
EXCHANGE RATES
29 March 2005: Seven new currencies added to the list of exchange
rates published by Danmarks Nationalbank on a daily basis
As from 1 April 2005, seven new currencies are added to the list of exchange rates published by Danmarks Nationalbank, and the number of
significant figures for Icelandic kronur (ISK), Hungarian forints (HUF) and
Slovenian tolar (SIT) is increased from three to four.
The seven new currencies on the list are:
• Croatian kuna (HRK)
• Russian roubles (RUB)
• Thai baht (THB)
• Malaysian ringgit (MYR)
• Philippine pesos (PHP)
• Indonesian rupiah (IDR)
• Chinese yuan renminbi (CNY)
This brings the number of currencies on the list published by Danmarks
Nationalbank to 36.
Danmarks Nationalbank's exchange rates are normally listed daily at
2.15 pm on the basis of information from a number of central banks. The
exchange rates are published for information only. Currency cannot be
bought from or sold to Danmarks Nationalbank at the published exchange rates.
8 June 2005: Danmarks Nationalbank's publication of exchange rates
As of 1 July 2005 Romania introduces New Romanian lei (RON) as its
official currency, replacing old Romanian lei (ROL). The conversion rate
between the two currencies is 1 RON = 10,000 ROL. As from 1 July 2005
Danmarks Nationalbank's list of exchange rates will reflect this change:
Romanian lei will be removed from the list and replaced by New
Romanian lei.
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Danmarks Nationalbank's exchange rates are normally listed daily at 2.15
pm on the basis of information from a number of central banks. The exchange rates are published for information only.
Currency cannot be bought from or sold to Danmarks Nationalbank at
the published exchange rates.
OTHER PRESS RELEASES
17 January 2005: Restructuring of Danish Ship Finance as a limited
liability company
In 1960-61 Danmarks Nationalbank participated in the establishment of
Danish Ship Finance, and since then has been one of its guarantors.
Danish Ship Finance, the Danish Ministry of Economic and Business
Affairs and Danmarks Nationalbank have now concluded an agreement
to restructure Danish Ship Finance as a limited liability company.
Danmarks Nationalbank's participation in Danish Ship Finance should
be seen against the background of its involvement during the 1950s and
1960s in the establishment of a number of specialist institutions for
financing industry, agriculture, housing and shipbuilding. This was done
in response to a requirement at that time to strengthen the capital markets, and because there was a need for specialised institutions.
These institutions were set up as foundations, which make it difficult for
them to adapt to market conditions. Consequently, they have, one by
one, been restructured as limited liability companies.
Danish Ship Finance has been an important instrument in relation to
financing and subsidising shipbuilding in Denmark, e.g. via interestsubsidy schemes for ship finance, which were discontinued in 1993. Since
then it has granted loans on market terms.
Until 1984, Danish Ship Finance made a profit in connection to
borrowers prepayments of interest-subsidised loans. Recognising that
the profit from such prepayments would have accrued to the government if the latter itself had handled these lending activities, the
parties have agreed to compensate for this profit in connection with the
modernisation of Danish Ship Finance. Consequently, Danmarks Nationalbank and the Danish government will receive a total of DKK 1,610
million.
Like the other guarantors, Danmarks Nationalbank will acquire shares in
the limited liability company. These shares cannot be sold for at least five
years.
The agreement is subject to the Danish Parliament (Folketing) passing
the necessary legislation, and to approval of the agreement by the Board
150
of Representatives of Danish Ship Finance and the Committee of Directors
of Danmarks Nationalbank.
For further details about the agreement, reference is made to Danish
Ship Finance and the Danish Ministry of Economic and Business Affairs.
21 January 2005: Danmarks Nationalbank sells its shares in
Grønlandsbanken A/S to the Greenland Home Rule
Danmarks Nationalbank has been a shareholder of Grønlandsbanken A/S
since its foundation in 1967. At that time the establishment of a bank in
Greenland was considered an important task for society.
It is not normally the role of Danmarks Nationalbank to be a co-owner
of a private bank, and Danmarks Nationalbank has gradually reduced its
ownership interest over the years.
Today Danmarks Nationalbank has concluded an agreement with the
Greenland Home Rule to transfer Danmarks Nationalbank's total shareholding in Grønlandsbanken A/S, nominally DKK 24,666,000. This shareholding constitutes 13.7 per cent of the share capital of Grønlandsbanken
A/S and is denominated as 246,660 shares of DKK 100 each.
The agreement is subject to the approval of the Home Rule's acquisition
of the shares by the Danish Financial Supervisory Authority.
The agreed purchase sum is DKK 89,044,260, equivalent to DKK 361 per
share.
9 February 2005: Danmarks Nationalbank has sold its shares in
Grønlandsbanken A/S
In a stock-exchange announcement dated 20 January 2005 Danmarks Nationalbank stated that it had sold its total shareholding of nominally kr.
24,666,000 shares in Grønlandsbanken A/S to the Greenland Home Rule.
The shareholding amounted to 13.7 per cent of the total share capital
of Grønlandsbanken A/S and was denominated as 246,660 shares of kr.
100 each. The agreement was subject to the approval of the Home
Rule's acquisition of the shares by the Danish Financial Supervisory Authority.
The Financial Supervisory Authority has approved the Greenland Home
Rule as the purchaser of the shares. The property and voting rights relating to the shares are therefore transferred to the Greenland Home Rule
as of 15 February 2005.
4 April 2005: Ruling in the Himmerlandsbanken case
The Himmerlandsbanken winding-up estate today lost the "bond case" at
the Danish Supreme Court. The ruling means that subscribers to subordinate capital are ranked alongside with other creditors.
151
After the Supreme Court's ruling, Danmarks Nationalbank will take the
necessary steps to ensure that legitimate claims under the guarantee provided by the Guarantee Consortium are met as soon as possible.
18 April 2005: Exhibition in Danmarks Nationalbank's lobby
In the period from 19 April to 13 May 2005, Danmarks Nationalbank exhibits the three prize-winning designs from the international urban planning and architectural design competition for the new premises of the
European Central Bank, ECB, in Frankfurt am Main, Germany.
The exhibition will be open to the public in the lobby of Danmarks Nationalbank, Havnegade 5, Copenhagen, from Monday to Friday between
9 am and 4 pm.
Pictures and further information about the competition can be found
at the ECB's website, www.ecb.int/ecb/premises, and at the competition
website, www.new-ecb-premises.com.
2 May 2005: Cyprus, Latvia and Malta join ERM II
With effect from Monday, 2 May 2005, Cyprus, Latvia and Malta have
joined the EU's exchange rate mechanism, ERM II.
Danmarks Nationalbank welcomes the new participants in ERM II.
The central rates and fluctuation bands of the three currencies have
been fixed vis-à-vis the euro and are stated in press releases from the EU
and the ECB.
The entry of the new member states will not entail any changes in the
central rate, fluctuation band and other terms and conditions for the
Danish krone in ERM II.
28 November 2005: Slovakia joins ERM II
With effect from 28 November 2005, Slovakia joined the EU's exchange
rate mechanism, ERM II.
Danmarks Nationalbank welcomes the new participant in ERM II.
The central rate and fluctuation bands of the new currency has been fixed
vis-à-vis the euro and are stated in press releases from the EU and the ECB.
The press releases from the ECB are available at www.Nationalbanken.dk
under Monetary Policy/Exchange Rate Mechanism/ERM II.
