Friday, September 30, 2011

Denmark Announces Emergency Bank Liquidity Program

The Danmarks Nationalbank announced it will provide as much as 400 billion kroner in an emergency liquidity provision program to assist the nation's banks.  The measures include expanding the existing collateral basis, and introducing 6-month loans in addition to the existing 7-day loan facility.  Danmarks Nationalbank Governor, Nils Bernstein, said: "The expansion of credit facilities is intended to supplement the banks' access to raise loans, thereby easing the transition to a situation without government guarantees when these guarantees expire in 2012 and 2013,"

Denmark's central bank last raised the lending rate by 25 basis points to 1.55% in July this year, after increasing the rate by 25 basis points in April this year, mirroring the interest rate increases by the European Central Bank (ECB).  The Danish Central Bank typically follows the moves of the ECB in order to keep its currency, the Krone, stable.  Denmark reported an annual inflation rate of 2.6% in August and 2.9% in July, compared to 3.1% in May, and 2.9% in April this year.  The Danish economy grew at a year on year rate of 2% in Q2, compared to 1.7% in Q1 2011 (2.9% in Q4 2010).  The Danish krone (DKK) has strengthened about 3% against the US dollar this year, and last traded around 5.37.


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