Low credit exposure

Our guarantee structure and prudent business model have secured us a premium credit rating by the international rating agencies Moody’s Investor Service (Aaa) and Standard & Poor’s (AAA). This is in line with the credit rating of the Danish State.

Credit ratings

Credit ratings

jointliability

Strength through joint liability

All the 98 municipalities and the five regions in Denmark are members of KommuneKredit. Our members share joint and several liability for our obligations. Combined with our prudent business model and strict risk management principles, this makes our bonds highly secure. This structure also helps us maintain the highest possible ratings from the international rating agencies, Moody’s Investor Service (Aaa) and Standard & Poor’s (AAA).

The figure below illustrates our liability structure.

Read a one pager about our liability structure

Obligations of our members

KommuneKredit’s members are legally required to ensure that we maintain an equity capital of at least 1 per cent of total liabilities. If the equity capital falls below this threshold, our members are required to contribute with the amount necessary to restore it.

If we ever fail to meet our obligations, the creditors can directly enforce the joint and several liability.

Read about the implications of statutory joint and several liability

Solidarisk hæftelse – en ubetinget styrke

Solidarisk hæftelse

Solidarisk hæftelse

I dag er alle kommuner og regioner i Danmark medlemmer af foreningen KommuneKredit. De hæfter solidarisk for vores forpligtelser.

Sikkert bindeled

Sikkert bindeled

Vi er det sikre bindeled mellem global finansiering og lokale låntagere. Vi sikrer et finansielt grundlag for udviklingen af det danske velfærdssamfund.

Finansiering af udlån og leasing

Finansiering af udlån og leasing

Vi finansierer vores udlån gennem ved at udstede obligationer på det danske og internationale kapitalmarked.

ultimateexposure

Low risk and ultimate exposure to all Danish taxpayers.

Our members share joint and several liability meaning that they have a collective financial responsibility. Members cannot withdraw while any loan or loan guaranteed by them is outstanding. The Ministry of the Interior intervenes if a municipality or region faces financial distress, potentially implementing recovery plans and providing subsidies or loan dispensations. Danish administrative law stipulates that municipalities and regions cannot declare bankruptcy. This principle, upheld by a High Court decision, ensures that the Danish government will step in and ultimately provide a recovery plan. Ultimately, a KommuneKredit bond is therefore an exposure to all Danish taxpayers.

FAQ

FAQ

riskclassification

Risk classification

0%

Risk weight

Our bond issues have a credit risk weight of 0 per cent according to CRR/CRD.

HQLA Level 1

Liquidity category

Our bonds are liquid and safe. They are in the highest liquidity category in the LCR Delegated Act.

riskmanagement
  1. 1

    Low risk tolerance

  2. 2

    Strict hedging principles

  3. 3

    More than 6-month survival horizon in a stressed scenario

  4. 4

    Positive liquidity position across the curve

  5. 5

    Excellent asset quality in both lending and liquidity portfolio

Strict financial risk management

To mitigate risks for our investors and members, KommuneKredit has a very low risk tolerance across all categories of financial risk. The risks we take are limited to those absolutely necessary in order to accomplish our mission. As our members are jointly and severally liable for any obligation assumed by KommuneKredit, any risk assumed by us will ultimately be a risk exposure for the Danish municipalities and regions. This means that any potential loss must be covered by the local governments at the expense of public welfare or higher taxes.

Market risk

Using derivatives, we convert all funding into the currency and interest rate that match our lending and leasing agreements as well as our total liquidity resources. We hedge interest rate and currency exposure to keep our market risk at a low level.

Credit risk

We only grant loans and leasing agreements to local authorities or entities with a guarantee. Therefore, we are solely exposed to credit risks arising from investments in bonds and derivative instruments. The risk is limited by the high credit quality of bonds and high credit ratings of counterparties.

Liquidity risk

At any time, KommuneKredit holds a liquidity reserve to cover a long period of extreme financial market stress. Furthermore, our liquidity resources consist of highly liquid bonds with a very high credit quality (HQLA). Both are precautionary measures as part of our liquidity contingency plan.

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Projects we have financed

See all cases

Contact us

If you would like to know more about treasury and sustainable financing in KommuneKredit, please feel free to contact us.

Treasury

funding@kommunekredit.dk+45 3311 1512

Sustainable finance

bf@kommunekredit.dk+45 3311 1512

Telephone hours

Monday - Friday