The entry of the new member state will not entail any changes in the
central rate, fluctuation band and other terms and conditions for the
Danish krone in ERM II.
152
Danmarks Nationalbank's Publications
Danmarks Nationalbank publishes the following publications:
• Report and Accounts (March)
Danmarks Nationalbank's Report and Accounts comprises a presentation
and description of the bank's Accounts for the year, and a Report of the
Board of Governors on, inter alia, recent trends in the Danish economy
and the monetary and foreign-exchange-rate policy.
• Financial Stability (May)
Financial Stability includes an analysis of financial stability and an assessment of whether the financial sector is robust.
• Monetary Review (Published on a quarterly basis)
The Monetary Review describes and comments on recent trends in external finance and domestic credit. It also includes articles on areas of
Danmarks Nationalbank's work which are judged to be of interest to a
broader audience.
• Danish Government Borrowing and Debt (February)
Publishing "Danish Government Borrowing and Debt" is an integral
part of the debt administration. The publication describes the development over the past year and reports on issues of significance to debt
management.
• Working Papers (Current issues – Electronic publication only)
The Working Papers of Danmarks Nationalbank describe research and
development, often still ongoing, as a contribution to the professional
debate.
• PhD Theses (Current issues – Electronic publication only)
Every year Danmarks Nationalbank offers a PhD grant in economics,
where the topic of the thesis is related to Danmarks Nationalbank's
areas such as monetary policy, risk management and financial stability.
• Financial Statistics – Nyt (News) and Tables Supplement (Current issues
– Electronic publication only)
The "Nyt" series presents key figures from the statistics which Danmarks Nationalbank is responsible for compiling. "Nyt" comprises nine
series. The Tables Supplement contains far more extensive data than
the "Nyt" publications and also describes the sources and methodologies.
All time series in Danmarks Nationalbank's statistical publications can
also be downloaded from the statistics database at Danmarks Nationalbank's website. For some subjects, further series can be downloaded,
153
e.g. more detailed distributions by sector, instrument, country or maturity.
Other publications by Danmarks Nationalbank:
• Danmarks Nationalbank, the Nationalbank Building, 2nd edition
(2005)
This publication describes the Danmarks Nationalbank building and its
layout. It is illustrated with an abundance of photos of the exterior
and interior of the building.
• The Coins and Banknotes of Denmark, 2nd edition (2005)
This publication presents Denmark's coins and banknotes together,
with an account of how the coins and banknotes are manufactured.
• Payment Systems in Denmark (2005)
The publication presents a description of payment and securities settlement systems and the roles of central banks regarding these
systems. Danmarks Nationalbanks' role in payment systems and the
Danish payment and securities settlement systems are explained in detail.
• Financial Management at Danmarks Nationalbank (2004)
The publication provides a description of the principles and methodologies used in connection with management of the foreign-exchange
reserve and Danmarks Nationalbank's other portfolios.
• Mona – a quarterly model of the Danish economy (2003)
This publication outlines the major features and properties of the economic model applied by Danmarks Nationalbank for analysing domestic business cycles.
• Monetary Policy in Denmark, 2nd edition (2003)
The publication offers interested parties a comprehensive presentation
of the Danish approach to monetary policy and of the relation between
monetary policy in theory and practice.
The publications are available at Danmarks Nationalbank's website,
www.nationalbanken.dk, under Publications. They can be ordered via the
order form at the website or from:
Information Desk
Havnegade 5
DK-1093 Copenhagen K
Telephone: +45 33 63 70 00 (direct) or +45 33 63 63 63
E-mail: [email protected]
154
Danish Bank Holidays other than Saturdays
and Sundays
New Year's Day
Maundy Thursday
Good Friday
Easter Monday
General Prayer Day (in 2006, 12 May)
Ascension Day
Whit Monday
Constitution Day (5 June)
24 December
Christmas Day
Boxing Day
31 December
Appendix of
Tables
156
ANNUAL ACCOUNTS AND MONTHLY BALANCE SHEETS OF DANMARKS NATIONALBANK
Table 1
Assets
Assets deposited
with the European
Monetary
Institute
Claims
on the
IMF, etc.1
Monetary-policy
lending
Kr. million
Gold
Foreign
assets
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
......................
......................
......................
......................
......................
......................
......................
......................
......................
......................
......................
3,531
3,652
3,331
3,934
4,567
4,683
4,979
5,196
5,298
5,124
6,941
53,577
73,624
115,844
89,416
154,715
110,851
138,633
183,034
214,441
208,456
204,204
4,521
4,979
4,790
•
•
•
•
•
•
•
•
4,177
4,598
6,602
9,330
8,441
5,127
8,549
8,268
7,416
5,684
3,557
•
•
•
•
•
•
•
•
•
72,635
135,296
2004 Jan ...............
Feb ...............
Mar ..............
Apr ..............
May .............
Jun ...............
Jul ................
Aug ..............
Sep ...............
Oct ...............
Nov ..............
Dec ..............
5,298
5,298
5,300
5,304
5,304
5,304
5,304
5,304
5,304
5,304
5,304
5,304
202,593
194,432
203,866
211,485
214,422
216,431
217,147
217,975
214,956
211,662
208,451
208,143
•
•
•
•
•
•
•
•
•
•
•
•
7,302
7,102
6,813
6,818
6,833
6,788
6,697
6,587
6,410
6,137
6,118
5,919
•
•
•
•
•
•
•
•
•
•
•
•
2005 Jan ...............
Feb ...............
Mar ..............
Apr ..............
May .............
Jun ...............
Jul ................
Aug ..............
Sep ...............
Oct ...............
Nov ..............
Dec ..............
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
213,577
213,997
225,235
216,794
223,418
227,136
215,966
216,252
217,177
201,607
197,770
202,594
•
•
•
•
•
•
•
•
•
•
•
•
5,673
5,580
5,580
5,246
5,148
4,748
4,701
4,712
4,712
4,708
4,194
3,208
84,341
87,560
93,336
86,810
98,684
113,203
99,005
102,976
111,481
105,645
124,864
135,296
Note: End of period. The annual figures are from the annual accounts of Danmarks Nationalbank. The monthly figures – also at end December –
are from the monthly balance sheets.
As from the 2004 annual accounts Danmarks Nationalbank's annual and monthly balance sheets are published with monetary-policy lending
and deposits listed as separate balance-sheet items, whereas previously they were included under "Lending", "Deposits" and "Certificates of
Deposit". Moreover, as from the 2004 annual accounts, current accounts, retail clearing accounts and securities settlement accounts in kroner
are included in net terms. Previously, these items were included in gross terms under "Lending" and "Deposits". For more information on
the balance-sheet changes see also Danmarks Nationalbank, Report and Accounts, 2004, p. 124.
The use of the monetary-policy instruments is specified in Table 5.
1
Danmarks Nationalbank's accounts with the International Monetary Fund are specified in Table 10.
2
Including shares and tangible fixed assets as from 2001, when these were capitalised, cf. Danmarks Nationalbank, Report and Accounts, 2001, p. 116.
3
Up to and including December 2004 the figures show only certificates of deposit.
