Financial regulation creating growth
Access to capital and financing of new activities are fundamental conditions for a sustainable corporate sector.
Access to capital and financing of new activities are fundamental conditions for a sustainable corporate sector. Hence, it is paramount that financial regulation continues to stimulate the growth and development of businesses. As a consequence of the financial crisis, processes have been initiated on an international scale to pave the way for new financial regulation in a range of areas. Various processes are now running under the auspices of G20, the Basel Committee, the IMF and the European Commission. In the wake of the financial crisis, the Basel Committee has formulated a new regulatory framework for mortgage credit institutions, which proposes stricter requirements in terms of liquidity and capital. In adjusted form, the rules will be introduced in the EU through changes to the EU capital adequacy rules.
Moreover, after the financial crisis, a need arose to impose stricter control on the markets for financial products. Farmers and food companies apply commodity, foreign currency and interest rate derivative instruments for hedging against the price and currency risk arising in connection with their production and sale of products.
- The financial crisis has triggered a need for stricter financial regulation. However, stricter regulation should be balanced in the light of the increased burden on borrowers. In addition, regulation must not be at the expense of a future well-functioning market for loan capital and price hedging.
- The balance principle of the Danish mortgage credit system gives investors significant assurance. Therefore, it should be possible to assign Danish mortgage bonds the same rating as government bonds.
- Denmark should be given the possibility to treat financial institutions in the same way in connection with risk-weighting of outstanding accounts between banks and mortgage credit institutions.
- In the EU, the derivatives market is governed by the MiFID Directive and a special regulation on over-the-counter derivatives. Derivatives market framework and transparency must be enhanced to strengthen the markets’ function as a hedging instrument. Market participants should be registered and a maximum be introduced on the positions held by financial investors. The existing exemptions for agricultural cooperatives should be continued.
