Et dansk marked for sekuritisering af erhvervslån

Morten Mølskov Jarlstrup

Student thesis: Master thesis


Currently, no market for the securitization of corporate loans exists in Denmark. Due to the credit crunch experienced by SMEs1 since the start of the financial crisis, the Danish government is looking to impose national regulations to ensure banks’ ability to securitize corporate loans, and the government expects this will lead to the extension of new loans. This thesis argues that the securitization will only lead to additional loans if banks can obtain regulatory capital relief in the process. This is the only way to ensure banks can extend new loans without affecting their solvency. Therefore, this thesis examines the current capital requirement regulation in order to identify the criteria imposed on securitization transactions when capital relief is an objective. Current legislation requires originating banks to retain a material net economic interest of at least 5 %2 on an ongoing basis. This requirement has a negative impact on the capital relief and will limit the incentive for banks to securitize new and existing loans. Regardless of the benefits of securitization, a future market is challenged by asymmetric information. Private information within the banks about their loans lead to adverse selection and moral hazard behavior that must be prevented by ensuring transparency in the underlying pool of loans. The thesis analyzes the challenges faced and proposes solutions to these economic barriers through risk allocation in the transaction. A future market must balance the need for ensuring incentives against the need of capital relief. After analyzing the objectives and economical barriers of securitization the thesis moves on to examine current Danish regulation. It is found in the regard, that the traditional “true sale” securitization structure is not applicable under Danish law. As a result, the notice-to-debtors rule that must be observed to ensure the bondholders’ rights to the transferred loans form a barrier preventing banks from securitizing loans. The debtors set-off right under Danish law must be accounted for in the transaction. Finally, the analysis finds that the special provisions under Danish law regarding financial institutions confidentiality obligations impose a legal barrier that de facto hinders the securitization of corporate loans by worsening the effects of asymmetric information. After the analysis of the current legislation, the newly proposed bill by the Danish government is examined to determine whether the legal and economic barriers are repealed. Although the proposed legislation imposes the necessary legal framework to carry out the transaction, a future Danish market still faces challenges.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2013
Number of pages82