157
Table 1
Assets
Other lending
Domestic bonds
Other assets, etc.2
Total
49,670
49,659
37,116
40,225
72,946
67,635
97,016
132,037
125,486
3,412
4,324
34,096
35,108
33,766
37,487
37,696
39,847
41,037
41,012
39,746
37,102
34,329
2,348
2,383
2,822
2,402
3,437
8,865
5,073
5,856
4,921
4,654
3,344
151,920
174,003
204,271
182,794
281,802
237,007
295,286
375,403
397,307
337,066
391,996
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
72,412
82,921
129,270
135,421
105,637
131,820
112,965
118,234
152,585
120,229
90,369
133,277
38,001
37,978
38,158
37,668
37,659
37,723
37,994
38,265
37,773
37,280
37,876
37,169
4,009
3,847
3,947
4,056
4,201
4,851
4,904
4,921
5,567
5,656
5,429
5,975
329,615
331,578
387,354
400,752
374,055
402,917
385,011
391,286
422,595
386,269
353,546
395,788
................ Jan 2004
................ Feb
............... Mar
................ Apr
............... May
................ Jun
................. Jul
............... Aug
................ Sep
................ Oct
............... Nov
................ Dec
3,122
2,977
3,115
2,628
3,033
2,894
3,004
3,026
3,525
3,474
3,400
4,324
36,971
37,727
35,780
36,165
37,856
38,449
38,099
37,823
38,679
38,725
36,568
34,885
3,866
3,602
3,833
3,881
4,144
4,832
5,198
5,312
5,938
6,144
6,256
6,679
352,675
356,567
372,002
356,648
377,407
396,386
371,097
375,223
386,637
365,427
378,177
392,111
................ Jan 2005
................ Feb
............... Mar
................ Apr
............... May
................ Jun
................. Jul
............... Aug
................ Sep
................ Oct
............... Nov
................ Dec
Kr. million
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
158
Table 1
Liabilities
Banknotes in
circulation
Coins in
circulation
Monetary-policy
deposits3
Other
deposits
Central
Government
......................
......................
......................
......................
......................
......................
......................
......................
......................
......................
......................
31,434
33,187
35,079
37,199
42,430
40,650
42,966
43,164
44,984
47,047
50,953
3,222
3,426
3,631
3,816
3,952
4,148
4,333
4,491
4,701
4,992
5,264
33,813
30,865
52,738
34,752
99,896
51,874
113,620
160,664
157,279
167,252
220,423
3,219
28,068
33,863
21,231
46,404
52,460
37,996
61,679
91,002
2,820
2,187
38,808
34,995
33,954
37,131
39,678
37,718
43,510
50,319
43,981
60,810
56,428
2004 Jan ...............
Feb ...............
Mar ..............
Apr ..............
May .............
Jun ...............
Jul ................
Aug ..............
Sep ...............
Oct ...............
Nov ..............
Dec ..............
42,536
42,132
42,961
43,803
44,517
44,654
45,158
44,933
44,884
44,864
45,510
47,047
4,616
4,604
4,655
4,703
4,780
4,799
4,823
4,832
4,833
4,856
4,900
4,992
131,140
139,014
141,256
159,437
134,518
140,498
141,065
136,940
137,124
119,441
128,158
160,379
38,219
35,288
48,701
37,220
39,595
52,234
39,734
38,812
58,175
40,903
39,921
66,804
56,875
54,487
96,607
101,955
96,377
105,557
98,416
109,334
120,221
118,014
75,948
58,006
2005 Jan ...............
Feb ...............
Mar ..............
Apr ..............
May .............
Jun ...............
Jul ................
Aug ..............
Sep ...............
Oct ...............
Nov ..............
Dec ..............
45,800
45,787
46,575
46,945
47,372
47,949
48,137
47,794
47,661
47,914
48,623
50,953
4,965
4,943
5,008
5,018
5,080
5,135
5,112
5,121
5,135
5,143
5,213
5,264
177,496
196,827
183,362
167,920
186,520
202,368
193,937
221,839
226,862
209,206
221,845
220,423
2,642
2,587
2,627
2,718
2,551
2,707
2,341
2,322
6,861
2,704
2,440
2,185
65,755
50,592
80,699
80,320
81,564
83,121
66,185
42,207
42,126
42,094
40,504
53,475
Kr. million
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Cf. the notes to the Table of Assets.
159
Table 1
Liabilities
Other
liabilities
General
Capital
Fund and
Statutory
Reserve
Value
Adjustment
Reserve
General
Reserves
Total
1,474
1,527
1,648
1,606
1,815
1,869
1,884
1,721
1,577
1,514
1,614
1,523
1,548
1,333
2,333
3,445
729
539
317
562
714
503
300
300
300
300
300
300
300
300
300
300
300
•
1,093
2,107
3,101
20
1,363
1,454
3,577
3,310
2,648
3,858
35,927
37,359
38,742
40,072
41,439
42,753
44,951
45,859
46,635
47,336
48,074
151,920
174,003
204,271
182,794
281,802
237,007
295,286
375,403
397,307
337,066
391,996
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
.......................
631
429
488
530
685
910
1,146
1,317
1,665
1,943
2,250
1,637
1,577
1,577
1,577
1,577
1,577
1,577
1,577
1,577
1,577
1,577
1,577
1,577
4,283
4,310
864
1,281
1,761
2,444
2,847
3,295
3,871
4,427
5,037
5,102
300
300
300
300
300
300
300
300
300
300
300
300
3,577
3,577
3,310
3,310
3,310
3,310
3,310
3,310
3,310
3,310
3,310
3,310
45,859
45,859
46,635
46,635
46,635
46,635
46,635
46,635
46,635
46,635
46,635
46,635
329,615
331,578
387,354
400,752
374,055
402,917
385,011
391,286
422,595
386,269
353,546
395,788
................. Jan 2004
................ Feb
............... Mar
................ Apr
............... May
................ Jun
.................. Jul
............... Aug
................ Sep
................ Oct
................ Nov
................ Dec
750
637
848
375
553
705
684
728
1,518
1,519
2,122
2,391
1,514
1,514
1,514
1,514
1,514
1,514
1,514
1,514
1,514
1,514
1,514
1,514
3,508
3,436
1,086
1,555
1,969
2,603
2,903
3,415
4,676
5,049
5,633
5,622
300
300
300
300
300
300
300
300
300
300
300
300
3,310
3,310
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
46,635
46,635
47,336
47,336
47,336
47,336
47,336
47,336
47,336
47,336
47,336
47,336
352,675
356,567
372,002
356,648
377,407
396,386
371,097
375,223
386,637
365,427
378,177
392,111
................. Jan 2005
................ Feb
............... Mar
................ Apr
............... May
................ Jun
.................. Jul
............... Aug
................ Sep
................ Oct
................ Nov
................ Dec
Foreign
liabilities
Counterpart
of SDRs
allocated by
the IMF1
2,200
1,634
876
1,253
2,425
3,143
3,734
3,311
2,976
1,633
2,391
Kr. million
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
160
SPECIFICATION OF BANKNOTES IN CIRCULATION
Kr. million
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
........................
Table 2
1,000 kr.
500 kr.
200 kr.
100 kr.
18,238
19,280
19,589
19,787
22,978
22,049
23,569
23,434
24,387
25,627
27,892
5,307
5,819
6,556
8,088
9,272
8,789
9,296
9,395
10,052
10,777
12,006
•
•
1,618
2,182
2,534
2,688
2,890
3,065
3,262
3,335
3,602
6,759
6,926
6,119
5,881
6,339
5,825
5,768
5,731
5,729
5,712
5,802
Total1
Total,
mio.pieces
31,041
32,803
34,681
36,789
42,026
40,268
42,453
42,581
44,417
46,479
50,386
111
116
118
123
136
130
133
134
138
142
150
50 kr.
