Changed banking rules would have killed popular short-term loans

Many homeowners are breathing a sigh of relief after proposals to make it all but impossible to issue one-year variable loans were shelved by the Basel Committee on Banking Supervision until 2018.

Banks can also look forward to significantly fewer restrictions than were previously suggested by the committee, which establishes global guidelines for the regulation of the world’s banks.

Denmark currently has the world’s third largest bond mortgage market behind only Germany and the US. Although Denmark is not an official member of the Basel Committee, it generally follows the committee's recommendations.

The Danish Bankers Association, the Association of Mortgage Banks, Nationalbanken and the Financial Supervisory Authority had all previously warned that the proposal would have made it too expensive for financial institutions to issue one-year variable rate mortgages, typically known as ‘flex’ loans.

However, the Economic Council – or ‘wise men’, as they are commonly known – had argued that limiting flex loans ‘would not necessarily be bad for the economy if households were in reality forced to exchange part of the very short adjustable rate mortgages for more stable, possibly fixed-rate mortgages’.

The full implementation of Basel 3 is planned to take place at the end of 2012.