Investors retsstilling i tilfælde af realkreditinstituttets konkurs

Nadia Bottan Pedersen

Student thesis: Master thesis


This master thesis deals with the situation where a Danish mortgage credit institution has gone bankrupt and focuses on the covered bond investor’s legal position in the bankruptcy estate. A key element in the Danish mortgage credit system is the asset liability management system, known as the balance principle. The principle ensures that all mortgage loans are match funded. The issuance of covered bonds is done through capital centres. The capital centres are considered “on balance” SPVs and are not an integrated part of the estate in bankruptcy – therefore assets are bankruptcy remote. The borrower pays interest, payments and margin to the mortgage credit institute, the institute passes the interest and payment on to the investor – the mortgage institute withholds the credit risk (towards borrower). In relation to the credit rating of borrower the credit scoring is generally done through a cash flow based model. The property valuation and LTV limits is regulated by the Danish Mortgage Credit Loans and Mortgage Credit Bonds etc. Act. The risk of bankruptcy can be partly read of the spread between Danish covered bonds and Danish government bonds. The spread needs however to be adjusted in order to isolate the risk spread. The main risk origins from exposure to liquidity risk (due to continuous LTV compliance) and credit risk. The adjusted spread indicates that investor takes account of a risk of bankruptcy – it can therefore be concluded that a bankruptcy of a Danish mortgage credit institute is not completely unlikely. The Danish mortgage credit system is generally considered to be very important to the financial stability in Denmark. It is therefore likely that the Danish government will interfere in case of insolvency in a Danish mortgage credit institute – the subject of this thesis is therefore mostly theoretical important. In case of a bankruptcy a trustee will be appointed. Holders of Danish covered bonds have a primary preferential right to all assets of the capital centre. If the claims are not covered by the capital centre (leaving them uncovered residual claims), they maintain a preferential claim against the assets available for distribution (the general estate in bankruptcy). As a result, Danish covered bond investors have an excellent legal position in case of a bankruptcy of a Danish mortgage credit institute.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2010
Number of pages80