737
778
799
851
904
917
931
956
989
1,028
1,083
Note: End of year.
1
Banknotes in circulation as stated in Danmarks Nationalbank's balance sheet furthermore includes the special notes circulation on the Faroe
Island (on 30 December 2005 kr. 369 million) and 20-, 10- and 5-krone notes (on 30 December 2005 kr. 198 million).
SPECIFICATION OF COINS IN CIRCULATION
Table 3
Kr. million
20 kr.
10 kr.
5 kr.
2 kr.1
1 kr.
50 øre
25 øre
Total2
Total,
mio.pieces
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
1,122
1,212
1,299
1,371
1,421
1,522
1,600
1,673
1,789
1,950
2,091
697
738
773
813
842
874
922
958
993
1,037
1,087
442
462
483
504
523
540
562
574
592
609
635
259
291
321
348
369
386
403
420
439
461
488
385
393
401
413
422
435
443
454
466
479
497
112
121
126
134
139
141
148
152
160
165
170
152
159
163
169
171
175
179
183
186
189
194
3,169
3,374
3,566
3,752
3,887
4,072
4,257
4,414
4,625
4,890
5,162
1,561
1,641
1,706
1,779
1,829
1,881
1,940
1,991
2,056
2,119
2,197
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
.............................
Note: End of year.
1
2-krone coins put into circulation up to and including 1959 are included in the Table. The figures are revised back to 1995, and there will therefore be deviations from previous Annual Reports.
2
Coins in circulation as stated in Danmarks Nationalbank's balance sheet furthermore includes the 200-krone commemorative coin (kr. 102 million on
30 December 2005).
161
LOANS FINANCING DECENTRALISED BANKNOTE HOLDINGS
Table 4
Kr. million
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
...............................................................
1,361
1,438
1,655
2,912
4,991
2,677
2,150
3,208
3,123
3,371
3,487
Note: Monthly figures are available on www.nationalbanken.dk, under Statistics (Download statistics – Publications, Tables supplement:
Specification of Danmarks Nationalbank's balance sheet).
162
THE BANKS' AND THE MORTGAGE-CREDIT INSTITUTES' NET POSITION
WITH DANMARKS NATIONALBANK
Table 5
Kr. million
Certificates
of deposit1
Net current
accounts2
Monetary-policy
loans3
Total net position
1995 ............................
1996 ............................
1997 ............................
1998 ............................
1999 ............................
2000 ............................
2001 ............................
2002 ............................
2003 .............................
2004 .............................
2005 .............................
33,813
30,865
52,738
34,752
99,896
51,874
113,620
160,664
157,279
160,379
207,582
2,025
15,565
18,456
12,612
6,536
8,099
3,705
10,106
12,945
6,873
12,841
44,040
33,822
19,901
29,775
33,123
25,335
63,408
81,167
48,024
72,635
135,296
-8,202
12,608
51,293
17,589
73,309
34,638
53,917
89,603
122,200
94,617
85,127
2004 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
131,140
139,014
141,256
159,437
134,518
140,498
141,065
136,940
137,124
119,441
128,158
160,379
4,688
3,347
18,207
5,514
4,397
12,407
6,079
14,214
11,035
11,756
13,158
7,055
39,370
51,668
99,120
104,430
71,121
92,295
79,175
93,486
105,088
91,373
63,515
72,635
96,458
90,693
60,343
60,521
67,794
60,610
67,969
57,668
43,071
39,824
77,801
94,799
2005 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
163,645
187,178
177,733
163,379
172,710
187,421
188,758
204,304
218,455
195,468
201,585
207,582
13,851
9,649
5,629
4,541
13,810
14,947
5,179
17,535
8,407
13,738
20,260
12,841
84,341
87,560
93,336
86,810
98,684
113,203
99,005
102,976
111,481
105,645
124,864
135,296
93,155
109,267
90,026
81,110
87,836
89,165
94,932
118,863
115,381
103,562
96,981
85,127
Note: End of period. The annual figures are from the annual accounts of Danmarks Nationalbank. The monthly figures – also at end December –
In 1999 the group of monetary-policy counterparties was expanded to include mortgage-credit institutes. Before 1999 the statistics solely
include banks.
1
Nominal value.
2
The monetary-policy counterparties' net current-account balances in Danish kroner at the close of the monetary-policy day.
3
Loans against collateral. Up to 20 June 1999 including repurchase agreements.
163
MONEY STOCK
Table 6
Banknotes
and coins1
Deposits on
demand
Time
deposits
with an
original
maturity
< 2 years
1995 ............
1996 ............
1997 ............
1998 ............
1999 ............
2000 ............
2001 ............
2002 ............
2003 .............
2004 .............
2005 .............
30.1
31.1
32.6
33.9
36.1
37.4
39.2
39.0
41.0
43.7
47.3
260.8
291.7
310.9
333.2
341.8
349.2
375.6
399.1
428.2
492.8
596.3
107.6
114.9
122.4
119.0
128.3
101.7
102.7
102.7
112.2
119.2
114.1
14.0
16.2
15.1
14.9
12.9
6.9
9.9
18.5
19.2
21.0
18.4
2.1
3.5
2.5
1.9
4.3
3.3
4.0
6.6
2.7
2.0
14.2
4.3
7.0
17.3
17.4
11.6
8.6
15.0
45.2
77.3
20.2
8.2
418.9
464.4
500.9
520.2
535.0
507.1
546.4
611.2
680.6
699.0
798.5
3.2
10.8
7.9
3.9
2.8
-5.2
7.7
11.8
11.4
2.7
14.2
2004 Jan .....
Feb ....
Mar ....
Apr ....
May ...
Jun .....
Jul ......
Aug ...
Sep ....
Oct .....
Nov ....
Dec ....
40.1
40.0
39.9
41.6
41.7
41.7
42.3
41.7
41.9
42.3
42.6
43.7
440.4
437.8
437.0
463.7
471.8
458.7
471.7
477.3
464.6
486.5
496.9
492.8
141.1
137.7
141.1
145.2
144.6
133.2
154.9
151.4
144.1
143.6
144.7
119.2
19.1
19.0
19.2
20.2
20.1
19.9
20.3
19.6
19.8
20.4
22.3
21.0
4.4
4.1
3.5
8.7
9.1
10.1
9.0
7.2
6.3
4.7
4.5
2.0
114.1
119.8
120.7
123.2
117.0
102.0
103.1
98.8
97.4
88.7
76.4
20.2
759.1
758.3
761.4
802.6
804.3
765.6
801.3
796.0
774.1
786.3
787.5
699.0
15.6
13.9
18.6
15.3
14.3
12.9
13.5
14.2
14.3
9.4
9.5
2.7
2005 Jan .....
Feb ....
Mar ....
Apr ....
May ...
Jun .....
Jul ......
Aug ...
Sep ....
Oct .....
Nov ....
Dec ....
