The central government raises loans on the financial markets to meet its funding requirements. It is the total outstanding amount of these loans that is referred to as central government debt. Danmarks Nationalbank manages central government debt, which means that if central government needs to borrow money, Danmarks Nationalbank finds creditors in the market who will lend the money to central government.
The Minister of Finance has the overall and political responsibility for central government debt, and is authorised by law to raise loans on behalf of central government. The division of responsibilities between The Ministry of Finance and Danmarks Nationalbank is defined in a bilateral agreement.
Danish government debt policy is based on internationally recognised principles for sound central government debt management, including openness, credibility, clearly defined objectives and a clear division of responsibilities.
Responsibilities of Government Debt Management
In Denmark, Danmarks Nationalbank manages central government debt on behalf of the Minister of Finance.
Government Debt Management must ensure that the objectives of government debt policy are met. The focus is therefore on maintaining a low refinancing risk by covering funding requirements well in advance, ensuring a broad investor base and having a high level of liquidity reserves. Danmarks Nationalbank ensures this by performing the following tasks:
- Preparing an issuance strategy that meets the annual funding requirements on the basis of the Finance Act and input from the Ministry of Finance.
- Issuing government bonds and T-bills to cover the government’s funding needs. The funding requirement is determined by the central government’s current revenue and expenditures as well as loans that fall due.
- Monitoring and manages the risk on the entire central government debt portfolio (the central government’s domestic and foreign debt, the central government’s account with Danmarks Nationalbank, the assets of the government funds and government re-lending).
- Aiding in ensuring a transparent and liquid market for Danish government securities through its agreements with primary dealers to trade Danish government securities.
- Administering the funds in the two government funds Innovation Fund Denmark and the Fund for Better Working Environment and Labour Retention .
- Managing on-lending and government guarantees to government-owned companies.
- Ensuring through the central government’s issuances, that there is an adequate balance in the central government’s account to cover the government’s payments.
Structure
The functions of Government Debt Management are divided into front, middle and back offices.
The separation of functions and clear procedures reduce operational risks and ensure a clear distribution of responsibilities. This also facilitates internal control.
The placement of the tasks at Danmarks Nationalbank makes it easier to monitor the interaction between government debt policy, monetary policy and financial stability. This is consistent with the IMF’s recommendations for government debt management, the so-called Stockholm principles.
Front office and strategy
Formulates government debt policy and prepares proposals for loan strategies while handling the operational part of government debt policy. This comprises the issuance of government securities, including facilitating auctions, buybacks, securities lending and swap transactions. It also determines market terms for on-lending.
Middle office
Is responsible for the risk management of central government debt. In addition, it follows up on whether the guidelines for the front office with regard to issuances, buybacks and swap transactions are consistent with the agreed strategies.
Back office
Settlements cover clearing and settlement of payments concerning central government debt, including the servicing of debt and swaps. Government Accounts prepares the section of government accounts concerning central government debt together with the Ministry of Finance.
The government debt area is audited by Danmarks Nationalbank’s auditors on behalf of Rigsrevisionen, the national audit office of Denmark.
Danmarks Nationalbank’s auditors
Ascertain that the government debt accounts give a true and fair view, i.e. that they are without significant errors and omissions. In addition, Rigsrevisionen may assess whether the government debt is managed in an appropriate way.
Contact information
An important part of the government's debt policy is to provide market participants and the public with information about the government's borrowing strategy, borrowing needs and general information about the framework for the management of the government's debt. If you want to know more about the government's borrowing and debt, please contact:
| Email: | governmentdebt@nationalbanken.dk |
| Tel. num.: | +45 3363 6131 |
| Address: | Government debt management Danmarks Nationalbank Langelinie Allé 47 2100 København Ø |
| LEI-code: | 549300PTO6LS1PTM6607 |