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    Bradley Associates about Banks in Denmark Win Government Support

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    Banks in Denmark Win Government Support Over S&P Bond Warning

    Denmark’s government said it has no intention to ask banks to adjust a mortgage refinancing model that Standard & Poor’s says has exposed the industry to a liquidity shock.

    One-year mortgage bonds used to finance loans as long as 30 years pose no risk to Denmark’s $340 billion economy and banks shouldn’t be forced to stop selling them, Business Minister Henrik Sass Larsen said.

    “We don’t consider the one-year adjustable-rate mortgage bonds a problem or a risk,” Sass Larsen said yesterday in a phone interview from Copenhagen.

    S&P said this month banks in Denmark’s $500 billion mortgage bond market are putting themselves at risk by relying on a model that requires them to return to market every year. Industry efforts to mitigate those risks by spreading annual auctions over quarterly refinancing’s aren’t enough, S&P analyst Per Tornqvist said this week. He warns that banks are unlikely to adjust their funding model without government guidance.

    According to Sass Larsen, the industry has already done enough to address any funding mismatch.

    “The refinancing risk has been distributed throughout the year, which makes it improbable they should carry a risk,” he said. “Besides, they’ve performed very well during the financial crisis.”

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