43.2
43.0
43.1
44.4
44.2
44.9
45.1
44.7
45.5
45.4
46.1
47.3
502.0
500.4
508.1
550.1
552.4
561.9
581.8
581.8
576.6
584.2
597.1
596.3
135.1
134.8
128.3
133.4
123.5
138.5
152.2
146.7
138.9
142.4
129.3
114.1
21.3
21.3
18.3
18.8
19.0
18.0
18.3
18.8
19.0
18.5
20.3
18.4
4.9
6.3
2.8
6.0
4.9
11.5
5.2
3.7
3.4
3.8
4.2
14.2
6.7
0.5
2.4
2.0
1.7
3.6
1.6
3.9
0.1
0.6
2.1
8.2
713.1
706.5
703.0
754.8
745.7
778.4
804.3
799.6
783.7
795.0
799.2
798.5
-6.1
-6.8
-7.7
-6.0
-7.3
1.7
0.4
0.5
1.2
1.1
1.5
14.2
Kr. billion
Deposits
at notice
with an
original
maturity
< 3 months
Repurchase
agreements
Bonds, etc.
issued with
an original
maturity
< 2 years
Money
stock
M3
Year-on-year
increase
in money
stock
per cent
Note: End of period. The money stock is calculated in accordance with the ECB's definition of harmonised monetary aggregates for the EU: M1, M2
and M3. This includes residents' short-term deposits with MFIs in kroner and foreign currencies. Special deposit schemes are included in the
money stock (M2 og M3) to the extent that they are within the short-term band. Bonds issued with an original maturity of up to and
including 2 years, money market papers and shares issued by MFIs are included in M3. The money stock is calculated on the basis of the
consolidated balance sheet of the MFI sector and represents the MFI sector's liquid liabilities via-à-vis the money-holding sectors – i.e. citizens
and companies, but excluding the central government and non-residents, who are regarded as money-neutral in this connection.
The M1 monetary aggregate is calculated as the sum of "Banknotes and coins" and "Deposits on demand", and the M2 monetry aggregate is
calculated as the sum of M1, "Time deposits with an original maturity < 2 years" and "Deposits at notice with an original maturity < 3
months".
The MFI sector comprises Danish Monetary Financial Institutions, i.e. banks and mortgage-credit institutes, other credit institutions, money
market funds and Danmarks Nationalbank.
1
Banknotes and coins in circulation, excluding MFI holdings.
164
THE OFFICIAL INTEREST RATES OF DANMARKS NATIONALBANK
Per cent per annum
1995
8
6
27
18
6
27
3
25
7
28
5
9
23
15
28
1996 11
25
8
7
21
1
19
6
23
Mar ........
Apr ........
........
May ........
Jul ........
........
Aug ........
........
Sep ........
........
Oct .........
Nov ........
........
Dec ........
........
Jan
Feb
Mar
Apr
Jun
Aug
........
........
........
........
........
........
........
........
........
Discount
rate
Current
account
deposits1
6.00
6.00
5.75
5.75
5.50
5.00
5.50
5.00
4.75
4.75
4.25
4.25
4.00
4.00
3.75
3.75
Lending
and certificates of
deposit2
7.00
6.75
6.50
6.35
6.20
6.05
5.90
5.50
5.40
5.30
5.15
5.00
4.75
4.60
4.50
4.35
4.25
4.10
4.00
3.90
3.80
3.70
3.50
3.25
3.25
1997 10 Oct ........
3.50
3.50
3.75
1998
4.00
3.75
4.25
4.00
3.75
4.25
4.00
4.00
3.50
3.50
4.25
4.00
5.00
4.75
4.65
4.40
4.25
3.95
3.25
3.25
2.75
2.75
3.00
3.00
1999
6
29
21
8
22
5
26
4
May
Sep
Oct
Nov
Dec
........
........
........
........
........
........
........
........
7
4
1
9
17
5
Jan
Feb
Mar
Apr
Jun
Nov
........
........
........
........
........
........
Table 7
Per cent per annum
2000
2001
4
17
28
9
23
30
1
6
27
29
6
13
27
Feb
Mar
Apr
Jun
Aug
Sep
Oct
-
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
9
14
6
31
18
5
9
Feb
May
Jul
Aug
Sep
Oct
Nov
.....
.....
.....
.....
.....
.....
.....
1
9
30
6
Feb
Aug
Dec
.....
.....
.....
.....
Discount
rate
Current
account
deposits1
3.25
3.50
3.75
4.25
3.25
3.50
3.75
4.25
4.50
4.50
Lending
and certificates of
deposit2
3.60
3.85
4.10
4.70
4.90
5.10
5.00
5.10
5.60
4.75
4.75
5.50
5.40
4.50
4.50
4.25
3.75
4.25
3.75
3.25
3.25
5.30
5.00
4.95
4.65
4.15
4.10
3.60
2.75
2.75
3.55
3.50
3.45
2.95
7 Mar .....
23 May .....
6 Jun .....
2.50
2.50
2.00
2.00
2.70
2.65
2.15
2 Dec .....
2.25
2.25
2.40
2006 17 Feb .....
3 Mar .....
2.50
2.50
2.50
2.75
2002
2003
2005
3.75
3.50
3.40
2.90
2.85
3.30
Note: Interest rates at year-end or as from the date stated.
1
As from April 1992 until end-April 1997 interest-earning deposits were subject to maximum limits. Until end-March 1992 the banks also had
access to drawings on current account. The rate of interest for these drawings was 0.5 to 1 per cent higher.
2
Danmarks Nationalbank's interest rate for collateralised lending as well as for sale and repurchase of the Nationalbank's certificates of deposit.
On purchasing certificates of deposit before expiry the Nationalbank's buy-back price is normally based on a slightly higher interest rate. The
interest rates stated exclude this premium. Until 21 June 1999 the Nationalbank's lending rate was called the repo rate.
165
THE OFFICIAL INTEREST RATES OF THE EUROPEAN CENTRAL BANK
Table 8a
Main refinancing operations
Variable rate tenders
With effect from1
Deposit facility
Minimum bid rate
Marginal
lending facility
2002
6 Dec ..................................
1.75
2.75
3.75
2003
7 Mar ..................................
6 Jun ...................................
1.50
1.00
2.50
2.00
3.50
3.00
2005
6 Dec ..................................
1.25
2.25
3.25
2006
8 Mar ..................................
1.50
2.50
3.50
Note:
On 8 June 2000 the ECB announced that, starting from the operation to be settled on 28 June 2000, the main refinancing operation of the
Euro-system would be conducted as variable rate tenders. The minimum bid rate refers to the minimum interest rate at which
counterparties may place their bids.
Source: ECB.
1
The dates refer to the deposit and marginal lending facilities. For main refinancing operations, changes in the rate are effective from the first
operation following the date indicated.
EUROSYSTEM MONETARY-POLICY OPERATIONS ALLOTTED THROUGH TENDERS
Per cent
per annum
2005
5 Jan .....
12 .....
19 .....
26 .....
2 Feb .....
8.....
16 .....
23 .....
2 Mar .....
9.....
16 .....
23 .....
30 .....
6 Apr ....
13 .....
20 .....
27 .....
4 May ....
11 .....
18 .....
25 .....
Table 8b
Minimum
bid
Marginal Per cent
rate
rate
per annum
Minimum
bid
Marginal Per cent
rate
rate
per annum
Minimum
bid
Marginal
rate
rate
2.00
2.06
2.06
2.06
2.06
2.06
2.06
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2005
1
8
15
22
29
6
13
20
27
3
10
17
24
31
7
14
21
28
5
12
19
Jun .....
- .....
- .....
- .....
- .....
