The Danish Maritime and Commercial Court today found in favour of Nykredit in the so-called administration margin case against the Danish Competition Council, which has prevented Nykredit, for the past three years, from adjusting its administration margins on private residential mortgages to market conditions.
With today's decision, Nykredit is now on an equal footing with all other Danish mortgage banks and may adjust prices according to requirements when and if warranted by market and capital conditions.
– We are very pleased with the decision of the Maritime and Commercial Court and no longer feel tied hand and foot. We are facing increasing regulatory capital requirements in coming years, and the cost of capital has gone up markedly. Therefore, we need to operate on the same terms as all other participants, and this situation has now been achieved. The decision enables us to maintain the Nykredit Group's long-term lending capacity and solid ratings, so that we may continue to serve our customers in future, says Peter Engberg Jensen, Group Chief Executive, in a comment on the decision.
The dispute was about whether Nykredit should remain bound by the undertaking to reduce administration margins to 0.5%, which Nykredit made to the Danish Competition Council on the acquisition of Totalkredit back in 2003. We find that Nykredit should not continue to be bound by such undertaking. It has been Nykredit's impression that Nykredit was entitled to adjust administration margins according to market conditions and that the undertaking would lapse along with the remaining restrictions imposed on Totalkredit's partner banks in April 2010. And the Maritime and Commercial Court has now confirmed this view.
Following lengthy negotiations, the competition authorities last autumn approved a limited and isolated price adjustment as of 1 April 2012 based on changed market conditions, but not to a level at which other market participants may freely operate.
Without having any specific plans, the Nykredit Group will now assess the future need to adjust the price of private residential mortgage loans in light of the court decision and the authorities' current indications on the future capital requirements.
Contact:
Peter Engberg Jensen, Group Chief Executive, or Nels Petersen, Head of Corporate Communications, tel +45 44 55 14 70 or +45 20 22 22 72
For full text, please see pdf attached.