Jul .....
- .....
- .....
- .....
Aug ...
- .....
- .....
- .....
- .....
Sep ....
- .....
- .....
- .....
Oct ....
- .....
- .....
2.00
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.05
2.06
2.06
2.06
2.06
2.07
2.06
2005 26
3
9
16
23
30
6
14
21
29
2006 4
11
18
25
1
8
15
22
28
8
Note: Cf. note in table 8a. The marginal rate refers to the lowest rate at which funds were allotted.
Source: ECB.
Oct ....
Nov ...
....
....
....
....
Dec ....
....
....
....
Jan ....
....
....
....
Feb ....
Mar ...
2.00
2.25
2.50
2.06
2.05
2.05
2.05
2.08
2.09
2.29
2.29
2.30
2.25
2.30
2.30
2.30
2.30
2.30
2.31
2.31
2.31
2.32
•
166
THE FOREIGN-EXCHANGE RESERVE
Table 9
Assets
deposited
with the
European
Monetary
Institute
Claims on
the
IMF, etc.1
Total
gross
Foreign
liabilities
Total
net2
Kr. million
Gold
Foreign
assets
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
...................
...................
...................
...................
...................
...................
...................
...................
...................
...................
...................
3,531
3,652
3,331
3,934
4,567
4,683
4,979
5,196
5,298
5,124
6,941
53,577
73,624
115,844
89,416
154,715
110,851
138,633
183,034
214,441
208,456
204,204
4,521
4,979
4,790
•
•
•
•
•
•
•
•
4,177
4,598
6,602
9,330
8,441
5,127
8,549
8,268
7,416
5,684
3,557
65,806
86,853
130,567
102,680
167,724
120,661
152,161
196,498
227,155
219,264
214,703
2,200
1,634
876
1,253
2,425
3,143
3,734
3,311
2,976
1,633
2,391
63,606
85,219
129,691
101,427
165,299
117,517
148,427
193,187
224,179
217,631
212,312
2004 Jan ............
Feb ............
Mar ...........
Apr ...........
May ..........
Jun ............
Jul .............
Aug ...........
Sep ............
Oct ............
Nov ...........
Dec ...........
5,298
5,298
5,300
5,304
5,304
5,304
5,304
5,304
5,304
5,304
5,304
5,304
202,593
194,432
203,866
211,485
214,422
216,431
217,147
217,975
214,956
211,662
208,451
208,143
•
•
•
•
•
•
•
•
•
•
•
•
7,302
7,102
6,813
6,818
6,833
6,788
6,697
6,587
6,410
6,137
6,118
5,919
215,193
206,832
215,979
223,607
226,559
228,523
229,148
229,866
226,669
223,103
219,873
219,366
631
429
488
530
685
910
1,146
1,317
1,665
1,943
2,250
1,637
214,562
206,403
215,491
223,076
225,873
227,613
228,002
228,548
225,005
221,161
217,623
217,730
2005 Jan ............
Feb ............
Mar ...........
Apr ...........
May ..........
Jun ............
Jul .............
Aug ...........
Sep ............
Oct ............
Nov ...........
Dec ...........
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
5,124
213,577
213,997
225,235
216,794
223,418
227,136
215,966
216,252
217,177
201,607
197,770
202,594
•
•
•
•
•
•
•
•
•
•
•
•
5,673
5,580
5,580
5,246
5,148
4,748
4,701
4,712
4,712
4,708
4,194
3,208
224,374
224,701
235,938
227,164
233,690
237,007
225,791
226,088
227,013
211,439
207,089
210,926
750
637
848
375
553
705
684
728
1,518
1,519
2,122
2,391
223,624
224,064
235,091
226,789
233,137
236,302
225,107
225,360
225,495
209,920
204,967
208,535
Note: End of period. The annual figures are from the annual accounts of Danmarks Nationalbank. The monthly figures – also at end-December –
1
Danmarks Nationalbank's account with the International Monetary Fund is specified in Table 10.
2
As a result of exchange-rate adjustments the foreign-exchange reserve declined by kr. 3,841 million in 1995, increased by kr. 765 million in 1996,
by kr. 1,454 million in 1997, by kr. 913 million in 1998, declined by kr. 366 million in 1999, by kr. 4,821 million in 2000, increased by kr. 3,437
million in 2001, declined by kr. 699 million in 2002, increased by kr. 161 million in 2003, declined by kr. 99 million in 2004 and increased by kr.
3,777 million in 2005.
167
DENMARK'S ACCOUNT WITH THE INTERNATIONAL MONETARY FUND
Denmark's qouta
in the Fund
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
...................
...................
...................
...................
...................
...................
...................
...................
...................
...................
...................
The Fund's
holdings of
Danish kroner
Table 10
Denmark's
reserve position
in the Fund1
Allocated SDR
(accumulated)
Denmark's
holdings of SDR
SDR
million
Kr.
million
SDR
million
Kr.
million
SDR
million
Kr.
million
SDR
million
Kr.
million
SDR
million
Kr.
million
1,070
1,070
1,070
1,070
1,643
1,643
1,643
1,643
1,643
1,643
1,643
8,818
9,134
9,856
9,605
16,667
17,167
17,306
15,811
14,488
13,904
14,828
670
648
602
277
1,061
1,203
1,076
921
957
1,100
1,427
5,521
5,533
5,545
2,483
10,762
12,568
11,335
8,863
8,435
9,310
12,879
400
422
468
793
582
440
567
722
686
543
216
3,297
3,601
4,311
7,122
5,905
4,599
5,971
6,948
6,053
4,594
1,950
179
179
179
179
179
179
179
179
179
179
179
1,474
1,527
1,648
1,606
1,815
1,869
1,884
1,721
1,577
1,514
1,614
107
117
249
246
250
51
223
76
55
29
78
880
997
2,291
2,208
2,536
528
2,354
730
481
243
705
Note: End of period. Conversion from SDR to Danish kroner is made at the year-end SDR-rate. In addition to the above account, kr. 903 million had
been lent to the Poverty Reduction and Growth Facility at end-2005.
1
Denmark's reserve position in the IMF is determined as the difference between the quota and the Fund's holdings of Danish kroner.
CENTRAL RATE AND FLUCTUATION BAND VIS-À-VIS EURO IN ERM II
Table 11
Kroner per 100 euro
Denmark
Upper limit ............................................................................................................
Central rate ...........................................................................................................
Lower limit ............................................................................................................
762.824
746.038
729.252
168
EXCHANGE RATES
Table 12
Euros1
(EUR)
US dollars
(USD)
Japanese yen
(JPY)
Pounds
sterling
(GBP)
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
..................................
•
•
•
•
743.56
745.37
745.21
743.04
743.07
743.98
745.19
560.53
579.59
660.86
669.70
698.34
809.03
831.88
788.12
658.99
598.93
600.34
5.9799
5.3316
5.4761
5.1338
6.1755
7.5081
6.8522
6.2969
5.6840
5.5366
5.4473
884.61
905.17
1,082.32
1,109.36
1,129.49
1,223.33
1,197.74
1,182.10
1,074.99
1,096.69
1,090.02
78.65
86.47
86.54
84.23
84.46
88.26
80.58
81.12
81.45
81.54
80.29
88.45
89.79
93.36
88.70
89.47
91.89
92.60
99.03
93.03
88.90
93.11
2004 Jan ..........................
Feb ..........................
Mar .........................
Apr .........................
May ........................
Jun ..........................
Jul ...........................
Aug .........................
Sep ..........................
Oct ..........................
Nov .........................
Dec .........................
744.81
745.11
744.93
744.35
744.06
743.42
743.55
743.65
743.81
743.79
743.13
743.32
590.55
589.25
607.56
621.43
620.24
612.49
606.26
610.81
608.82
595.65
572.11
555.13
5.5535
5.5291
5.5992
5.7656
5.5293
5.5964
5.5457
5.5280
5.5307
5.4703
5.4609
5.3456
1,076.15
1,100.85
1,109.85
1,118.36
1,107.53
1,119.18
1,116.87
1,110.96
1,091.77
1,075.73
1,063.74
1,070.97
81.52
81.20
80.67
81.21
81.46
81.31
80.85
80.96
81.81
82.08
82.59
82.80
86.69
84.91
87.23
89.75
90.62
89.73
87.73
89.26
88.97
90.32
91.28
90.46
2005 Jan ..........................
Feb ..........................
Mar .........................
Apr .........................
May ........................
Jun ..........................
Jul ...........................
Aug .........................
Sep ..........................
Oct ..........................
Nov .........................
Dec .........................
744.05
744.27
744.64
744.99
744.44
744.48
745.84
745.96
745.84
746.20
745.96
745.41
567.20
571.96
563.71
576.15
586.97
612.03
619.65
606.87
608.65
621.10
632.99
628.76
5.4866
5.4512
5.3623
5.3666
5.4995
5.6310
5.5354
5.4861
5.4818
5.4055
5.3441
5.3033
1,065.01
1,079.16
1,075.75
1,090.89
1,088.37
1,112.96
1,084.83
1,088.64
1,100.74
1,095.18
1,098.13
1,097.49
82.24
81.92
81.94
81.27
80.98
80.38
79.11
79.87
79.91
79.20
78.02
79.03
90.60
89.46
90.95
91.11
92.16
94.32
94.17
94.23
95.52
95.24
95.28
93.49
Danish kroner
per 100 units
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Swedish
kronor
(SEK)
Norwegian
kroner
(NOK)
Note: Annual and monthly averages. As from 2002 the stated exchange rates are fixed on the basis of market exchange rates at 2.15 pm, whereas
previously they were fixed on the basis of market exchange rates at 11.30 am. However, the SDR exchange rate is not fixed directly on the
basis of market exchange rates, but calculated on the basis of a basket of currencies. This basket is published by the international Monetary
Fund, IMF. As of 1 January 2006 the amounts for the four currencies that determine the value of the SDR were revised. The value of the SDR
is now the sum of the values of the following amounts of each currency: Dollar 0.632, euro 0.410, yen 18.4 and pound sterling 0.0903.
Previously they were: Dollar 0.577, euro 0.426, yen 21.0 and pound sterling 0.0984.
For a number of currencies only averages for the recent years are stated, since the Table solely comprises exchange rates fixed by Danmarks
Nationalbank. The structure of the list of exchange rates is changed continuously, most recently with effect from 1 April 2005, cf. the press
release, p. 148.
Exchange rates on a daily basis can be downloaded from www.nationalbanken.dk, Market info and Statistics (Download statistics –
Database).
1
Historical annual and monthly averages for the euro area and the weighted ECU based on these currencies, subsequently renamed the euro, are
found in Danmarks Nationalbank, Report and Accounts, 2001 and earlier.
2
As of 1 July 2005 Romania introduced New Romanian lei (RON) as its official currency, replacing old Romanian lei (ROL).
3
As of 1 January 2005 Turkey introduced New Turkish lira (TRY) as its official currency, replacing old Tyrkish lira (TRL).
169
EXCHANGE RATES
Table 12
Swiss
francs
(CHF)
Canadian
dollars
(CAD)
Australian
dollars
(AUD)
New
Zealand
dollars
(NZD)
SDRs
(XDR)
Nominal
effective
krone rate
(1980 = 100)
8.65
8.69
9.31
9.41
9.64
10.27
8.56
8.62
8.58
8.54
9.55
474.22
469.65
455.35
462.37
464.63
478.68
493.47
506.47
488.88
481.96
481.30
408.39
425.08
477.44
452.28
470.26
544.49
537.54
501.86
470.27
460.64
496.12
415.80
453.67
490.90
421.66
450.86
469.29
430.51
427.91
428.17
440.53
457.13
367.64
398.76
437.20
359.66
369.27
367.89
349.85
364.87
382.69
397.53
422.41
849.63
841.42
909.13
908.10
954.73
1,065.90
1,059.21
1,019.83
921.93
886.70
885.50
103.9
102.9
100.0
101.3
99.6
95.6
96.9
97.7
101.2
102.2
101.6
8.49
8.59
8.54
8.50
8.46
8.49
8.48
8.54
8.49
8.49
8.53
8.85
475.72
473.56
475.39
478.74
483.03
489.36
486.93
483.29
482.03
482.17
488.39
484.06
455.68
443.07
456.68
463.19
449.88
450.81
458.45
464.63
471.76
476.78
478.24
455.72
454.89
458.29
455.14
460.86
436.78
425.24
433.94
433.70
427.60
436.26
440.63
425.85
397.24
408.04
401.35
397.19
381.61
385.21
392.16
399.75
401.25
406.92
400.86
397.04
880.56
881.85
894.70
906.78
899.94
897.76
892.92
894.64
891.73
881.27
866.03
854.61
102.6
102.6
102.1
101.4
101.8
101.8
102.0
101.9
102.0
102.3
102.8
103.2
9.06
9.22
9.41
9.238
9.056
9.389
9.514
9.519
9.796
10.182
10.224
9.892
481.00
480.15
480.68
481.37
481.89
483.72
478.77
480.39
481.32
481.74
482.87
481.58
463.33
461.52
463.26
466.18
467.44
492.75
506.37
503.42
516.28
527.43
535.03
541.07
433.98
446.50
443.09
445.16
449.47
469.06
466.12
462.08
465.96
468.24
465.38
466.57
399.67
409.13
412.00
414.61
421.62
433.51
420.63
422.07
425.85
433.53
436.59
436.87
864.25
867.74
860.94
869.85
878.40
898.06
898.26
890.28
892.35
897.54
903.30
899.70
102.8
102.5
102.7
102.4
102.0
100.9
101.2
101.3
101.0
100.9
100.7
100.8
Icelandic
kronur
(ISK)
170
EXCHANGE RATES
Table 12
Estonian
krooni
(EEK)
Latvian
lats
(LVL)
Lithuanian
litai
(LTL)
Polish
zlotys
(PLN)
Czech
koruny
(CZK)
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
…
…
…
…
…
…
…
47.49
47.49
47.55
47.63
…
…
…
…
…
…
…
1,279.75
1,161.21
1,118.83
1,070.38
…
…
…
…
…
…
…
214.79
215.21
215.47
215.82
…
…
…
…
176.05
186.03
203.05
193.07
169.26
164.73
185.46
…
…
…
…
20.19
20.95
21.88
24.13
23.34
23.33
25.03
…
…
…
…
2.94
2.87
2.91
3.06
2.93
2.96
3.00
…
…
…
…
…
…
…
101.05
84.62
76.89
77.20
…
…
…
…
…
…
…
439.96
378.02
354.21
360.41
2004 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
47.60
47.62
47.61
47.57
47.55
47.51
47.52
47.53
47.54
47.54
47.49
47.51
1,110.48
1,112.41
1,129.47
1,144.87
1,134.82
1,132.43
1,127.35
1,129.21
1,125.35
1,111.84
1,092.42
1,078.20
215.69
215.77
215.75
215.57
215.49
215.31
215.35
215.38
215.42
215.41
215.23
215.28
158.04
153.42
156.38
156.35
157.48
161.96
166.54
167.84
170.03
172.25
174.57
179.55
22.76
22.68
22.58
22.89
23.26
23.52
23.57
23.51
23.54
23.62
23.75
24.25
2.82
2.83
2.94
2.97
2.94
2.94
2.98
2.99
3.00
3.01
3.03
3.03
76.05
75.80
77.97
79.70
79.55
78.55
77.73
78.31
78.06
76.47
73.57
71.39
347.82
349.45
357.52
368.75
362.23
357.57
354.16
356.07
359.02
355.11
346.53
338.20
2005 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
47.55
47.57
47.59
47.62
47.58
47.58
47.67
47.68
47.67
47.69
47.67
47.64
1,068.52
1,069.27
1,069.72
1,070.29
1,069.51
1,069.63
1,071.53
1,071.74
1,071.53
1,071.32
1,071.33
1,069.88
215.49
215.55
215.66
215.77
215.60
215.62
216.01
216.05
216.01
216.11
216.04
215.89
182.40
186.71
185.94
179.35
178.38
183.35
181.99
184.48
190.47
190.23
187.91
193.61
24.55
24.84
25.03
24.73
24.62
24.79
24.71
25.21
25.44
25.15
25.49
25.73
3.02
3.05
3.04
3.002
2.953
2.990
3.026
3.051
3.034
2.963
2.972
2.950
72.76
73.33
72.27
73.88
75.35
78.71
79.70
78.09
78.41
80.07
81.63
81.09
346.10
349.00
345.90
348.69
355.35
365.99
368.20
364.99
362.05
367.12
372.68
375.44
Danish kroner
per 100 units
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Hungarian Hong Kong Singapore
forint
dollars
dollars
(HUF)
(HKD)
(SGD)
171
EXCHANGE RATES
Table 12
Bulgarian
leva
(BGN)
Cyprus
pounds
(CYP)
Maltese
liri
(MTL)
Romanian
lei
(RON)2
Slovakian
koruny
(SKK)
Slovenian
tolars
(SIT)
Turkish
liras
(TRY)3
South
Korean
won
(KRW)
...
...
...
...
...
...
382.50
381.21
381.26
380.88
381.02
...
...
...
...
1,284.63
1,298.73
1,294.10
1,291.67
1,272.34
1,278.80
1,292.11
...
...
...
...
...
...
1,849.01
1,817.41
1,744.45
1,738.48
1,733.39
...
...
...
...
...
...
0.0287
0.0239
0.0198
0.0184
...
...
...
...
...
...
...
17,21
17,41
17,91
18,59
19,31
...
...
...
...
3.82
3.61
3.42
3.29
3.18
3.11
3.11
...
...
...
...
...
...
0.0007242
0.0005265
0.0004399
0.0004199
445.32
...
...
...
...
0.5881
0.7160
0.6449
0.6324
0.5535
0.5231
0.5861
380.84
381.43
382.70
382.40
382.29
380.32
380.17
380.21
380.30
380.29
379.95
380.04
1,269.99
1,271.50
1,271.25
1,269.57
1,269.83
1,276.51
1,278.21
1,285.75
1,289.18
1,291.41
1,285.95
1,283.67
1,731.68
1,739.24
1,746.16
1,751.04
1,746.91
1,747.63
1,745.66
1,745.12
1,739.06
1,730.93
1,720.67
1,719.14
0.0181
0.0184
0.0186
0.0183
0.0184
0.0182
0.0182
0.0182
0.0181
0.0181
0.0187
0.0192
18,29
18,38
18,44
18,54
18,52
18,62
18,64
18,54
18,57
18,60
18,79
19,12
3.14
3.14
3.13
3.12
3.12
3.11
3.10
3.10
3.10
3.10
3.10
3.10
0.0004387
0.0004429
0.0004598
0.0004546
0.0004096
0.0004098
0.0004168
0.0004132
0.0004046
0.0003999
0.0003946
0.0003969
0.4992
0.5053
0.5212
0.5387
0.5268
0.5287
0.5234
0.5277
0.5302
0.5216
0.5267
0.5279
380.42
380.53
380.72
381.02
380.56
380.65
381.35
381.42
381.35
381.51
381.42
381.14
1,279.09
1,276.30
1,276.96
1,278.19
1,287.92
1,296.89
1,300.12
1,301.37
1,301.73
1,301.84
1,300.69
1,299.86
1,721.41
1,727.18
1,724.67
1,733.05
1,734.17
1,734.18
1,737.35
1,737.64
1,737.35
1,738.17
1,737.62
1,736.35
0.0195
0.0203
0.0205
0.0205
0.0206
0.0206
209.24
212.97
212.52
207.30
204.14
203.73
19,29
19,56
19,49
19,00
19,09
19,32
19,18
19,29
19,39
19,17
19,29
19,68
3.10
3.10
3.11
3.109
3.108
3.109
3.114
3.114
3.115
3.115
3.115
3.112
418.56
435.17
430.19
422.41
428.05
449.62
462.33
451.25
453.99
456.94
465.30
464.79
0.5464
0.5595
0.5599
0.5702
0.5857
0.6047
0.5974
0.5942
0.5913
0.5938
0.6083
0.6149
172
EXCHANGE RATES
Table 12
Danish kroner
per 100 units
South
African
rand
(ZAR)
Croatian
kuna
(HRK)
Russian
roubles
(RUB)
Thai
baht
(THB)
Malaysian
ringgit
(MYR)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
............................
...
...
...
...
114.22
116.75
98.02
75.07
87.52
93.05
94.17
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
2004 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
84.96
87.13
91.65
94.25
91.30
95.21
98.97
94.80
93.05
93.15
94.60
96.71
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
2005 Jan .....................
Feb .....................
Mar ....................
Apr ....................
May ...................
Jun .....................
Jul ......................
Aug ....................
Sep .....................
Oct .....................
Nov ....................
Dec ....................
94.94
95.03
93.61
93.52
92.34
90.60
92.33
93.82
95.71
94.31
95.05
98.82
...
...
...
100.80
101.60
101.75
102.05
101.24
100.27
101.08
101.09
100.89
...
...
...
20.71
21.00
21.46
21.59
21.31
21.45
21.74
21.99
21.82
...
...
...
14.57
14.73
14.95
14.86
14.74
14.83
15.18
15.39
15.30
...
...
...
151.62
154.47
161.03
163.61
161.41
161.50
164.62
167.52
166.41
...
...
...
10.58
10.80
11.08
11.07
10.85
10.85
11.17
11.61
11.75
...
...
...
0.0603
0.0619
0.0635
0.0632
0.0608
0.0595
0.0616
0.0630
0.0638
...
...
...
69.61
70.92
73.95
75.38
74.91
75.22
76.78
78.30
77.86
Philippine Indonesian
pesos
rupiah
(PHP)
(IDR)
Chinese
yuan
renminbi
(CNY)

Danmarks Nationalbank Report and Accounts

Transcription

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